Non Resident Indian (NRI) is a citizen of Indian, who remains overseas for employment/carrying on business or profession outside Indian or remains overseas under circumstances showing an intention for an uncertain duration of stay overseas is a non-resident. Non-resident foreign citizens of Indian Origin are treated at par with Non Resident Indian (NRIs).
Person of Indian Origin (PIO) (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who -
- At any time, held Indian passport, or
- Who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
Any person of full age and capacity -
Who is a citizen of a different country, but was a citizen of India at the time of, or at any time after, the beginning of the constitution, or
Who is a citizen of another country, but was qualified 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 area that became part of India after the 15th Day of August, 1947. Who is a child of such a citizen, or
A person, who is minor child of a person mentioned in previous clause
Provided that no person, who is or had been a citizen of Pakistan, Bangladesh shall be capable for signing up as an Overseas Citizen of India.
Under the standard permission granted by RBI, the following categories can freely buy immovable property in India -
- Non-Resident Indian (NRI) - that is a citizen of India living outside India.
- Person of Indian Origin (PIO) - that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who at any time, kept Indian passport or
- Indian citizens abroad for any other purpose in the situations indicating a definite intention to stay outside India for an indefinite period.
- Who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955)
The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land/plantation property/farm house in India. OCI can buy immovable property in India except agricultural land/plantation property/farmhouse.
Since basic permission is not available to NRI/PIO to obtain agricultural and/plantation property/farm house in India, such proposals will require specific agreement of Reserve Bank and the proposals are considered in consultation with the Government of India.
The mere acquisition of property does not bring in income tax. However, any income acquiring from the ownership of it, in the form of rent (if it is let out)/annual value of the house (if is not let out and it is not the only non commercial/residential property possessed by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part thereof is taxable in the hands of the owner.
The Government of India has provided general permission for NRI/PIO/OCI for buying property in India and they do not have to pay any taxes even while buying property in India. However, taxes have to be paid if they are selling this property. Rental income attained is taxable in India, and they will have to obtain a PAN and file return of income if they have rented this property. On sale of the property, the profit on sale shall be subject to capital gains. If they have kept the property for less than or equal to 3 years after taking actual ownership then the gains would be short term capital gains, which are to be included in their total income as tax as per the normal slab rates shall be payable and if the property has been held for more than 3 years then the resultant gain would be long term capital gains subject to 20% tax plus applicable cess.
Yes. Long-term and short-term capital profits are taxable in the hands of non-residents.
Type of asset: - web like house property, land and building, jewellery, development rights etc. Rate of tax deduction at source (TDS) Long term - 20.6% Short term - 30.9% Exemption available (only for long term capital gains) - The long term capital gains developing on sale of a residential house can be invested in buying/constructing another residential house, within the given time. The exemption is restricted to the amount of capital gains or amount invested in new residential house, whichever is lower. If the amount of capital gains is invested in bonds of National Highways Authority of India (NHAI) or Rural Electrification Corporation, then the entire capital gains is exempted, else the proportionate gain is excused. As per the financial budget 2007-08, a capital of Rs.50 lakhs has been added on investment that can be made in capital tax saving bonds.
In case the non-resident pays any tax on capital benefits developing in India, he would generally be able to acquire a tax credit in respect of the taxes paid in India in the home country, because the income in India would also be involved in the country of tax residence. The amount of the tax credit as also the basis of calculating the tax credit that can be claimed are specified in the respective country’s DTAA and is also reliant on the laws of the home country where the tax payer is a tax resident.
If the property was attained out of foreign exchange sources i.e. remitted through usual banking channels/by debit to NRE/FCNR(B) account, the amount to be repatriated should not surpass the amount paid for the property -
A. foreign exchange received through normal banking channel or
B. By debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR(B) account. Repatriation of sale proceeds of residential property purchased by NRI’s/PIO’s out of foreign exchange is limited to not more than two such properties. Capital gains, if any, may be credited to the NRI account from where the NRI’s/PIO’s may repatriate an account up to USD one million, per financial year, as discussed below.
If the property was acquired out of Rupee sources, NRI/PIO may remit an amount up to USD one million, per financial year, out of the balances held in the NRO account (inclusive of sale proceeds of web acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance. The NRI/PIO may use this facility to remit capital gains, where the acquisition of the subject property was made by funds sourced by remittance through normal banking channels/by debit to NRE/FCNR(B) account.
The rental income, being a current account transaction, is repatriable, subject to the suitable deduction of tax and the certification there of by a Chartered Accountant in practice. Repatriation of sale continues is subject to certain conditions. The amount of repatriation cannot exceed the amount paid for acquisition of the immovable property in foreign exchange.
An official dealer or a housing finance organization in India authorized by the National Housing Bank may provide housing loan to a non-resident Indian or a person of Indian origin existing outside India for purchasing a residential accommodation in India, subject to the subsequent conditions, namely -
- The loan amount shall not be credited to Non-resident External (NRE)/Foreign Currency Non-resident (FCNR)/Non-resident non-repartiable (NRNR) account of the borrower
- The loan shall be fully secured by equitable mortgage by deposit of title deal of the property suggested to be acquired, and if necessary, also be loan on the borrower’s other web in India.
- The instalment of loan, interest and other charges, if any, shall be paid by the debtor by remittances from outside India through normal banking channels or out of funds in his Non-resident External (NRE)/Foreign Currency Non-resident
(FCNR)/Non-resident Non-repatriable (NRNR)/Non-resident Ordinary (NRO)/non-resident Special Rupee (NRSR) account in India, or out of rental income produced from renting out the property acquired by utilization of the loan or by any relative of the borrower in India by crediting the borrower’s loan account through the bank account of such relative (The word ‘relative’ means ‘relative’ as defined in section 6 of the Companies Act, 1956.)
- The rate of interest on the loan shall be in accordance to the directives issued by the Reserve Bank of India or, as the case may be, the National Housing Bank.
If you are an NRI/OCI/PIO, you would have to file your income tax returns if you meet either of these conditions -
- Your taxable income in India during the year was above the basic exemption limit of 1.6 lakh OR Your taxable income in India during the year was above the basic exemption limit of 1.6 lakh OR
- You have earned short-term or long-term capital gains from sale of any investments or web, even if the gains are less than the basic exemption limit.
Note- The enhanced exemption limit for senior citizens and women is acceptable only to residents and not to non-residents.
Yes, there are two exceptions -
If your taxable income comprised only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, you do not have to file your tax returns.
If you attained long term capital gains from the sale of equity shares or equity mutual funds, you do not have to pay any tax and thus you do not have to include that in your tax return.
You may also file a tax return if you have to claim a refund. This may occur where the tax deducted at source is more than the real tax liability. Assume your taxable income for the year was below 1.6 lakh but the bank deducted tax at source on your interest amount, you can claim a refund by filing your tax return. Another illustration is when you have a capital loss that can be set-off against capital gains. Tax may have been deducted at source on the capital gains, but you can set-off (or carry forward) money loss against the gain and lower your actual tax obligation. In such cases, you would need to file a tax return.
Typically, you could file your return either by giving a power of attorney to someone in India or by submitting your form and documents to a tax expert in India who would then file returns on your behalf. But nowadays, the easiest option for NRIs to file their Indian tax returns is by using the online platform. There are numerous options to file online.