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NRIs right to purchase property in India

Can NRIs buy real estate in India? Most people ask this question, and the answer to this question is yes. The RBI's circular now allows Non-Resident Indians to purchase certain types of property. However, other types of property can also be purchased after it is approved by obtaining special permits. NRIs buying real estate in India should understand the legal requirements for owning real estate within the country. According to the Foreign Exchange Management Act's (FEMA) provisions, Person of Indian Origin (PIO) and NRIs are treated the same when investing in real estate in India. Types of properties where NRIs can investNRI investors do not need to request special permission from RBI, nor do they need to send communications or intimations regarding the RBI. The RBI, through a circular, has granted general permission to NRIs for acquiring any number of residential or commercial properties. The income tax law also allows NRIs to own any amount of residential or commercial real estate. Joint ownershipNRIs can act as the sole owner or jointly purchase real estate with other NRIs. However, Indian residents or other persons who are prohibited from investing in real estate in India cannot become the co-owners of the property, regardless of the co-owner's contribution to the purchase. Property ownership after becoming NRIWhat if someone who owns a property in India later becomes an NRI? Such a person can still own that property in India even after residing outside India. NRIs are also allowed to continue to hold any agricultural land, plantation property, or farmhouse they owned when they become an NRI, which they are not allowed to purchase otherwise after becoming an NRI. It depends on when you bought it. The rent received from such property can be remitted after appropriate Indian taxes have been paid on such rent. Similarly, any NRI real estate can be sold or let out to anyone living in India. You can also gift or transfer any property other than agricultural land, farmhouse or plantation property to any NRI.Characteristicsof NRI Investment in India ·         NRI cannot purchase agricultural land or plantation property in India. However, they can buy residential and commercial properties. If there is a reason behind scouting for agricultural land, the Reserve Bank of India (RBI) will review such interest on a case-to-case basis.·         There's no limitation to the amount of home loan one may take to buy a property in India. If an NRI wants an agent to conduct transactions on your behalf, such as registering property, they must provide the agent with a Power of Attorney (PoA). The PoA holder represents the NRI by submitting a copy of the PoA to the relevant authority to sign. ·         Like any other real estate purchase in India, NRI is responsible for paying the necessary taxes: stamp duty, registration fee, annual property tax after purchase, and even goods and services tax on property construction. NRIs can also invest in real estate in India to earn rental income. They would be taxed at 30% via tax deducted at source (TDS), and the balance can be remitted to the country under FEMA regulations.·         In the case of proceeds earned through the sales of immovable properties, it can be repatriated after a reduction of between 20% and 30% TDS, depending on whether it is long-term or short-term capital gains. ·         For various reasons, NRIs purchase property in India as a long-term investment, as a place to stay during their visits home, because they are emotionally connected to India, or for their families back in India. Once an NRI embarks on the process, they will realize that buying real estate in India requires them to complete a few formalities and documentation. General checklist What documents are needed before buying a property?  Passport or OCI card: An NRI must show their Indian passport. If they hold a foreign passport, they can purchase a property in India provided they have either of the cards, i.e., a PIO card or an OCI card. PAN Card: It is always mandatory for property-related transactions. Power of attorney: NRIs must give a power of attorney if they're outside India for executing the purchase transaction. It must be noted that the NRIs will need a special power of attorney registered and notarized and not a general power of attorney to execute a property transaction. Also, the POA must be signed by the NRI in the presence of a consulate officer or notary in their country of residence and also have to be attested by them.Which property documents are required?For a smooth purchase transaction and hassle-free ownership of a property, it is necessary to verify all the essential papers like: ·         Title deed (in the seller's name). Some states have specific paperwork that the NRIs need to be aware of. For example, if they plan to buy property in Mumbai, they must check for e-Khata (in the seller's name) for property taxes.·         Approved plan·         Building permit·         Occupation certificate (if it is a ready building)·         Older title deeds(optional)·         Encumbrance certificate (updated)·         Share certificate (if it is a cooperative housing society)·         NOC from the society·         RERA registration (if applicable)If these documents are in order, an NRI can prepare the sale agreement for purchasing the property. What are the documents required for registration?Except for the IDs (like passport or PAN card), an NRI will need to submit their recent address proof documents (like utility bills) and passport size photographs for the sale deed registration.Funding and Financial TransactionsWhen buying a property in India, NRIs must carry out all transactions in Indian currency and through local banks. It means NRIs that want to invest in a property in India must have an NRI account in one of the authorized Indian banks.NRIs can smoothly obtain funds for buying properties if the paperwork is as required. Many financial institutions offer various NRI home loan schemes. However, first, they need to make sure that they can invest at least 20 per cent of the property value from their sources. It means that they can get funding for up to 80 per cent of the property's value.As NRI investors are required to route all their transactions through Indian banks, they must ensure they use their NRO/NRE accounts for all inward money remittances. They can also submit post-dated cheques or opt for Electronic Clearance Service (ECS) from their NRO, NRE, or Foreign Currency Non-Resident (FCNR) accounts. Before approaching a bank for funds, NRIs must get all their documents verified by a competent lawyer to ensure they are in order. In addition, they should obtain a certificate from the seller stating that the property that is being purchased has is no lien attached to it. If it is joint property or inherited by the seller, it is necessary to ensure that the title deed is cleared. Lastly, NRIs must ensure that no bills or other dues with any authorities are to be cleared. What documents are needed for getting a home loan? NRIs must furnish the following documents:·         Copy of Indian passport and visa·         In case an Indian passport is unavailable§  PIO Card if they hold a foreign passport§  OCI card if their parents are Indian citizens ·         Work permit/employment contract/appointment letter of the country where they reside.·         Recent salary certificate / Payslips for the past six months·         Recent income tax returns·         Bank statements of NRE and NRO account for the last year·         Bureau report of the country of residence·         Power of attorney in the format as given by the bank (in case they are out of India for executing the purchase transaction) Tax Benefits: NRIs are eligible for a major part of the tax benefits available to resident Indian buyers. If they sell the property they bought within three years; the earnings will then be taxed as it is deemed to be short-term capital gains. However, if the property is sold after three years, they can exercise the option of cutting down the long-term capital gains tax payable by buying another property.Conclusion Except for agricultural land, farms and plantations, NRI has no restrictions on purchasing commercial or residential properties in India. NRI has different rules and regulations for investing in Indian real estate; however, this is not as difficult as people think. As a result, the availability of necessary documents simplifies and speeds up property purchases.*****   

Posted By

Kishan Dutt Kalaskar Retired Judge

6 days ago

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Commercial Agreement and its Importance

What is commercial agreement? Commercial: Commercial transaction are some sorts dealing where payment for defined goods or services are involved. Different form of commercial transaction involves transactions between business to business or business to consumer or business to government are few examples of the same.[1] Agreement: As per section 2(E) of Indian Contract Act, 1872 "every promise and every set of promises, forming the consideration for each other is an agreement."[2] Commercial Agreement: The negotiations between parties with regards to the commercial transaction of goods or services which are listed in agreements in writing.The agreements define the duties and responsibilities of all parties and what they will get in return from the agreement. A commercial agreement generally contain following clause:[3] ·     Name of parties.·     Terms, purpose and duration of agreement.·     Commercial benefit of all parties.·     Duties and Responsibilities of each parties to the agreement.·     Termination of the agreement clause.·     Signature of all parties to give consent to all clauses of the agreement.  Process of Making of Commercial Agreement Each agreement is different from each other and it should meet all the requirements of parties involved in the transaction. All transaction start from negotiations between all parties in the transaction to enter into a contract after negotiations are completed then a document is drafted generally on a stamp paper and registered with a notary. Process of commercial agreement is: ·     Negotiation: Negotiations are starting point of any commercial relationship between parties and it is done so that parties in the agreement could do their research well on the subject matter of the agreement and define their position with the respect to clauses of the agreement clearly during negotiations.·     Drafting: Drafting of an agreement is done with an utmost understanding of law of contract act and other important laws related to product or services or payment and facts should be stated precisely and carefully. Each and every statement should be clear defined in the agreement. Definite words and sentences should be used and non-commitment language must be avoided at all cost.·     Stamp Duty: Instruments such as agreement are chargeable to stamp duty. However there are few types of commercial agreement which are exempted from stamp duty by the state laws. Agreement which are executed in India they must be stamped before or at the time of their execution . An instrument which are not duly stamped those cannot be accepted as evidence under evidence act and cannot be accepted in the courts in India.·     Registration: It is recommended to record the contents of agreement with a registration officer as it gives proof of originality of documents, a registered document is of legally valid under Indian registration Act. But not all documents require registration under Indian Laws.[4]  Types of Commercial Agreement When your business starts to make agreements with other businesses for supply or sale of goods and services, then a proper a commercial contracts to record these agreements and protect themselves in case of a dispute between the parties to contract. There are so many different kinds of commercial contracts, and some are highlighted below:·      Purchase and Sale AgreementsPurchase and sale agreements are one of the most basic and popular of commercial agreement. These contracts cover one party’s agreement to buy goods from the other parties to the transaction. In this type of contract, it is important to specify the quantities or specify the goods that are needed, the amount of payment and manner of the payment, time and date of delivery, what happens if the goods are not available, and what happens if other disputes arises between the parties. ·      Services AgreementsOne other type of commercial contract is the services contract. In a services contacts, someone agrees to provide services for someone else. For example, a dry cleaning service could agree to come in thrice a month for cleaning your business’s premises. The contract should specifically detail about services are to be provided and who  how it will be provide by them. It should account for any I basic  requirements, liability of the parties to each other damage caused by the services provider or researcher, and more. ·      Distribution AgreementsDistribution agreements cover how goods will get from the production department to the ultimate consumers. Some organization specialize in distribution of goods, which may include transportation, logistics, and even advertisement of the goods. A good distribution agreement will specify which duties of the distributor and which the production company will retain. ·      Production AgreementsFinally, production of goods or services are agreements arise when one company needs a detail part of good made, and so it’s an agreement with another organization that will produce the part. Its’s same as a purchase and sale agreements, production agreements should made with a clear intention on how much of the part is needed and what to do if something goes wrong.[3]? Benefits of Commercial Contracts·      Proof of detailsThis is definitely one of the reasons why a written contract is essential for your organization or any type of agreement –it can legally serve as evidence for the proof of details on whatever parties have agreed in the agreement. It provides the ultimate understanding of the agreement between the both the parties to the contract, , or payment liability that one party need to comply with hired employees. All these things should be stated in the written agreement as legal evidence.·      Prevent misunderstanding from arisingA written commercial agreement is usually documented for  a sensitive between parties entering into a business transaction. The main objective of this agreement is to give all parties to the agreement a chance read and have a clearer understanding of the terms or conditions of the transaction, including the expectations and liabilities of each party and what they have come to terms after negotiation.·      Provide’s securityIn any commercial transaction, an agreement can provide security and confidence to each parties to the agreement involved in the transaction. For example, an employment contract between the employer and an employee with regards to their duties and responsibilities, payment and overall relationship. An employer is legally responsible in complying strictly with the employee’s salary under industrial act and other benefits stated by Indian laws, whereas the employee has to perform all his or her duties assigned duties by employer as mentioned in the job description.·     Guaranteed confidentialityOne of the most important benefit of having written agreement in commercial transactions is the to have confidential clause to protect business secrets and other parties has to agree to the confidentiality and non-disclosure provisions. As part of the agreement, all parties to the contract are legally bound to hold in secrecy as mentioned by the other parties and the information exchanged between the parties, and the party that violates this clause under the agreement would be held liable under the agreement.·     Serve as an record of business transactionA written agreement is used as record of business transaction the parties to the contract and what they have agreed on in the agreement.[5]

Posted By

Anik

6 days ago

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Vilesh Bhaurao Bondade

Experience

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Location

: Nagpur |

State Bar Council

: Maharashtra

Professional Summary

Mr. Vilesh Bondade is qualified B-COM, MA LLB, PGDT having Experience 4 years Languages Known Marathi, English , Hindi Practicing in Nagpur District Specialization in Income Tax, TDS, Society Registration ,Civil matter, GST, Legal Documentation, GST practitioner in nagpur, is recognised for GST Advisory and tax optimization works. can accept full spectrum of work like Accounting Planning, GST tax optimisation, GST reconciliation Services as per clients requirement. GST Practitioner number is 271800005932GPE.

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