Buying property is not only an investment opportunity but also a necessity to obtain a place to stay or a place to set up your business. Therefore, the need to buy property keeps on arising for some or another person. The perimeters, rules, and regulations of buying property in the territory of India while being a resident of India are quite clear. However, the need to buy property outside India keeps on arising in various situations like a resident Individual settling outside India, an Investment opportunity outside India, a business entity needs to set up business outside India, and many others.
In this article, you will get to explore the possibilities of purchasing immovable property outside India while being an Indian resident.
Term “Person resident in India” is defined under FEMA based on various criteria for Individual, Body Corporate, Offices, Branch, and Agency.
Know the meaning of the term “Person Resident in India”.
Taking into consideration the various definitions of immovable property available in the Transfer of Property Act, 1882, General Clauses Act, 1897, and Indian Registration Act, 1908, when one talks about Immovable Property, it includes land, building, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth but not standing timber, growing crops, or grass.
Persons resident in India are eligible to purchase property abroad through a number of different routes. Each of these routes are subject to differing legal conditions and have differing tax implications, both in India and the foreign country. Purchasing property abroad, therefore, requires a certain amount of structuring to ensure that foreign property investments are both legitimate and tax-efficient. Structuring a foreign property transaction correctly can greatly mitigate the risks involved with purchasing property abroad.
Here are a few ways in which an a person resident in India can hold assets outside India:
A person resident in India may acquire immovable property outside India by way of gift or inheritance, provided such gift is given by or inheritance is received from-
A person resident in India can purchase an immovable property outside India out of Foreign Exchange held in his Resident Foreign Currency (RFC)* account maintained in accordance with the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015.
* RFC savings Account is a saving account maintained in foreign currency for Non-Resident Indians who have returned to India and hold funds in foreign currency.
A resident can acquire immovable property outside India jointly with a relative who is a person resident outside India, provided there is no outflow of funds from India. This means that a resident is eligible to buy immovable property outside India jointly with non-resident relatives as long as there is no outflow of funds from India.
* 'Relative' in relation to an individual means husband, wife, brother or sister or any lineal ascendant or descendant of that individual.
Know about the Liberalised Remittance Scheme.
Companies also need land or buildings or other immovable property abroad to set up their business office or for the purpose of investment or for the accommodation of their staff. A company incorporated in India having overseas offices may acquire immovable property outside India for its business and for residential purposes of its staff.
However, total remittances for the acquisition of immovable property must not exceed the following limits prescribed for initial and recurring expenses, respectively:
As per Regulation No. 1.2 of Part-I of RBI/FED/2015-16/7 FED Master Direction No. 12/2015-16, a person resident in India may acquire property outside India:
As per Regulation No. 1.2, Above mentioned restrictions on the purchase of immovable property outside India shall not apply where:
According to section 6(4) of the FEMA, a person resident in India can hold, own, transfer or invest in any immovable property situated outside India if such property was acquired, held or owned by him/ her when he/ she was resident outside India or inherited from a person resident outside India.
A resident individual in India is permitted to use the annual LRS limit to invest in foreign companies, which can then purchase property abroad. Investment by an individual in a foreign company is subject to certain additional conditions that are covered under FEMA, 1999.
Every resident Individual can transfer funds under LRS for the acquisition of immovable property. Where certain individuals combine funds for the acquisition of a property then such property should be in the name of all members who have made the remittance.