OBJECTIVE: Get a comprehensive understanding of the income tax implications on Joint Developments Agreements under the provisions of Income Tax Act. Further dwell upon the rules pertaining to FDI on Real Estate Sector under FEMA.

1. Acquisition & Transfer of
Immovable Property by NRI /OCI
FEMA & Income Tax Implications
CA. Divakar Vijayasarathy
DVS Advisors LLP
India-Singapore-London-Dubai-Malaysia-Africa
www.dvsca.com

2. Schema
Regulatory
Overview
Preamble Definitions
Permitted
Transactions
Prohibited
Transactions
Repatriation
Housing
Loans
Penalties
Income Tax
Implications

3. Regulatory Overview
Objective of FEMA
-consolidate and amend the law
relating to foreign exchange with
the objective of facilitating
external trade and payments and
-for promoting the orderly
development and maintenance
of foreign exchange market in
India
Relevant Regulation
Foreign Exchange Management
(Acquisition and Transfer of
Immovable Property in India)
Regulations, 2018- Notification
No. FEMA 21(R)/2018-RB
Suspended Regulation
Foreign Exchange Management
(Acquisition and transfer of
immovable property in India)
Regulations, 2000- Notification
No. FEMA 21/2000-RB dated
May 3, 2000

4. Changes made by new Regulation
2018 Regulation
• NRI/OCI
• Regulates the source of funds for acquisition
by NRI
• Repatriation of funds with the approval of RBI
• Mortgage and repatriation under ECB
• LTVs, Diplomats, Spouse of NRI/OCI included
in the regulation
• Citizens of Hong Kong, Macau and Democratic
People’s Republic of Korea (DPRK) inserted
under prohibitions
2000 Regulation
• PIO
• Source of funds for PROI being Indian
Citizen unregulated
• Repatriation of funds with prescribed
limits on amount of funds and
timeline for sale being not earlier than
3 years from acquisition
• No Regulations pertaining to
mortgage, repatriation under ECB

5. Objective
Persons
NRI
OCI
ROI
Long-term visa
holders
(i)Foreign Embassies/
Diplomats/ Consulate
Generals
Immovable Properties
including but not limited to
Residential
building/land
Commercial
building/land
agricultutal
land/farm
house/plantation
property
Subject
Object
Purpose

6. Definitions
Term Definition Illustration
Non-Resident Indian (NRI) NRI means a person resident outside India
who is a citizen of India
Amit is a Citizen of India. He works in Apple,
California. He is an NRI
Overseas Citizen of India (OCI) OCI means a person resident outside India
who is registered as an Overseas Citizen of
India Cardholder under Section 7(A) of the
Citizenship Act, 1955
Rahul was a citizen of India until 2018. He
acquired UK citizenship. Subsequently he
applied for OCI and obtained the same from
the MEA.
Note: Erstwhile PIO (valid only till March 31, 2019) shall convert to OCI-Notified in 2015
‘Person Resident Outside India’ (PROI) PROI means a person who is not resident in
India.
Elizabeth(US citizen) is wife of Amit who is a
Citizen of India. Amit and Elizabeth live in
California. Elizabeth is a PROI
Immovable Property
(General Clauses Act, 1897)
(26) "immovable property" shall include land,
benefits to arise out of land, and things
attached to the earth, or permanently
fastened to anything attached to the earth;

7. Permitted Transaction - NRI/OCI
Nature of
Transaction
What is permitted Procedure/Rules
Acquire immovable
property
Any immovable property other than agricultural land/
farm house/ plantation property
- Funds received in India through inward
remittance under the permitted banking
channels
- Funds held in permitted NRA
Gift - From a relative resident in India, NRI or OCI
- Any immovable property other than agricultural
land/ farm house/ plantation property
Inheritance - From a person resident in India
- From a person resident outside India
Only if the property was acquired within the
legal framework at the time of acquisition
Transfer of
immovable Property
- To a person resident in India – any immovable
property
- To a person resident outside India - Any immovable
property other than agricultural land/ farm house/
plantation property

8. Permitted Transactions – PROI
Nature of transaction Nature of Presence in India What is permitted? Procedure
Acquire an immovable
property
- a branch,
- office or
- other place of business for
carrying on in India any
activity
- excluding a liaison office
Immovable property :
- necessary for
- incidental to carrying on such
activity
- all applicable laws, rules, regulations or
directions for the time being in force
are duly complied with
- Files with RBI a declaration in the Form
IPI – within 90 days acquisition
Mortgage an immovable
property
Immovable property so acquired
can be mortgaged as security for
any borrowing
Depending on the nature of transaction

9. Permitted Transactions – PROI (any person)
Nature of Transaction What is permitted Procedure/Rules
Acquisition of Immovable
Property
It is prohibited - NA
Transfer of immovable property - Has acquired under a prior legal framework
- Transfer to a person resident in India
- Not allowed without prior permission
- The Reserve Bank may, for sufficient reasons, permit the
transfer, subject to such conditions
- transaction takes place through banking channels in India
Creation of charge on immovable
property in favour of an overseas
lender
PRI or on his behalf create charge on his
immovable property in India in favour of an
overseas lender or security trustee (PROI is the
lender), to secure an external commercial
borrowing under permitted Regulations
- by a Bank which is an authorized dealer
- subject to the directions issued by the Reserve Bank in
this behalf
Creation of a mortgage on an
immovable property
NRI or an OCI, being a director of a company
outside India (PROI is the Co) can create a
mortgage on an immovable property in India
owned by them for a loan to be availed by the
company from an overseas lender (end use of the
loan shall be in accordance with ECB/borrowing
guidelines)
- by an Authorized Dealer in India being the Indian
correspondent of an overseas lender
- subject to the directions issued by the Reserve Bank in
this behalf
- the funds shall be used by the borrowing company only
for its core business purposes overseas
- in case of invocation of charge, the Indian bank shall sell
the immovable property to an eligible acquirer and remit
the sale proceeds to the overseas lender

10. Foreign Embassies/ Diplomats/ Consulate Generals
What is permitted Procedure
Purchase or sell
immovable property
- Clearance from Government of India, Ministry of External
Affairs
- Consideration is paid out of funds remitted from abroad
through banking channels

11. Spouse of NRI or OCI
Nature of Transaction What is Permitted? Procedure
Spouse of NRI or OCI, being
resident outside India (not being
NRI/OCI), acquiring jointly a
immovable property
- ONE immovable property other than
agricultural land/ farm house/ plantation
property
- Jointly with his/her NRI or OCI spouse
• Mode of Payment
- Funds received in India through inward
remittance under the permitted banking
channels
- Funds held in permitted NRA
• The marriage has been registered and
subsisted for a continuous period of not
less than two years immediately preceding
the acquisition
• Spouse is not otherwise prohibited from
such acquisition
Spouse shall be a Person Resident Outside India and has not applied for OCI (spouses of NRI are eligible to apply for OCI-
however this part of the regulation covers only those who have not applied for OCI)

12. Long-term Visa Holder
Who is a LTVH What is Permitted? Procedure
A person being a citizen of
• Afghanistan
• Bangladesh
• Pakistan
belonging to minority
communities in those countries,
namely,
• Hindus,
• Sikhs,
• Buddhists,
• Jains,
• Parsis and
• Christians
who is residing in India and has
been granted a Long Term Visa
(LTV)
Acquisition of:
- one residential immovable
property in India as dwelling
unit for self-occupation
and
- one immovable property for
carrying out self-
employment
- the property should not be located in and around restricted/ protected
areas so notified by the Central Government and cantonment areas
- the person submits a declaration to the Revenue Authority of the district
where the property is located, specifying the source of funds and that
he/ she is residing in India on LTV
- the registration documents of the property should mention the
nationality and the fact that such person is on LTV
- a copy of the documents of the purchased property shall be submitted to
the Deputy Commissioner of Police (DCP)/ Foreigners Registration Office
(FRO)/ Foreigners Regional Registration Office (FRRO) concerned and to
the Ministry of Home Affairs (Foreigners Division)
- transfer of the property before acquiring Indian citizenship shall require
prior approval of DCP/FRO/FRRO concerned
Note: the property of such person may be attached/ confiscated in the event of his/ her indulgence in anti-India activities

13. Protected and Restricted Areas
ANDAMAN &
NICOBAR
ARUNACHAL
PRADESH
HIMACHAL
PRADESH (H.P.)
MANIPUR MIZORAM SIKKIM UTTAR PRADESH
(U.P.) AND
UTTRAKHAND
Andaman &
Nicobar islands
Municipal Area,
Port Blair,
Havelock Island,
Long, Neil Island,
Jolly Buoy, North &
South Cinque, Red
Skin, Mayabunder,
Diglipur, Rangat,
Mt. Harriet and
Madhuban
Itanagar, Zin Along,
Pasighat, Miao,
Namdapha and Tipi,
Sejusa (Puki)
Bhalukpong.
Poo-Khab-Sum,
Do-Dhankar-Tabo-
Gompa-Kaja,
Morang-Dabling
Loktak Lake, Imphal,
Moirang INA Memorial,
Keibul Deer Sanctuary &
Waithe Lake Konjam War
Memorial.
Vairangte, Thingdaw
l and Aizawl
Gangtok, Rumtek,
Phodang,
Pemayangtse,
Tashiging, Zongri in
West of Sikkim
,Tsangu (Chhangu)
Lake in East Sikkim ,
Mangan, Siagoik,
Tong, Chungthang,
Lachung and
Yunthang.
Nanda Devi
Sanctuary, Niti
Shathi and Kalindi
Khal in Chamoli and
Uttar Kashi Districts,
Adjoining areas of
Milan Glacier.

14. Protected and Restricted Areas
JAMMU & KASHMIR (J & K)
Khaltse Sub-Division (Drokahpa Area),
Khaltse Dumkhar Skorduchan Hanudo,
Biama Dha.
Nubra Sub-Division
 Lah-Khardung, La-Khlsar-Frit upto
Panamik
 Leh-Khardung La-Khalsar-upto Hunder
 Leh-Sabo-Digar. La-Digar-Labab-
Khungru. Gampa-Tangar (Only for
trekking conducted by approved tour
operators and accompanied by State
Police Personnel).
Nyoma Sub-Division
 Leh-Upshi-Chumathang-Mahi-
Puga-Tso-Moari Lake/Kozok
 Leh-Upshi-Debring-Puga-Tso-
Morarj Lake/Korzok
 Leh-Karu-Chang. La-Durbuk-
Tangtse-Lukung-Spankmik
(Pangong Lake upto Spankmik).

15. General Guidelines
• Payment mode: Any transaction involving acquisition or transfer of
immovable property under these regulations shall be undertaken:
(i) through banking channels in India;
(ii)subject to payment of applicable taxes and other duties/ levies in India.
• Existing property: Further any existing holding of immovable property in
India by a PROI made in accordance with the policy in existence at the time
of such acquisition would not require any modifications to confirm to these
regulations.

16. Repatriation of Sale Proceeds
Nature of Transaction What is Permitted? Rules/Procedure
Immovable Property held / inherited by
PROI or his successor
- acquired while being resident in India
- inherited from a person resident in
India
Can repatriate the sale proceeds Prior RBI approval needed
Sale of an immovable property by NRI or
OCI
Repatriation of sale proceeds upto a
maximum of two residential properties (silent
on per annum or during the life)
- the immovable property was acquired as per
the legal framework in existence during
acquisition
- consideration was paid in foreign exchange
received through proper banking channels or
out of funds held in FCNRA or NREA.
Default of loan by person resident in India
under ECB norms
Repatriation of sale proceeds towards the
outstanding dues on the respective loan and
not any other loan
- overseas lender or security on whose favour
charge is created can sell the said immovable
property
- can be sold only by the person resident in
India
- can be sold only to a person resident in India

17. Prohibitions
Prohibitions
Prohibited
Transactions
Prohibited
Persons

18. Prohibited Transactions
PRIO/OCI/NRI
• Acquisition or transfer of immovable
property in India by a PROI
• Acquisition or transfer of agricultural land/
farm house/ plantation property by NRI or
OCI or Foreign Embassies/ Diplomats/
Consulate Generals to other than resident
Indians in case of transfer
• Mode of payment: acquisition of
immovable property for which payment is
made by traveler’s cheque or by foreign
currency notes or by any other prohibited
mode
• Joint acquisition of second immovable
property by a PROI with his/her spouse
who is an NRI or OCI
• Repatriation of sale proceeds outside India
of more than two residential properties
• Repatriation of sale proceeds of an
immovable property under a ECB to repay
any other loan other than the loan
mortgaged for
Minority Immigrants:
• Buying a residential/commercial property
for renting out or second
residential/commercial property for self-
occupation by Hindus, Sikhs, Buddhists,
Jains, Parsis and Christians who is residing
in India and has been granted a Long Term
Visa (LTV) being a citizen of Afghanistan,
Bangladesh or Pakistan
• Sale of the aforementioned properties
prior to acquiring citizenship
Neighboring Countries:
• Buying of any immovable property or
leasing out of an immovable property
exceeding five years by person of Pakistan
or Bangladesh or Sri Lanka or Afghanistan
or China or Iran or Hong Kong or Macau or
Nepal or Bhutan or Democratic People’s
Republic of Korea (DPRK) without the prior
permission of RBI

19. Prohibited Persons
The Regulation prescribes a blanket prohibition on certain persons from acquiring or transferring immovable properties
in India. The following persons being citizens of
•Pakistan,
•Bangladesh,
•Sri Lanka,
•Afghanistan,
•China,
•Iran,
•Nepal,
•Bhutan,
•Hong Kong or
•Macau or
•Democratic People’s Republic of Korea (DPRK)
Shall not acquire or transfer immovable property without the prior permission of RBI. It is pertinent to note that
according to the regulation, citizen includes individuals and legal entities
However the above-mentioned citizens can lease an immovable property in India for the purposes of a branch, office or
other place of business for carrying on in India any activity excluding a liaison office for not exceeding five years

20. Housing Loans for NRI/OCIs
NRI eligible for loan to acquire immovable property on complete mortgage
Property shall be used for self-occupation
Property rent, if rented out shall be paid towards loan instalment irrespective of the rent being higher or lower than the instalment.
Relatives can repay loan on behalf of the NRI
Interest rates shall be same as in the case of Residents
Tenure shall not be more than 15 years
Loan availed shall be used only for the purpose and not any prohibited activities

21. Penalties
Amount is quantifiable Thrice the sum involved
Amount not quantifiable Up to INR 2 Lakhs
Continuing Contravention may extend to INR 5000 for every day after the first
day during which the contravention continues

22. Income Tax Implications
- No implications under Income Tax Act, 1961 (“the Act”) at the time of investment
- Tax liability arises only when immovable properties generates any income viz. rental income if let out and capital gains
income if sold out
- Income from House Property
Particulars Let out Self-occupied
Rental Income Charged to taxation Not applicable (Benefit of no-taxation
available for max 2 self occupied
properties)
Standard Deduction of 30% and municipal taxes Available Not available
Deduction of interest on loan Max. Rs. 2 lakhs Max. Rs. 2 lakhs
Principal repayment of housing loan Max. Rs. 1.5 lakhs Max. Rs. 1.5 lakhs
Deduction of TDS Individuals - 30% + surcharge + cess
Companies - 40% + surcharge + cess
Not applicable
Lower or no withholding application Can be made Not applicable
Claim of TDS on return filing Partial or full depending on computation
provisions
Not applicable
Repatriation of funds Form 15CA-CB

23. Income Tax Implications
Particulars STCG LTCG
Period of Holding 2 years or less More than 2 years
Computation Mechanism Same as resident
Transfer expenses Allowed as deduction
Indexation benefit for cost of acquisition and
improvement
Not available Available
Tax Slab rates 20% + surcharge + cess
Exemptions from capital gains Not available Available
Lower or no withholding application Can be made
Claim of TDS on return filing Partial or full depending on computation provisions
Repatriation of funds Form 15CA-CB

24. Exemptions
Particulars Section 54 Section 54F Section 54EC
Assessee Individual non-residents Individual non-residents Any non-resident
Assets being sold Residential property Commercial property Any immovable property
Nature Long term Long term Long term
Nature of investment 1 Residential property in India 1 Residential Property in India NHAI or RECL or other specified
bonds
Time period Purchase within 1 year before the
sale or 2 years after the sale or
construct within 3 years after the sale
Purchase within 1 year before the
sale or 2 years after the sale or
construct within 3 years after the
sale
Within 6 months from the date
of transfer
Special Exemption If capital gains <= Rs. 2 crores,
investment is possible in 2 properties;
however option can be availed once
in a lifetime
Not Available Not Available

25. Exemptions
Particulars Section 54 Section 54F Section 54EC
Capital Gains Deposit
Scheme (“CGDS”)
Investment in CGDS if purchase or
construction not possible before return
filing due date
Investment in CGDS if purchase or
construction not possible before return
filing due date
Not Available
Quantum of Exemption Amount invested or Capital Gains
whichever is less
LTCG*Amount invested/Net
consideration
Maximum Rs. 50 lakhs
Additional Conditions Not Applicable -Non resident should not owned more
than 1 residential property apart from
exemption property
- No new asset shall be purchased or
constructed apart from exemption
property within 1 year or 3 years of
transfer respectively
- No loans shall be acquired against
these bonds
Lock-in period 3 years 3 years 5 years
Violation -Unutilised amount in CGDS account
shall be charged as capital gains
- New asset shall be considered as short
term capital asset and cost of
acquisition for the purpose of
calculating gains shall be reduced by
exemption claimed earlier
-Unutilised amount in CGDS account
shall be charged as capital gains
- Exemption shall be withdrawn and
charged as LTCG
- STCG shall also be computed on
transfer of new asset
Exemption shall be withdrawn and
charged as capital gains

26. Thank You
DVS Advisors LLP
India-Singapore-London-Dubai-Malaysia-Africa
www.dvsca.com
Credits and acknowledgement
Kavitha Divakar – BSL.LLB, DTL
Jugal Gala – B Com ACA
DVS Advisors Research Team