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NRIs' rights in India related to property
  • March 9, 2021
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NRIs’ rights to inherit immovable property in India are governed by Indian laws.

The provisions of the Foreign Exchange Management Act (FEMA) and the Income Tax Act apply to immovable property succession and continuing possession by NRIs or PIOs. This law is investigated.

When it comes to non-residents owning land in India, things can get complicated. NRIs will own a wide variety of assets in the country where they were born. The same cannot be said, however, about the inheritance rules that refer to those lands.

NRIs' rights in India related to property

NRIs will inherit various types of properties in India.

Any immovable property in India, whether residential or commercial, may be inherited by a non-resident Indian (NRI) or an individual of Indian descent (PIO). They may also inherit agricultural land or a farmhouse that they would not otherwise be able to obtain by buying. Anyone, including family, will leave property to an NRI. Under certain circumstances, an NRI or PIO will inherit a property in India from another NRI or PIO. If the inheritance is in the hands of a person of a foreign country who lives outside of India, the RBI must approve it.

It is necessary to remember that the individual from whom the NRI inherits the property must have inherited the property in compliance with the terms of the legislation governing foreign exchange in force at the time. As a result, if the property in question was purchased without securing permission from the Reserve Bank of India when permission was necessary, the NRI or PIO cannot inherit the property without the RBI’s express permission.

 

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In the time of the property’s succession, there is a tax incidence.

There is no tax occurrence at the time of inheritance since Estate Duty was repealed several years ago. As a result, neither the deceased’s representative nor the inheritor would pay any tax at the time of inheritance. If an individual transfers the same property as a gift during his lifetime and the value of the gift reaches Rs 50,000, the receiver must consider the market value of the property acquired as a gift in his net income unless he is one of the donor’s listed relatives.

 

Continued possession of ancestral land is subject to taxation.

The property can be held by the NRI or PIO, or it can be sold. And if the NRI wishes to sell the home, there are some tax consequences for the period that he owns it. Since wealth tax has been abolished in India, being the owner of immovable property has no wealth tax consequences for an NRI.

If the NRI is a non-resident for income tax purposes because of his stay in India, he would be required to report the income from the ancestral property in India. If the NRI wishes to leave the ancestral house property vacant for the purpose of living in it during his visit to India, he would not be required to have any revenue for taxation purposes.

If he owns more than one house home, including the inherited property, and leaves them empty, he must pick one to be self-occupied and provide notional rental income on the other properties, depending on the amount of rent the property will fetch in the market. If the NRI’s gross income from all sources, including rented and/or notional rental income, exceeds the basic exemption cap, he must file an income tax return in India.

NRIs' rights in India related to property

Incidence of taxation at the time of the property’s sale or donation

An NRI may either gift or sell the inherited property and remit the proceeds outside of India. The gifting of a property by an NRI is subject to such conditions. The inherited property may only be gifted to an individual who is a native of India, an NRI, or a PIO. He can’t give that to someone who isn’t one of these. When a donation is given to a non-relative, the beneficiary must pay tax on the fair value of the land.

If an NRI/PIO wishes to sell his or her property to another NRI/PIO, the RBI must first grant approval. Similarly, if an NRI wishes to sell ancestral agricultural property, plantation land, or a farmhouse, he or she can sell it to an Indian resident or person. If the NRI owned or inherited the property while a citizen of India, he may dispose of it in any manner he sees fit, including by selling, rent, transfer, or gift.

Foreign nationals of non-Indian descent who live outside India are not entitled to obtain any immovable property in India unless they inherit it from an individual who was a citizen of India. Foreign nationals of non-Indian descent who have inherited immovable property in India with the RBI’s special approval are unable to sell or move the property without any of the RBI’s permission.

 

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An NRI’s capital gains on inherited land are taxed as ordinary income.

If the NRI sells the land, the individual who buys it must subtract income tax at the applicable rates under Section 195 of the Income Tax Act on the taxable value of capital gains.

If the inheritor and the deceased have a cumulative ownership time of more than 24 months, the proceeds from the transaction would be considered long-term capital gains. If the property was sold after April 1, 2001, the expense at which it was bought by each of the former owners would be used to calculate capital gains. If the property was purchased before April 1, 2001, the purchaser has the option of using the selling valuation as of April 1, 2001, as the rate and applying indexation to it to calculate capital gains.

The NRI has the choice of paying 20% tax on such long-term capital gains or taking advantage of Section 54 and 54F tax incentives by investing in a new residential home. Alternatively, the NRI will invest up to Rs 50 lakhs per year in capital gains bonds issued by designated institutions such as the Rural Electrification Corporation, the National Highways Authority of India, the Power Finance Corporation, and the Railway Finance Corporation, subject to time limits.

 

Repatriation of the ancestral property’s selling proceeds

An NRI will repatriate up to one million dollars in selling proceeds per year without obtaining RBI permission, given that all taxes on the sale of the property have been paid in India. If the amount to be remitted crosses one million dollars, however, special RBI approval would be needed.

 

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Disclaimer: The views of this expressed above are for informational purposes only based on the industry reports & related news stories. Navimumbaihouses.com does not guarantee the accuracy of this article, completeness, or reliability of the information & shall not be held responsible for any action taken based on the published information.
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