• Who is an N R I ?
• What kind of Bank Accounts can be Operated by N R I's?

• What is the position regarding acquisition of immovable property by NRI?
• Can NRI avail loans for purchase of immovable property?
• For what purposes  are loans available to NRIs?
• What is meant by "Own Contribution"? How this "Own Contribution to be paid"?
• What are the common documents to be submitted along with the application?
• What security will NRIs have to provide?
• Can NRIs give a Power of Attorney in favor of a person of his choice in India to complete loan formalities on his behalf?
• Can the house occupied by NRI be let out?
• What is the position of income from house property on such property? 
• What is the position of capital gains on sale of residential house property?

Under the Foreign Exchange Management Act, 1999, Non-resident Indians are:

1. Indian citizens who stay abroad for employment or carrying on business or vocation outside India or for any other purpose in circumstances indicating an uncertain period of stay abroad; OR,
    

2. Government servants who are posted abroad on duty with the Indian Mission and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources; OR,
    

3. Government servants deputed abroad on assignments with foreign government or regional/international agencies like the World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP); OR, 4. Official of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.
    

Who can open and how? .

An existing bank account of an Indian national going abroad and becoming a non-resident Indian is automatically designated as non-resident (ordinary) account (NRO). An NRI can also open such ordinary accounts even by making remittances from abroad or by transfer from an existing non-resident account in India in his own name. Such accounts can be opened by overseas corporate bodies (OCBs). NRO accounts can be opened while an NRI is on a visit to India or simply by making remittances from abroad. NRO account can be in the sole name of an NRI or in joint names of more than one NRI or in joint names with any of the close relatives in India. In other types of joint accounts, prior permission of Reserve Bank of India (RBI) is required.
 

What types of account can be opened?
 

NRO account can be opened in the categories of current, savings, and recurring and term deposit accounts.

What type of transactions are permitted?
 

All types of transactions of deposits and withdrawals to and from NRO account are normally permitted. However, the RBI has prescribed certain transactions requires to be reported to RBI in prescribed forms.

Can the funds be repatriated ?
 

The funds can be freely withdrawn for the local disbursements without RBI approval. Interest is now repatriable.

Is interest earned exempt from tax?
 

Interest on NRE account is not exempt from Income tax and balances to the credit of NRE account are not exempt from wealth tax.

B) Non-resident external account (NRE)
 

Who can open and how?
 

NRI as well as OCBs are permitted to open NRE accounts. NRE accounts can be opened by depositing foreign currency along with the account opening application form. The account opening form may be signed by NRI abroad and the signature of NRIs may be verified by a bank abroad or by Indian Embassy or by notary public official abroad. NRE account can be opened during the visit to India by tendering foreign currency travellers cheques or foreign currency notes.

What types of account can be opened?
 

All types of account that is current, savings, recurring and term deposit can be opened under NRE accounts scheme. NRE accounts can be opened in single or joint name. However, in case or account opened in joint name, all the joint holders should be resident of external group of countries.

Can funds be repatriated ?
 

As per the Liberalized Exchange Rate Management System (LERMS) all the remittances of foreign exchange to NRE accounts are converted into Indian rupee at the market rate of exchange and credits are given in terms of Indian rupees. Similarly, at the time of repatriation, the amount to be repatriated is converted into the designated foreign currency at the prevailing market rate of exchange. NRE Account offers all the facilities of the NRO account plus complete repatriation without informing the reserve bank.

Is interest earned exempt from tax?
 

Interest on NRE account is exempt from Income tax and balances to the credit of NRE account are exempt from wealth tax.

Who can open and how?

All non resident Indians, resident in external group of countries and OCBs are eligible to open FCNR accounts. FCNR accounts are permitted only in four currencies :

1. Pound Sterling (GBP)

2. US Dollar (USD)

3. Euro

4. Japanese Yen (JPY)

The rate of interest on the above account vary for each type of designated currency.

What types of account can be opened?
 

FCNR account is permitted in the form of fixed deposits for a maximum period of three years. Current and savings accounts are not available under this scheme.

Is interest earned exempt from tax?
 

Interest earned on FCNR account is exempt from income tax and the balance in the account is exempted from wealth tax.

What are the options available to depositor at maturity?
 

There are three options available to a depositor at maturity of FCNR account :

1. To ask for the repayment in designated foreign currency.

2. To ask for the repayment in Indian rupees or in any foreign currency other than designated foreign currency.

3. To ask for the conversion of FCNR account into NRE fixed deposit.

How does it differ from NRE account?

The FCNR accounts, primarily differ from NRE account on the point of fact that the balance in FCNR account is denominated in designated foreign currency in which the account is opened and thus unlike NRE accounts, there is no loss either on account of difference between buying and selling rates or on account of fluctuation in exchange rates. The deposits in FCNR accounts can be withdrawn prior to maturity date.

Consequent to the liberalization in exchange control policy and procedures, certain relaxations in the existing regulations and procedures governing the acquisition, holdings, etc. of immovable property in India have been announced. The current position in therefore as under :

1. Non-resident Indians holding Indian passport do not require any permission from RBI for acquiring immovable property for bonafide residential purposes.
    

2. Non-resident Indians holding Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO account or NRE account or FCNR account.
    

3. RBI has given general permission to non resident Indians holding foreign passport (i.e. foreign citizens of Indian origin) to acquire, hold, transfer or dispose off by way of sale or inheritance immovable properties situated in India provided:
   
   a. The property is for the purchaser's bonafide residential purpose.
   
   b. The purchase consideration is met either by remittance of funds from abroad through normal banking channels or out of NRE  account or FCNR
    

4. Foreign citizens of Indian origin are required to declare the properties to RBI within a period of 90 days from the date of purchase in form IPI 7. The following documents must be submitted along with the declaration.
   
   a. A certified copy of the purchase deed or a certificate from the Cooperative Housing Society or an Association of the apartment owners as an evidence of transfer / registration of the property in the declarant's name.
   
   b. Certificate from the declarant's bankers in India evidencing receipt of inward remittance(s) in foreign exchange through normal banking channel or withdrawal of funds from declarant's NRE account or FCNR account or FCNR Special Deposit Account and payment of consideration for the property out of those funds.
    

5. Where a foreign citizen of Indian origin wishes to acquire a property out of funds held in NRO account then the permission from RBI will be required which can be applied for in form IPI 1.
    

6. Where a foreign citizen of Indian origin wishes to acquire a property from the sale proceeds of another property, prior permission of RBI is essential and may be obtained by applying in form IPI 1.
    

7. Any number of properties can be acquired by non-resident Indians regardless of whether they are holding Indian passport provided they are required for bonafide residential purposes.
    

8. A person resident outside India who has established in India a branch or place of business (but not a mere liaison office) in accordance with RBI regulations, can acquire any immovable property in India, which is necessary for incidental to carrying on such activity.

Own contribution is the cost of the dwelling unit financed less the loan amount. The own contribution should be met from direct remittances from abroad through normal banking channels or from the Non-resident (External) account / Non-resident (ordinary) or the Non-resident special rupee account in India.

• Photocopy of the labour contract duly countersigned by your employer (translated to English for Non English documents)
• Latest salary certificate (in English) specifying the following:
  1. Name (as it appears in the passport)
  2. Date of Joining
  3. Passport Number
  4. Designation
  5. Prerequisites and salary
  6. Photocopy of labour card / identity card
  7. Photocopy of valid resident visa stamped on the passport
  8. Photocopy of monthly statement of local bank account
  9. Property related documents
      

Typically the security for the loan is first mortgage of the property to be financed, normally, normally by way of deposit of title deeds and / or such other collateral security as may be necessary.

In addition interim security may be required, if the property is under construction. Collateral or interim security could be in the form of assignment of life insurance policies, surrender value of which is at least equal to the loan amount, pledge of shades and such other investments.

Yes, normally it is desirable to appoint a Power of Attorney in India to represent his in dealings in India. The Power of Attorney should be executed as per drafts provided by the housing finance company. The Power of Attorney can be given to any person of his choice in India.

The RBI has granted general permission to NRI's and foreign citizens of Indian origin, to let out their residential properties acquired for their bonafied residential purpose but which on account of their residence abroad, are not required for their immediate residential purpose. The rental income cannot be repartriated. Thus rental income must be credited to the NRO account / resident accounts in India.

The owner of the property is liable to pay tax on income from house property. The term "owner" also include deemed owner. One house property self occupied by the owner for residential purpose, then there will be no income from house property. If the buildin or part thereof is used by the owner himself for the purpose of his own business or profession then there will be no income from house property in respect of such building provided the profit of such business or profession is chargeable to income tax separately. Whenever a person who owns a house property in one city is transferred to another city, it has been specifically provided that the annual value of such a property would be taken to be nil subject to the fulfillment of following conditions: 

Capital gains arising on transfer of a residential house, comprising buildings or land appurtenant thereto, is exempt if the amount of capital gains is utilized in acquiring another residential house, either by purchase or by construction. The conditions required to be fulfilled to claim exception are: