NRI Guide

Who is an NRI?

An NRI (Non-Resident Indian) is a citizen of India who resides outside India and has lived in India for less than 182 days in the preceding financial year. NRIs typically live abroad due to professional or other commitments for an indefinite period.

Who is a PIO?

A PIO (Person of Indian Origin) is any person, except those from Pakistan or Bangladesh, who:

• Has held an Indian passport at any point in time
• Has parents or grandparents who were citizens of India as per the Indian Constitution
• Is married to an Indian citizen or another PIO (for banking purposes)

A PIO is eligible to buy real estate and invest in Indian properties.

Who is an OCI?

An OCI (Overseas Citizen of India) is a foreign citizen who:

• Previously held Indian citizenship
• Was eligible for Indian citizenship at the time of the Indian Constitution's commencement
• Belongs to a territory that became part of India after Independence

An OCI can buy real estate in India.

Who Can Purchase Property in India?

As per RBI guidelines, the following can purchase property in India:

• Non-Resident Indians (NRIs)
• Persons of Indian Origin (PIOs)
• Overseas Citizens of India (OCIs)

For most banking and property-related matters, these three categories are collectively referred to as NRIs.

What Properties Can NRIs Buy?

NRIs can purchase the following types of properties in India:

• Residential properties
• Commercial properties

However, NRIs cannot purchase:

• Agricultural land
• Plantations
• Farmhouses

NRIs must obtain special permission from the RBI if they wish to purchase such restricted properties.

Documents Required for NRIs Purchasing Property

NRIs fall under two categories: salaried individuals and self-employed individuals.

For Salaried NRIs

• Indian passport
• PIO/OCI card (if applicable)
• PAN card
• Power of Attorney (PoA) documents
• Latest salary pay slips (past 6 months)
• Income tax returns (past 2 years)
• Copy of employment contract
• Appointment letter (if applicable)
• Work permit (if applicable)
• Bank statements (past 1 year) from an external account
• Bank statements (past 1 year) from an NRE/NRO account
• Address Proof
• Credit Report
• Property-related Documents

For Self-Employed NRIs

NRIs who are self-employed individuals looking to buy real estate in India should have the following documents:

• Passport
• PIO/OCI card (if applicable)
• Balance sheet (past 3 years)
• Profit and loss accounts (past 3 years)
• Bank statements (past 6 months for personal and company accounts)
• Income tax returns (past 3 years)
• Address proof
• Power of Attorney (PoA) documents
• Credit reports
• Property-related documents

Essential Property Documents for NRIs

• Title Deed
• Authorized building plan
• No Objection Certificates (NOC) from relevant authorities (Electricity Board, Pollution Control Board, Water Department, etc.)
• Sale agreement (with builder or previous owner)
• Possession letter
• Khata certificate and extracts
• Encumbrance certificate (if there was a previous owner)
• Occupancy certificate

Power of Attorney (PoA)

NRIs must appoint a Power of Attorney (PoA) to manage property transactions in India.

Types of PoA

• Special PoA: Limited to specific transactions.
• General PoA: Grants broader powers for multiple transactions.
• Durable PoA: Continues even if the grantor is incapacitated.

Functions of PoA in Real Estate

A PoA can:

• Mortgage, sell, lease, or collect rent on behalf of the owner
• Manage and settle disputes
• Sign documents and enter into contracts with banks or insurance companies

Income Tax Requirements for NRIs

NRIs must file income tax returns if:

• Their taxable income in India exceeds Rs. 1.6 lakhs per year
• They earn short-term or long-term capital gains from selling property

Exemptions from Filing Income Tax

NRIs are exempt from filing tax returns if:

• Their long-term capital gains come from equity shares or equity mutual funds
• Tax is already deducted at source (TDS) on their income

Steps for Granting Power of Attorney (PoA)

• Draft the PoA agreement on non-judicial stamp paper.
• Visit the Sub-Registrar’s office with legal representatives and two witnesses.
• Provide ID proof, two passport-size photographs, and a copy of the PoA agreement.
• Signatures, photographs, and fingerprints will be collected.
• Return to the Sub-Registrar’s office to collect the registered PoA.

Home Loan Guidelines for NRIs

NRIs can apply for home loans to purchase property in India. The guidelines include:

• Loan repayment tenure and amount depend on the lending bank.
• Interest rates are set by the RBI/National Housing Bank.
• Loan funds cannot be credited to an NRE/FCNR account.
• Loan repayments must be made through normal banking channels.

Documents Required for Home Loans

• Copy of passport and work visa
• Address proof (utility bill, lease agreement, or bank statement)
• Salary statement (past 6 months)
• NRE/NRO bank account statements (past 6 months)
• Power of Attorney (PoA) documents
• Two passport-size photographs
• PAN card
• Relevant documents based on salaried/self-employed status

Capital Gains Tax (CGT) for NRIs

Taxable Assets Under CGT

• House property
• Buildings
• Jewellery

Exemptions from CGT

NRIs can get exemptions from CGT if:

• They reinvest in NHAI bonds or Rural Electrification Corporation bonds
• They reinvest long-term capital gains into purchasing another house (exemption is the lower of the capital gains amount or the reinvestment amount)

Repatriation of Funds by NRIs

If the property was purchased using foreign exchange, the amount repatriated cannot exceed:

• The amount paid in foreign exchange through normal banking channels
• The amount paid via NRE debit/FCNR account

If the property was purchased with Indian rupees, NRIs can remit a maximum of 1 million USD per financial year from an NRO account.

Taxation on Income from Selling or Renting Property

For NRI investment in India, some of the assets taxable under CGT include:

• Rental income from property is taxable in India.
• If the house is not the sole residential property owned by the individual, its annual value is taxable.
• Capital gains from property sales are taxable.