NRI Investment Norms In Real Estate Eased
Among the various investment options available for non-resident Indians (NRIs), real estate plays a dominant role due to its rate of appreciation and the periodical returns on the investment. Whether it is a residential or commercial property investment, NRIs can invest through their representatives in India by giving a power of attorney to act on their behalf.
A copy of the power of attorney should be notarised with the Indian consulate in the respective country which will provide authenticity on their behalf for an investment in property in India. The property can be registered in the name of the NRI, and the power of attorney holder can sign on their behalf by producing a copy of the power of attorney to the appropriate authorities .
If a NRI decides to acquire a house through a power of attorney , he can still proceed abroad. This is because, for the purposes of income tax and wealth tax, the power of attorney holder accompanied by the actual possession of the property through the agreement to sell is deemed to be the owner of the property for the purposes of Section 27 of the Income Tax Act.
A general power of attorney in favour of the NRI's relatives will enable them to sell the property and arrange to repatriate the sale proceeds through an authorised foreign exchange dealer after payment of the taxes due. They can also rent out the property and credit the proceeds to a NRO account.
Similarly, NRIs can seek home loans through their power of attorney holder and documents can be signed on their behalf while investing in property. They can issue the EMI cheques on behalf of their relatives here as the Reserve Bank of India (RBI) has relaxed the norms of operation of joint accounts considerably recently.
A significant development is the proliferation of housing finance companies and banks in countries abroad. In the Gulf, Dubai boasts of many housing finance companies and banks having arrangements with exchange houses. Home loans can be processed through overseas representative offices for NRIs. As a result, the power of attorney enables their relatives to interact directly with developers in India. A number of nationalised banks have remittance arrangements with the exchange houses.
The RBI also said that any citizen who was earlier residing in a foreign country can own or transfer property or other assets in that nation if it was acquired during the time of his residence there. A person resident in India is free to hold, own, transfer or invest in foreign currency, foreign security or any property situated outside India if such currency, security or property was acquired, held or owned when he was resident outside India or inherited from a person who was resident outside India.
Similarly, returning NRIs can retain and reinvest the income earned on investments made under the Liberalised Remittance Scheme. There was lack of clarity earlier as to whether the income earned on assets held abroad by NRIs who have returned to India for permanent settlement and assets held outside India through Liberalised Remittance Scheme are required to be realised and repatriated to India. Now, the RBI has clarified that income and sale proceeds of assets held abroad need not be repatriated to India and can be retained and invested outside India.
Foreign exchange rules eased
The RBI has recently allowed NRIs to hold joint accounts with Indian residents, a move that helps increase remittances. The central bank has also permitted sale proceeds of foreign investments in India to accrue to NRE or FCNR accounts after tax deductions, under the Foreign Exchange Management Act (FEMA).
Foreign Currency Non-Resident (FCNR) account and Non-resident External (NRE) account are opened by NRIs with Indian banks. As per the recommendations of the committee constituted to review facilities available under FEMA, the central bank has taken such steps.
The RBI has allowed residents of India to include nonresident close relative in their resident bank accounts on 'former or survivor' basis.
However, such non-resident relative will not be eligible to operate the account during the resident's lifetime. It also permitted NRIs to open NRE and FCNR accounts with their resident close relatives . In this case, the resident relative can operate the account as a power of attorney holder.