A Non Resident Indian (NRI) is a citizen of India, who stays abroad for employment/carrying on business or vocation or stays abroad under circumstances indicating an intention for an uncertain duration. Non-resident foreign citizens of Indian Origin are treated at par with Non Resident Indians (NRIs).
A Person of Indian Origin (PIO) (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), is one who (a) at any time, held an Indian passport, or (b) who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
An Overseas Citizen of India (OCI) is:
(a) Any person of full age and capacity:
• Who is a citizen of another country, but was a citizen of India at the time of, or at any time after the commencement of the constitution, or
• Who is a citizen of another country, but was eligible to become a citizen of India at the time of the commencement of the constitution, or
• Who is a citizen of another country, but belongs to a territory that became part of India after the 15th Day of August, 1947.
(b) Any person, who is a minor child of a person mentioned in the above clause
• Provided that no person, who is or had been a citizen of Pakistan, Bangladesh shall be eligible for registration as an Overseas Citizen of India.
Under the general permission granted by RBI, the following categories can freely purchase immovable property in India:
a) Non-Resident Indian (NRI)
b) Person of Indian Origin (PIO)
c) Overseas Citizen of India (OCI)
The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land/plantation property/farm house in India. Further, there is no limit on the number of properties they can purchase.
If you are an NRI/OCI/PIO, you would have to file your income tax returns if you fulfil either of these conditions:
1. Your taxable income in India during the year was above the basic exemption limit; or
2. You have earned short-term or long-term capital gains from sale of any investments or assets, even if the gains are less than the basic exemption limit.
Note: The enhanced exemption limit for senior citizens and women is applicable only to residents and not to non-residents.
Yes, there are two exceptions:
(a) If your taxable income consisted only of investment income (interest) and/or capital gains income and if tax has been deducted at source from such income, you do not have to file your returns.
(b) If you earned long term capital gains from the sale of equity shares or equity mutual funds, you do not have to pay any tax and therefore you do not have to include that in your tax return.
Tip: You may also file a tax return if you have to claim a refund. This may happen where the tax deducted at source is more than the actual tax liability. Suppose your taxable income for the year was below the basic exemption limit but the bank deducted tax at source on your interest amount, you can claim a refund by filing your tax return.
Another instance is when you have a capital loss that can be set-off against capital gains. Tax may have been deducted at source on the capital gains, but you can set-off (or carry forward) capital loss against the gain and lower your actual tax liability. In such cases, you would need to file a tax return.
Traditionally, you could file your return either by giving a power of attorney to someone in India or by sending your form and documents to a tax expert in India who would then file returns on your behalf. But nowadays, the easiest option for NRIs to file their Indian tax returns is by using the online platform. There are several options to file online.
An authorised dealer or a housing finance institution in India approved by the National Housing Bank may provide housing loan to a non-resident Indian or a person of Indian origin residing outside India, for acquisition of a residential accommodation in India, subject to the following conditions, namely:
a) the quantum of loans, margin money and the period of repayment shall be at par with those applicable to housing finance provided to a person residing in India.
b) the loan amount shall not be credited to Non-resident External (NRE)/Foreign Currency Non-resident (FCNR)/Non-resident non-repatriable (NRNR) account of the borrower.
c) the loan shall be fully secured by equitable mortgage by deposit of title deal of the property proposed to be acquired, and if necessary, also have lien on the borrower’s other assets in India.
d) the instalment of loan, interest and other charges, if any, shall be paid by the borrower by remittances from outside India through normal banking channels or out of funds in his Non-resident External (NRE)/Foreign Currency Non-resident (FCNR)/Non-resident Non-repatriable (NRNR)/Non-resident Ordinary (NRO)/non-resident Special Rupee (NRSR) account in India, or out of rental income derived from renting out the property acquired by utilization of the loan or by any relative of the borrower in India by crediting the borrower’s loan account through the bank account of such relative (The word ‘relative’ means ‘relative’ as defined in section 6 of the Companies Act, 1956.)
e) the rate of interest on the loan shall conform to the directives issued by the Reserve Bank of India or, as the case may be, the National Housing Bank.
1. If the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels/by debit to NRE/FCNR(B) account, the amount to be repatriated should not exceed the amount paid for the property:
(i) In foreign exchange received through normal banking channel or
(ii) By debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR(B) account.
Repatriation of sale proceeds of residential property purchased by NRI’s/PIO’s out of foreign exchange is restricted to not more than two such properties.
2. If the property was acquired out of Rupee sources, NRI/PIO may remit an amount up to USD one million, per financial year, out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance. The NRI/PIO may use this facility to remit capital gains, where the acquisition of the subject property was made by funds sourced by remittance through normal banking channels/by debit to NRE/FCNR(B) account.
The rental income, being a current account transaction, is repatriable, subject to the appropriate deduction of tax and the certification thereof by a Chartered Accountant in practice. Repatriation of sale proceeds is subject to certain conditions. The amount of repatriation cannot exceed the amount paid for acquisition of the immovable property in foreign exchange.
India has DTAA’s with several countries which give a favourable tax treatment in respect of certain heads of income. However, in case of sale of immovable property, the DTAA with most countries provide that the capital gains will be taxed in the country where the immovable property is situated. Hence, the non-resident will be subject to tax in India on the capital gains which arise on the sale of immovable property in India. Letting of immovable property in India would be taxed in India under most tax treaties in view of the fact that the property is situated in India.
Yes. Long-term and short-term capital gains are taxable in the hands of non-residents.
Type of asset: Assets like house property, land and building, jewellery, development rights etc.
Rate of tax deduction at source (TDS)
Long term – 20.6%
Short term – 30.9%
Exemption available (only for long term capital gains)
