The Foreign Exchange Management (Overseas Investment, or OI) Rules, notified by the Reserve Bank of India (RBI) on 22 August 2022, supersedes the erstwhile provisions governing acquisition of immovable property abroad by a resident particular person.
As per these guidelines, no particular person resident in India shall purchase or switch any immovable property located exterior the nation with out the RBI’s permission, besides as offered within the guidelines. Therefore, it’s pertinent to know these guidelines earlier than buying or transferring such property. This article covers the varied permissible modes of acquisition of immovable property abroad, situations specified, and many others.
Acquisition from a resident Indian: A resident Indian can purchase immovable property exterior India by means of inheritance or present or buy from one other resident Indian, offered such resident Indian has acquired the property as per the regulation in power on the time of such acquisition.
Acquisition from a non-resident: A resident Indian could purchase immovable property exterior India from a non-resident:
a. By method of inheritance.
b. By method of buy out of international trade held in a resident international foreign money account (RFC), which is a financial savings account maintained in international foreign money for Non-Resident Indians, who’ve returned to India and maintain funds in international foreign money.
c. By method of buy out of the remittances despatched below the Liberalised Remittance Scheme (LRS) that enables remittances by resident people as much as $250,000 per monetary 12 months for any permitted present or capital account transaction or a mixture of each.
d. Jointly with a relative who’s an individual resident exterior India.
e. Out-of-income or sale proceeds of property exterior India (apart from Overseas Direct Investment or ODI).
Comparison of modifications
• Under the erstwhile rules, a resident Indian was allowed to collectively purchase, with a relative, immovable property exterior India, offered there was no outflow of funds from India. Under OI Rules 2022, no such restriction is positioned on fund outflow. Further, the definition of “relative” is now linked to the definition below Companies Act, 2013.
• It is specified {that a} resident Indian who has acquired abroad immovable property in accordance with the international trade provisions can switch such property by means of a present to a different eligible resident Indian. Thus, a resident Indian can purchase abroad immovable property by means of present from one other resident Indian however not from a non-resident.
• Income or sale proceeds of the property, apart from ODI, acquired abroad may also be used to accumulate immovable property exterior India. Therefore, such revenue may also be reinvested to purchase immovable property exterior India.
Other factors to be famous
• In case of a returning Indian, if an individual acquires an abroad immovable property when he was a resident exterior India, he can proceed to carry, personal, or switch such immovable property.
• If the revenue from the abroad immovable property acquired corresponding to lease, sale proceeds and many others. will not be reinvested, it needs to be introduced again to India inside a interval of 180 days from the date of such receipt.
• It is specified below the LRS that banks shouldn’t prolong any form of credit score services to resident people to facilitate capital account remittances. Therefore, it will not be attainable for the resident particular person to borrow funds from a financial institution and remit the identical for buying abroad immovable property.
• The abroad immovable property held by the resident particular person needs to be reported in his income-tax return below the schedule of international property. The revenue from such immovable property corresponding to lease, sale proceeds, and many others., would even be taxable in India as a resident can be topic to tax on his world revenue.
Concluding remarks
If a resident Indian is buying immovable property exterior India from one other resident Indian, the identical may be completed by inheritance or present or buy of the stated property. If the resident Indian is buying immovable property exterior India from a non-resident, the identical may be by inheritance or out of LRS or RFC account funds or collectively with a relative who’s an NRI or out of revenue from property exterior India (apart from ODI). It is advisable to work together with one’s financial institution earlier than continuing with any buy of abroad immovable property.
Mukesh Kumar M is accomplice, Swetha A is a senior supervisor and Karan Surana is an assistant supervisor at M2K Advisors LLP
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