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	Definition of a NRI? What is the position regarding acquisition of immovable property by a NRI? Can NRI avail loans for purchase of immovable property? For what purpose loans are available to NRI’s? Meaning of “Own Contribution” and how this is to be paid? What are the documents to be submitted along with the application? What security will NRI’s need to provide? Can NRI’s give power of attorney in favour of a person of his/her choice in India to complete loan formalities on his/her behalf? Can the house occupied by NRI’s be let out? What is the position of “income from house property” on such property? What is the position of Capital Gains on sale of residential house property? 1. Definition of a NRI? Under the Foreign Exchange Management Act, 1999, Non-resident Indians (NRI) are: Indian citizens who stay abroad for employment or are carrying on business or vocation outside India or for any other purpose in circumstances indicating an uncertain period of stay abroad; OR, Government servants who are posted abroad on duty with the Indian Mission and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources; OR, Government servants deputed abroad on assignments with foreign Government or regional / international agencies like the World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP); OR, Official of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad. top of page 2. What is the position regarding acquisition of immovable property by a NRI? NRI’s holding Indian passport do not require any permission from Reserve Bank of India (RBI) for acquiring immovable property for bona fide residential purposes. NRI’s holding Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO account or NRE account or FCNR account. RBI has given general permission to NRI’s holding foreign passport (i.e. foreign citizens of Indian origin) to acquire, hold transfer or dispose off by way of sale or inheritance immovable properties situated in India provided : The property is for the purchaser’s bona fide residential purposes. The purchase consideration is met either by remittance of funds from abroad through normal banking channels or out of NRE account of FCNR account. Foreign citizens of Indian origin are required to declare the properties to RBI within a period of 90 days from the date of purchase in form IPI 7. The following documents are required to be submitted along with the declaration: A certified copy of the purchase deed or a certificate from the Co-operative Housing Society or an Association of the apartment owners as an evidence of transfer / registration of the property in the declarant’s name. Certificate from the declarant’s bankers in India evidencing receipt of inward remittance in foreign exchange through normal banking channel or withdrawal of funds from declarant’s NRE account or FCNR account or FCNR Special Deposit Account and payment of consideration for the property out of those funds. Where a foreign citizen of Indian origin wishes to acquire a property out of the funds held in NRO account then the permission of RBI is required which can be applied for in form IPI 1. Where a foreign citizen of Indian origin wishes to acquire a property from the sale proceeds of another property, prior permission of RBI is essential and may be obtained by applying in form IPI 1. Any number of properties can be acquired by NRI’s regardless of whether they are holding Indian passport provided they are required for bona fide residential purposes. A person residing outside India who has established in India a branch or place of business (but not mere a liaison office) in accordance with RBI regulations, can acquire any immovable property in India, which is necessary for incidental to carry on such activity. top of page 3. Can NRI avail loans for purchase of immovable property? Yes, but the loan amount shall not exceed 85% of the cost of the property proposed to be purchased. Moreover, the actual loan which can be availed shall exclusively depend on the discretion of the lending financial institution. top of page 4. For what purpose loans are available to NRI’s? NRI’s can avail loans for buying or constructing a new home, extending or improving upon an existing home or even for buying a plot of land. top of page 5. Meaning of “Own Contribution” and how this is to be paid? Own contribution is the cost of the dwelling unit financed less the loan amount availed from a lending financial institution. The own contribution should be met from direct remittances from abroad through normal banking channels or from the Non-resident (External) account / Non-resident (Ordinary) or the Non-resident special rupee account in India. top of page 6. What are the documents to be submitted along with the application? The following documents are required along with the application form: Photocopy of the labour contract duly countersigned by the employer (translated to English for Non-English documents). Latest salary certificate (in English) specifying the following: Name (as it appears in the Passport) Date of Joining Passport Number Designation Perquisites and Salary Photocopy of Labour card / Identity Card Photocopy of valid resident visa stamped on the passport. Photocopy of monthly statement of local bank account. Property related documents top of page 7. What security will NRI’s need to provide? Typically the security for the loan is first mortgage of the property to be financed by the financial institution, normally, by way of deposit of title deeds and / or such other collateral security as may be necessary. In addition interim security may be required, if the property is under construction. Collateral or interim security could be in the form of assignment of life insurance policies, surrender value of which is at least equal to the loan amount, pledge of shares and such other investments. top of page 8. Can NRI’s give power of attorney in favour of a person of his/her choice in India to complete loan formalities on his/her behalf? Yes, and the Power of Attorney should be executed as per drafts provided by the housing finance company. The power of Attorney can be given to any person of his/her choice in India. top of page 9. Can the house occupied by NRI’s be let out? The RBI has granted general permission to NRI’s and foreign citizens of Indian origin, to let out their residential properties acquired for their bona fide purpose but which on account of their residence abroad, are not required for their immediate residential purpose. The rental income cannot be repatriated. Thus rental income must be credited to the NRO account / resident accounts in India. top of page 10. What is the position of “income from house property” on such property? The owner of the property is liable to pay tax on income from house property. The term “owner” also includes deemed owner. One house property self occupied by the owner for residential purpose does not account for income from house property. If the building or part thereof is used by the owner himself / herself for the purpose of his / her own business or profession then there will be no income from house property in respect of such building provided the profit of such business or profession is chargeable to income tax separately. Whenever a person who owns a house property in one city is transferred to another city, it has been specifically provided that the annual value of such a property would be taken to be nil subject to the fulfillment of the following conditions: The assessee must own only one house property which is meant for his / her own residence. He / she cannot occupy that house property because of his employment, business, profession, etc. away from the place. The property is not actually let out or any benefit is derived there from. No other deduction will be available to the assessee. top of page 11. What is the position of Capital Gains on sale of residential house property? Capital gains arising on transfer of a residential house, comprising buildings or land appurtenant thereto, is exempt if the capital gains is utilized in acquiring another residential house, either by purchase or by construction. The conditions required to be fulfilled to claim exemption are: The capital asset being transferred is a residential house property the income of which is chargeable under the head “Income from House property”. The house property is a long term asset i.e. held by the owner for more than 3 years. The house property has been transferred by an individual or a HUF. The tax payer purchases or constructs a new residential house within the specified time.