How Can NRIs Use Powers Of Attorney To Handle Real Estate In India?
NRIs Use Powers Of Attorney- For Non-Resident Indians (NRIs) who own real estate in India, a POA can be a helpful document. NRIs can’t physically handle the financial and legal actions, thus they need someone to act on their behalf and fulfil the requirements. The NRIs are assisted in reaching this goal by a POA. A Power of Attorney (POA) is a written directive issued by one person to another to act on his or her behalf. The grantor, donor, or principal of the deed is referred to as such, and the person acting on another’s behalf is referred to as the attorney or the agent.
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The Non-Resident Indians (NRIs)’ real estate transactions heavily rely on Powers of Attorney (POAs). According to the Registration Act of 1908, both parties must be physically present when an NRI sells or buys a home property and registers the transaction. A reliable individual can be named as the Power of Attorney if either the buyer or seller is unable to sign the paperwork in person. An appointed POA for real estate transactions needs to be registered with the appropriate sub-registrar. The Indian Consulate or Embassy of the nation where the buyer resides must certify the POA if the buyer is an NRI.
A POA may be applied to real estate for the following reasons:
- An asset may be mortgaged, sold, leased, exchanged, granted, financed with a loan, or rented out.
- Manage and resolve conflicts
- To enter into contracts or deal with bonds, perform the necessary actions as directed by banks, insurance companies, or financial organisations.
- Taxes must be paid
- Getting a mortgage or loan to improve your home.
- Insurance for the building
Various types of POAs:
The NRIs can utilise three different forms of POAs for their advantage.
Unique POA
A power of attorney is constrained and limited to a particular purpose with this sort of POA. A particular POA could be transaction-specific and expire once the transaction is completed.
Standard POA
A general power of attorney gives the attorney more authority than a special POA, particularly when it comes to making decisions on behalf of the principle. Additionally, the agent is free to conduct a variety of operations without any restrictions on the transactions.
Durable POA
A durable POA, as the name implies, is effective until specifically revoked by the grantor. Additionally, in the event that the grantor loses mental capacity, the agent can take over entire management of the grantor’s property.
It’s crucial to keep in mind that NRIs can use a specific POA to permit someone to purchase or sell real estate on their behalf. After stamp duty is paid, the POA must, however, be registered in India. A person who buys a property through GPA must have both the physical possession of the property and a registered sale deed.
A word of caution
When purchasing a property through POA, which is signed by an NRI, the buyer should exercise utmost caution. A little error in the execution of the POA can result in the nullification of a sale deed. There have been numerous instances where an NRI’s attorney hid his status in order to avoid Tax Deducted at Source (TDS). However, it is best to refrain from this practice. To be aware of, an NRI must pay TDS at a rate of 20–30% when selling a property in India.
Another myth is the idea that the POA holder should get remuneration for a property sale. The resident Indian buyer should typically only pay the NRI vendor through his NRO/NRE account. An NRI can give the POA holder permission to collect money on his behalf, but he cannot give permission for money to be paid to the POA holder. If there are numerous NRI sellers, payments should be made in accordance to each one’s ownership interest in the property. Payment made straight to the POA holder may result in future tax issues for the buyer.
How is POA carried out in India?
In the event that the NRI is in India, he may execute the POA here. The steps are listed below.
- Get the appropriate POA content prepared and drafted on 100-rupee non-judicial stamp paper.
- Visit the sub-registrar’s office with two representatives, witnesses, and other people. Don’t forget to bring the witnesses’ photo IDs, a photocopy of the POA, and the original copy.
- The needed POA must be signed by the grantor and the attorney in front of the sub-registrar & in the presence of the witnesses.
- Pick up the registered copy of the POA within the deadline, which could be three to five days from then.
How should the POA be carried out if the NRI has settled abroad?
There are two ways to carry out a POA in such cases.
Legalisation
The official of the Indian Embassy in this instance authenticates the notary’s signatures. While obtaining the POA is not required at the time of execution, the grantor must do so within three months after receiving it in India. According to Section 2 (17) of the Indian Stamp Act of 1899, the stamp tax is due.
Apostallisation
Any act, including a POA, carried out outside of India must be proved through the apostallization process. A certificate with an apostille authenticates and verifies the signer’s signature, for information. The 1961 Hague Convention regulates the procedure. However, it must also abide by Indian regulations, such as the Power of Attorney Act of 1882 and the Indian Registration Act of 1908. Therefore, if the POA is used outside of India, the holder must likewise register the POA there.
Multiple powers of attorney may be appointed by NRIs to conduct various financial activities in India. To avoid a conflict of interest between many powers of attorneys for the same transaction. It is best to designate a single power of attorney for each transaction. In addition, the grantor has the right to withdraw the POA at any time if the agent behaves improperly. If NRI passes away, develops a mental illness, or is deemed insolvent, it may also be revoked.
Conclusion
Although a POA is a legitimate technique to give someone permission to handle property on behalf of the owner. There have been several instances where misuse of a POA has resulted in civil and criminal penalties. The POA should therefore always be drafted and processed by a lawyer, especially when it comes to real estate & other transactions involving substantial sums of money.
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