Are Foreign Nationals of Indian origin allowed to purchase immovable property in India?
Yes, Foreign nationals of Indian origin, whether resident in India or abroad, have been granted general permission to purchase immovable property in India.
What should be the method of payment for purchasing residential immovable property in India by Foreign Nationals of Indian origin under the general permission?
The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India.
For non-resident Indians staying abroad, can the property be purchased through an agent or through power of attorney?
Non-resident Indians who are staying abroad may enter into an agreement through their relatives and/or by executing the Power of Attorney in their favour as it is not possible for them to be present for completing the formalities of purchase (negotiating with the builder or Developer, drafting and signing of agreements, taking possessions, etc) These formalities can be completed through some known person who can be given the Power of Attorney for this purpose. Power of Attorney should be executed on the stamp paper before the proper authorities in foreign countries. Power of Attorney cannot be drafted on the stamp paper bought in India.
What is a sale deed?
Sale Deed or Adharam is the registered document by which the title of a property is transferred or conveyed from one person to another. In a purchase or sale of a property, sale deed is a valuable legal document and it is governed by the Registration Act. As per Kerala rules, the purchase or sale of property is legally complete only when it is executed by the seller and registered in the respective Sub Registrar Office, after both the parties are satisfied with the sale consideration as per rules in existence and the terms and conditions as said in the deed.
The stamp duty and registration fees of a sale deed will differ from state to state in the country and as prescribed by the Stamp Act of the respective State. The sale deed would also require to be signed by at least two witnesses with all their details included.
What Documents are required for the registration of the Sale deed?
1. PAN card
2. Copy of ID Proof (Pan Card / Driving license / Aadhar Card / Voters Identity Card/Passport)
3. Copy of Address Proof (Driving license / Aadhar Card / Voters Identity Card / Passport)
4. Passport Size color photo
5.Left Hand Thumb impression
Is the presence of the buyer mandatory?
Buyer’s presence is not mandatory for registrations done in Kerala.
Can a minor purchase property?
A minor can purchase the property and the registration can be done through a guardian.
What is registration of the property?
Registration of the property means transferring the ownership by the Vendor to the Purchaser by registering the document with the concerned Sub registrar office of the district by paying the required stamp duty and registration fees. The stamp duty and registration fees may vary as per the prevailing Govt Stamp duty Act. At present the rates are as follows :
a) Stamp Duty :- Stamp duty is 8% of the total cost mentioned in the sale deed. It can be paid as online transfer to State Govt Treasury Account.
b) Registration fees :- It is 2% of the total cost mentioned in the sale deed and can be paid as online transfer to State Govt Treasury Account.
What is a Power of attorney and how to obtain it?
Power of Attorney (POA) is a legal document authorizing a person to act and do whatever acts and things on behalf of the person who is not physically present to execute and sign a document especially in the Registrar office for the purpose of registration. The POA can be general or special based on the powers given ( that means, full power and limited power) In the matter of sale of properties only blood relations can be given a POA ( father, mother, children, husband , wife, brother & sister ). In the case of other persons, stamp duty proportionate to the value of the property in respect of which POA is given is to be paid for registering the POA . It is primarily used by NRI (Non-resident Indians) to manage their property in India. The authorization thus gained enables the person who receives it to represent the person who grants it in legal procedures. Basically it is a simple document which lists out the powers that you want to share with the POA holder. To execute the Power of Attorney (POA) , Use the sample POA template and register In the registrar office.
What is a Presentation Power of Attorney?
It is an authorization given to a person to present a document for Registration before the concerned Sub Registrar Office(SRO) on behalf of the person executing the document who is unable to appear before the SRO due to various reasons. In such case the document shall be signed by the person executing the document and the power holder is authorized only to present the same before the SRO. The power holder is also authorized to sign the registers and books kept in the Registrar office and shall produce the original document by which Power of attorney is given before the SRO.
What is meant by Building Tax?
Building Tax is the tax that is to be paid to the respective statutory body viz Municipality/Corporation /Panchayath on immovable or tangible real property such as buildings and permanent improvements.
How is Building tax calculated ?
The assessment is made on the basis of the Built up area and fixed by the respective Municipality/Corporation /Panchayat as per their grade. Based on such assessments, all assessees are expected to pay the Building Tax. This can be paid either half yearly or annually.
How can Building tax be paid?
This can be paid directly to the Local self government body office.
Can Building tax be paid online?
As of now, Building tax cannot be paid online in Kerala.
What is Land tax?
Any person who possesses land in his name has to pay tax to the government on the basis of the extent of area he owns. The land taxes are to be paid to the respective village office of their area in the name of title holder of the property on a yearly basis. The tax receipt is necessary for all transaction related to the property. A buyer should confirm the actual seller’s name as recorded in the document .In the case of an apartment complex, the buyer can pay land tax proportionate to the undivided share he owns in the property. This has to be paid on a yearly basis.
What is one time tax?
It is tax payable to the revenue/Village office for any construction made. The assessment of the One time tax is made by the Thahsildar (Taluk Office) on the basis of the area of the individual apartment /building and can be paid by the owner directly to the respective village office with his registered sale deed after such assessment is made
What is an Encumbrance Certificate?
An Encumbrance certificate is an official statement showing all liabilities and transactions on a particular property in the respective Survey Number. EC is issued by the concerned Sub Registrar. This can be applied for any particular period required.
This certificate is basically to know the correct entitlement of a particular property. . This can be applied at the respective Sub registrar office, online by logging into Kerala registration website.
What is Mutation (Pokkuvaravu)?
Mutation is the process of recording the title of a property of a person in the Village Records.
After Purchase of a landed property, copy of the title deed has to be presented to the respective village with application for mutation. The village officer will take steps to record the full details of the land like Survey number, subdivision number, extend of land, full address of the tile holder, etc. in a particular Thandaper number in the Thandaper Register. Only after mutation you will be entitled to pay land tax in respect of that property. If a particular portion of a land is purchased from out of a larger extent in a survey number, then it has to be recorded in the Area register of the Thaluk office. It will take at least 30 days.
What is the TDS on properties above 50 Lakhs?
TDS is the Tax Deducted at Source ie, in the case of sale of a property, if the value of the land is above 50 lakhs, 1% (one percent) of the total value of the Land is to be deducted from the seller and remitted in the PAN account of the seller by the Purchaser and the balance amount only need be paid to the seller. This has to be recorded in the sale deed. It is a statutory requirement.
What is an Occupancy certificate/Completion Certificate?
Occupancy Certificate or completion certificate is a document which is issued by the local self government authority after completion of the construction of a building . The document is a proof of the construction of the building in compliance with applicable building rules and other laws. The building is assigned a building number only after obtaining the Occupancy certificate . It basically indicates that the building is certified as fit for occupancy, which in turn is a primary document for paying property tax.
What is an Ownership certificate?
An ownership certificate is a document issued by the Local self Government authority such as Panchayath/Municipality/Corporation certifying the absolute ownership of a building in the name of a particular individual who has registered the subject property in his name.
What is an Undivided share of Land (UDL)?
When a home buyer purchases an apartment, he/she is entitled to ownership of the constructed building and the proportionate share of land where the whole building is constructed. An Undivided share is the share of land allotted to the flat buyer proportionate to his built up area, while purchasing a property and it is registered in the name of the buyer.
What are capital gains on property sale?
Short Term Capital Gain-
Under the current laws, any gains on sale of capital assets sold after holding for less than 24 months is considered as short term capital gains.
Gain from sale of asset is computed as sale value(less any selling expenses) less cost of acquisition (purchase price + any other ancillary cost of purchase) less cost of improvement (renovations etc.).
The gains so computed is added to the tax payers return and taxed at the relevant slab rates..
Long Term Capital Gain-
The gain from selling property held for more than 24 months is taxed under long term capital gain.
Gain from sale of asset is computed as sale value (less any selling expenses) less Indexed cost of acquisition (purchase price+ any other ancillary cost of purchase) less indexed cost of improvement (renovations etc.).
While computing cost of acquisition and improvement in case of Long term capital gain the benefit of indexation is allowed. This is a method used to arrive at present value of the purchase price (i.e. to give effect to gain due to inflation over the years of ownership).
The cost of acquisition or improvement is multiplied by the indexation factor of the year of sale and divided by the indexation factor of the year of purchase, the resultant amount will be considered as the cost of acquisition or improvement.
Long term capital gains are charged to tax at 20% flat rate plus cess and surcharge. In case of resident Indians, the basic exemption can be availed based on the persons relevant rates, in case of NRI, the basic exemption limit is not applicable and tax would be levied on the whole gain at 20%.
What are the options available to reduce tax liability on Capital Gains?
Section 54: Exemption on Sale of House Property on Purchase of Another House Property
Exemption under Section 54 is available when the capital gains from the sale of house property is reinvested into buying another house property.
The taxpayer has to invest the amount of capital gains and not the entire sale proceeds. If the purchase price of the new property is higher than the amount of capital gains, the exemption shall be limited to the total capital gain on sale.
The new property can be purchased either 1 year before the sale or 2 years after the sale of the property. The gains can also be invested in the construction of a property, but construction must be completed within three years from the date of sale.
Section 54F: Exemption on capital gains on sale of any asset other than a house property
Exemption under Section 54F is available, when there are capital gains from sale of a long-term asset other than a house property.. Entire sale consideration and not only capital gain should be invested to buy a new residential house property must be purchased to claim this exemption.
The new property can be purchased either one year before the sale or 2 years after the sale of the property. The gains can also be invested in the construction of a property, but construction must be completed within 3 years from the date of sale.
The entire sale proceeds towards the new house will be exempt from tax if you meet the above-said conditions.
How to calculate short term and long term capital gain? Is it calculated from the date of registration or from the date of possession?
In case of sale of a property by an individual , the date of registration is considered and in the case of a Joint venture, for the land lord, the date of getting completion certificate or on the date of sale of his share by the land lord is considered.
What are the tax benefits one could get by taking a home loans?
The income tax act provides considerable benefits to individuals who purchase home with housing loans.
For the interest amount of a housing loan:
Under section 24 a person can claim exemption upto Rs 2lacs for interest on housing loan, this will be considered as loss from house property and can be set off from other income. Also for individuals who are letting out their property the interest portion of their loan can be deducted from rental amount.
This provides considerable tax advantage for individuals with taxable income.
Conditions for the above are:
1. The home loan must be for purchase and construction of a new property.
2. The loan must be taken on or after 1 April, 1999.
3. The purchase or construction must be completed within 3 years from the end of the financial year in which the loan was taken.
For principal repayment:
The amount repaid as principal can be availed as a deduction under the overall limit of Section 80C upto Rs 150,000.
To qualify for this deduction:
1. The home loan must be for purchase or construction of a new house property.
2. The property must not be sold in five years from the time you took possession. Doing so will add back the deduction to your income again in the year you sell.
New Deduction for first time home – owners :
Section 80EE allows tax benefits for first time home buyers. Income tax deduction can be claimed on home loan interest .The deduction allowed under this section is for interest paid on home loan up to maximum Rs 50,000 per financial year. You can claim this deduction until you have fully repaid the loan.
This deduction is over and above the Rs 2 lakhs limit under section 24 of the income tax act.
Besides, being an Individual Taxpayer, there are a set of conditions that you must satisfy before you go on to claim the benefit under this section –
1. This is the 1st house you have purchased
2. Value of this house is Rs 50 lakhs or less
3. Loan taken for this house is Rs 35 lakhs or less
4. Loan has been sanctioned by a Financial Institution or a Housing Finance Compan
5. As on the date of sanction of loan no other house is owned by you
What is the meaning of a property’s market value?
The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller, wherein the parties had each acted knowledgeably, prudently and without compulsion.
Can you sell a flat without registration?
Yes, you can sell the apartment without registration with the consent of the builder. The builder gives his consent upon clearance of 100% payment or on receiving written confirmation that the balance amount shall be paid by the new buyer.
Can we sell the property before the completion of the project?
Yes, you can sell the property before completion of the project.If you have availed any bank loan , then it has to be closed and the closure letter has to be submitted to the concerned department along with the Resale affidavit in the prescribed format to the builder by paying a nominal transfer fee.
What is common area and who will be the owner after handing over the project?
An apartment owner is allotted share of land proportionate to his built up area.Hence every buyer basically is an owner of a percentage of the total land. After handing over of the project to the Residents Association, the Association takes care of the common interests of the project. Some balance share held by the builder is registered to the Officially registered Residents Association name so that the Residents Association will have an upper hand in all decisions related to the project and re development in future.
Who will take the initiative to form the association?
At the end of the official one year maintenance period, the builder will invite the apartment owners to form the formal Residents Association . Office bearers and Executive committee members are elected by the owners who will thereafter take over the activities from the builder on behalf of the apartment owners.The Bye Laws of the Association shall be binding on all members of the association.
How is the maintenance charge calculated? From what date are the maintenance charges due?
Maintenance amount is collected per Sqft or as a fixed amount per month from all owners.The maintenance charges are applicable from the date of the building & being ready for occupancy with the metered Power connection.
Do we offer buy back facility?
We do not have a buy back facility but we assist the buyer to sell his apartment as per the enquiries found suitable for the subject apartment.
What type of cement blocks are used for construction and is it suitable for our climate?
Solid cement blocks used for wall construction and double coat plastering for outside walls that protects the building from the weather elements.
What is the role of the company in future maintenance and other related things after handing over?
The official maintenance period of the company is for one year after the building is fit for occupancy. The company takes responsibility for any major construction related issues for up to 5 years depending on the conditions in the contract.
What are the precautionary measures taken to deal with an earthquake?
Our Buildings are designed for Seismic loads as per IS 1893-2002. Kerala comes in Zone III.
What is the provision for water?
Source of water is open well and there shall be additional bore-well too and depending on the requirement suitable water treatment plant is provided. Plumbing provision shall be made for the Statutory water connection as per the applicable norms.
What is the provision for waste disposal?
We use incinerator. It is an apparatus used to burn waste, especially industrial waste, until it is turned into complete ash. Incinerators are constructed with well insulated and heavy materials so that it does not give off extreme amounts of external heat. The high levels of heat are kept inside the unit or furnace so that the waste gets burnt off easily and quickly. This helps in increasing the efficiency of each job. If the heat escapes, the waste within will not burn as well.
Sewage System shall be environment friendly Sewage Treatment Plant (STP) with MBBR technology and advanced Ultra Filtration method as per PCB norms, thus bringing the Biological Oxygen Demand (BOD) level to less than 3 and making it reusable for gardening or flushing or other purposes.
What is meant by a person resident in India?
Foreign Exchange Management Act (FEMA) and the Income Tax Act sets a distinct difference between a resident Indian and a Non-Resident Indian. It is the number of days during which a person has stayed in India that determines the status, however, there is a slight difference in the number of days involved. While FEMA is a regulatory Act, Income Tax Act has a different perspective related to taxation.
Who is a Person of Indian Origin (PIO)?
A Person of Indian Origin (not being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal & Bhutan)
Is one who has at any time held an Indian Passport
Whose paternal grandfather or father was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955.
Who is an NRI?
A citizen of India, who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident Indian. However, FEMA and Income Tax Act sets down two separate numbers of days in a financial year to qualify.
Who is an OCI (Overseas Citizen of India)?
The Overseas Citizenship of India(OCI) is an immigration status permitting a foreign citizen of Indian origin to live and work in the Republic of India indefinitely. Any person of full age and capacity:
Who is a citizen of another country, but was a citizen of India at the time of, or at any time after the commencement of the constitution, or
Who is a citizen of another country, but was eligible to become a citizen of India at the time of the commencement of the constitution, or
Who is a citizen of another country, but belongs to a territory that became part of India after the 15th of August, 1947.
Who is a child of such a citizen, or
A person, who is a minor child of a person mentioned in clause (1)
Provided that no person, who is or had been a citizen of Pakistan, Bangladesh shall be eligible for registration as an Overseas Citizen of India.
Are there Any Tax Benefits For Non-Resident Indians buying properties?
An NRI is entitled to all the tax benefits related to the purchase of property just like a resident Indian. This implies that
An NRI can claim Rs 1 Lakh deduction under 80C
There is no upper limit on the home loan interest rate.
What are the documents required for obtaining NRI Home Loans?
In addition to having an active NRI account, they are also required to furnish the following documents.
Copy of relevant pages of the passport
Copy of visa/work permit
The power of attorney (POA). POA is required because the borrower is not based in India
Utility bills (electricity, telephone, gas connection, etc.)
Driving license issued abroad
Government-issued national identity card or labour card or social card at the country of residence
Original copy of the latest overseas bank account showing overseas address
Employment contract/ appointment letter/offer letter or any other document/agreement, showing current terms of employment
Salary certificate/slip for the last three months
Bank account statement, showing salary credit for last six months
Duly acknowledged copy of last year individual tax return (NRIs/PIOs located in the West Asian countries are not required to submit this document.)
How is the mode of payment for NRI home loans?
An NRI can repay a loan in Indian currency through their NRI account by any of the following methods
Standing instruction at your Loan branch
What is the repayment period for the home loan for NRIs?
The repayment of the NRI home loan has to be through their respective NRI accounts. The period of loan varies depending on the age of the person availing the loan to the tenure as agreed upon between the issuing financial organization and the people concerned.
What are the eligibility criteria for obtaining NRI Home Loans?
Your repatriable income plays the most important role in deciding the maximum amount of loan available to an NRI. The banks and financial houses also take into consideration your income in India. Most of the banks demand the age to be within the group of 18 to 60. Some banks stipulate that the person should have had a job for more than two years too. It is also mandatory for the NRI to open and operate either an NRE or an NRO account.
What kinds of property can an NRI avail home loan for?
An NRI can avail of a loan for any number of properties in India. However, these loans are restricted to :
The construction of a building on a plot of land owned by self
To purchase a plot / flat allotted by a society/development authority/builder
For renovation or improvement of an existing property in India
Can the proceeds of the sale of such properties be remitted out of India?
Yes, an NRI can repatriate the proceeds of sales of land in India. However, there is a rider. This amount should not exceed the amount paid for acquisition of the immovable property in the foreign exchange received through normal banking channels or from the funds held in FCNR or NRE Account.
Can a home/land be sold by an NRI or Person of Indian Origin without the permission of the Reserve Bank of India?
No, prior permission has to be taken from RBI for the sale of a property.
Can an NRI or a PIO or a foreign national of non-Indian origin hold any immovable property in India acquired through inheritance from a person resident outside India?
An NRI or a PIO may hold an immovable property in India acquired through inheritance from a person resident outside India provided the owner had acquired such property in accordance with the regulations of the foreign exchange law in force at the time of acquisition or should be under FEMA guidelines. However, this requires specific approvals from the RBI.
Can a person resident outside India hold any immovable property in India acquired by way of inheritance from a person resident in India?
As per the provisions of Section 6(5) of the Foreign Exchange Management Act, 1999, a person resident outside India can hold immovable property acquired by way of inheritance from a person resident in India
Can an NRI/PIO acquire residential/commercial property by way of gift under the general permission available?
Yes. An NRI/PIO may acquire residential/commercial property by way of gift from a person resident in India or an NRI or a PIO.
Can a foreign national of non-Indian origin acquire residential property on a lease in India?
Yes. A Foreign National of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can acquire residential properties on lease in India. They do not need prior permission from RBI if the term of the lease does not exceed more than five years.
Can an NRI or PIO buy property in India jointly with other Indian citizens/PIO?
Yes. An NRI or PIO can buy property in India jointly with a resident Indian, an another NRI or a PIO.
Can NRI or PIO buy property in India jointly with a foreign citizen?
No. An NRI or PIO cannot invest in a property in India jointly.
Is there any limit on the number of housing properties that an NRI can buy?
No. An NRI can buy any number of residential properties in India. There are restrictions and prior permissions needed however when it comes to agricultural land.
What facilities are available for NRIs and OCBs?
NRIs and OCBs services include
Maintenance of bank accounts in India
Investments in securities/shares of, and deposits with, Indian firms/companies.
Investments in immovable properties in India
Can NRI/ PIO rent out their immovable property?
Yes. An NRI / PIO does not need prior approval from RBI to rent out their property.
Where can one contact with RBI for clarifications/ approvals etc. in respect of immovable property in India?
At Artech Realtors, we can guide you towards the correct channels for all your doubts related to investing in a property in India.
Can an NRI remit current income (rent) from India?
Yes. However, this has to be done into an NRI account held by the person.
Capital Gains Tax on NRI / PIO / OCI
Capital Gains Tax (CGT) – both short term and long term is payable on the part of an NRI as and when he/she sells off the house or part of it. The cess and taxes are calculated accordingly. Please contact your bank to know the details.
How does Double Taxation Avoidance Agreement work in the case of NRIs?
India has signed a Double Taxation Avoidance Agreement (DTAA) with many countries. In case the NRI pays any tax on capital gains arising in India, he would normally be able to obtain a tax credit concerning the taxes paid in India/ home country, because the income in India would also be included in the country of tax residence. The amount of tax credit is also based on computing the tax credit that can be claimed as specified in the respective country’s DTAA and is also dependent on the laws of the home country where the taxpayer is a tax resident.