outlookmoney.com: Buying Back Homeland

The law has=20 come a long way since the days of the Fera = regime, when=20 buying or selling of immovable property was = governed by=20 the citizenship of a person. Under Fema, the = thrust is=20 on residential status. But before we go into the = details=20 of the law, let's get the definitions straight. = An NRI=20 is an Indian citizen residing outside India. A = citizen=20 of another country is a PIO (person of Indian = origin) if=20 he has held an Indian passport at any time or if = he, his=20 father or his grandfather has been a citizen of = India. A=20 citizen of Pakistan, Bangladesh, Sri Lanka, = Afghanistan,=20 China, Iran, Nepal or Bhutan is not regarded as = a=20 PIO.

With the=20 emphasis on residential status, a foreign = citizen who is=20 a resident of India can buy and sell properties = without=20 prior approval from the RBI, subject to a = general ban on=20 citizens of the eight countries mentioned above = and=20 restrictions on buying certain properties.=20

A foreign=20 citizen of non-Indian origin cannot acquire = agriculture=20 land/farm house/plantation property in India = without the=20 prior approval of the RBI, whereas a foreign = citizen of=20 Indian origin can acquire such properties = without the=20 prior approval of the RBI but only by way of=20 inheritance. Leasing of immovable property for a = period=20 of five years or less is freely permitted.=20

The RBI does=20 not determine the residential status of a person = for the=20 purpose of acquisition of immovable property in = India.=20 Under Fema regulations, residential status is = determined=20 by operation of law. The onus is on the = individual to=20 prove his residential status, if questioned by = any other=20 authority.

Acquisition by way of purchase. = A general=20 permission is available to NRIs or PIOs to = purchase only=20 residential/ commercial property in India. There = is no=20 restriction on the number of = residential/commercial=20 properties that an NRI or a PIO can buy. The = name of a=20 foreign national of non-Indian origin cannot be = added as=20 a second holder of a residential/commercial = property=20 purchased by an NRI or a PIO.

While regulating = acquisition and=20 transfer of property, Fema stresses on = residential=20 status

A foreign=20 national of non-Indian origin, resident outside = India,=20 cannot acquire any immovable property in India = by way of=20 purchase without the RBI's nod. However, a = foreign=20 national of non-Indian origin, including a = citizen of=20 the eight countries mentioned above, may acquire = only=20 residential accommodation on lease, for not more = than=20 five years. He does not require the RBI's = permission for=20 this. A person resident outside India (that is, = an NRI,=20 a PIO or a foreign national of non-Indian = origin) cannot=20 acquire agricultural land/plantation/farm house = in India=20 by way of purchase.

Acquisition by way of gift. An = NRI or a=20 PIO may acquire residential/commercial property = by way=20 of gift from a resident of India, an NRI or a = PIO. = However, a=20 foreign national of non-Indian origin resident = outside=20 India cannot acquire residential/commercial = property in=20 India by way of gift. A person resident outside = India=20 cannot acquire agricultural land/plantation/farm = house=20 in India by way of gift.

Acquisition by way of inheritance. = A=20 person resident outside India can hold immovable = property in India acquired by way of inheritance = from a=20 person resident in India. Further, with the = approval of=20 the RBI, he may hold immovable property in India = acquired through inheritance from a person = resident=20 outside India, provided the bequeathor had = acquired the=20 property in accordance with Fema or the foreign = exchange=20 law in force at the time of acquisition.=20

Sale of=20 immovable property. An NRI can sell=20 residential/commercial property in India to a = person=20 resident in India, an NRI or a PIO. However, = a PIO = can sell=20 residential/commercial property in India only to = a=20 resident of India. He would need prior approval = of the=20 RBI for sale of residential/commercial property = in India=20 to an NRI or a PIO. A foreign national of = non-Indian=20 origin whether resident in India or outside = India would=20 require prior approval of the RBI for sale of=20 residential property in India acquired with the = specific=20 permission of the RBI to a person resident in = India or=20 outside India. An NRI or a PIO may sell his = agricultural=20 land/plantation/ farm house in India to an = Indian=20 citizen resident in India. However, a foreign = national=20 of non-Indian origin, resident outside India, = would=20 require prior approval of the RBI to sell = agricultural=20 land/plantation/farm house acquired in India.=20

Gift of=20 immovable property in India. An NRI or a PIO may = gift=20 residential/commercial property in India to a = person=20 resident in India, an NRI or a PIO. Further, an = NRI or a=20 PIO may gift agricultural land/plantation/farm = house in=20 India to an Indian citizen resident in India. = However, a=20 foreign national of non-Indian origin resident = outside=20 India would need prior approval of the RBI to = gift=20 agricultural land/plantation/ farm house = acquired by him=20 in India.

Acquisition of immovable property = for carrying=20 on a permitted activity in India. A person = resident=20 outside India who has established a liaison = office in=20 India in accordance with Fera/Fema regulations = cannot=20 purchase immovable property in India. = Practically, all=20 liaison offices in India acquire premises on = lease for=20 not more than five years for which no permission = is=20 required from the RBI. However, a person = resident=20 outside India who has established a branch = office or=20 other place of business in India in accordance = with=20 Fera/Fema regulations can purchase immovable = property in=20 India provided it is necessary for, or = incidental to,=20 carrying on the activity he is engaged in and = all=20 applicable laws have been complied with.=20

For details=20 on other related issues, you may approach the = chief=20 general manager, RBI, Foreign Investment = Division,=20 Central Office, Mumbai.

The author is a member of the Bombay = Chartered=20 Accountants' Society. http://www.bcasonline.org/=20 =