Transfer Indian Property: For NRI, PIO (OCI), India

by Whytecroft Ford | Feb 8, 2024 | Indian Law, Indian Law Weekly Round-Up, NRI Legal Services, OCI, PAN, Power of Attorney, Taxation

To transfer Indian property, as a non-resident Indian (NRI) and PIO (OCI) property owner, you should understand the legal procedures and requirements for transferring immovable property in India. Furthermore, what are the options available to you in accordance with the Government of India guidelines?

Before initiating such transactions, you must comply with relevant laws and regulations.

This includes understanding the legal documentation required. Tax implications and restrictions may apply to NRIs when transferring property in India. This way, you can ensure a more focused approach to transferring your property in India.

There may be some preliminary measures of preparation that you may be able to initiate from abroad.

This article provides an overview of three ways of transferring Indian immovable assets:

Transfer by sale
Transfer by gift
Transfer by mortgage

1. Transfer Indian Property By Sale

The sale of property in India by NRIs, PIOs, and foreign nationals of non-Indian origin is subject to certain restrictions. These regulations aim to ensure that the sale of property in India is conducted in a transparent and legal manner. Also, to protect the interests of all parties involved.

NRI

NRIs can sell property in India to a person resident in India, an NRI, or a PIO.

PIO/OCI

PIOs can sell property in India to a resident Indian, an NRI, or a PIO. For sale to PIO prior approval from the Reserve Bank is required.

Foreign National

Foreign nationals of non-Indian origin: can sell property in India, with prior approval from the Reserve Bank, to a person resident in India, an NRI, or a PIO.

Other Important Factors

The Reserve Bank’s approval may be required before the property can be sold to a PIO or OCI.

NRI/ PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India.

Foreign nationals of non-Indian origin residents outside India would need prior approval of the Reserve Bank to sell agricultural land/plantation property/ farm house in India.

2. Transfer Indian Property By Gift

The second manner in which property can be transferred is by way of gift.

NRIs/PIOs are allowed to gift residential/commercial property to: – a person who is a resident in India – An NRI – A PIO.

However, if a foreign national of non-Indian origin wishes to receive a gift of residential/commercial property from an NRI/PIO, they must obtain prior approval from the Reserve Bank of India.

3. Transfer Indian Property By Mortgage

The third way of a property transfer is by way of a mortgage. NRIs/PIOs can mortgage to an authorised dealer or housing finance institution in India without the approval of the Reserve Bank.

NRIs/PIOs must obtain prior approval from the Reserve Bank to mortgage their property to a party abroad.

Foreign nationals of non-Indian origin can only mortgage their property with prior approval from the Reserve Bank.

A foreign company that has established a Branch Office or other place of business in accordance with FERA/FEMA regulations has general permission to mortgage the property with an authorised dealer in India.

(Source: Ministry of External Affairs India. (2003, October 10). Master Circular Circular No.27)

Reserve Bank Approval

For the transfer of Indian property, prior approval from RBI maybe mandatory. This is because the (FEMA) regulations govern the transfer of immovable property by NRIs and PIOs.

The approval from RBI is necessary to ensure compliance with FEMA regulations and to prevent any illegal transactions.

To obtain prior approval from RBI, NRIs and PIOs need to submit an application in the prescribed format along with the necessary documents to the designated authorised dealer bank.

The application includes details such as the reason for the transfer, the value of the property, and the mode of payment.

Once the application is submitted, the authorised dealer bank will forward it to the RBI for approval. The RBI will review the application and grant approval if it meets the necessary requirements.

TAN & Indian Property

Another key update from the Indian government that NRIs should be aware of is related to the taxation of property transactions.

The government has introduced a new provision that requires NRIs to obtain a Tax Deduction and Collection Account Number (TAN) when selling any property in India.

Failure to comply with this requirement can lead to penalties and legal consequences.

The TAN can be obtained by submitting an application to the Income Tax Department and the relevant documentation.

It is important for NRIs to stay updated on such regulatory updates to ensure compliance and avoid any legal complications.

PAN is also a mandatory requirement.

Summary

Finally, the legal documents, processes and systems involved in transferring property in India can involve several layers and subsequent time.

For Indian-origin individuals, seeking professional advice or creating a basic structure of understanding from a professional can help gain clarity on the options available. By doing so, you may be able to approach your property matter in a more effective manner.

Lastly, don’t forget that apart from the legal implications and requirements for property transfer, the on-ground work in India also requires consideration.

How we can help

We may be able to assist with property matters in India, subject to your circumstances and property location etc. Please don’t hesitate to contact us for further information.