Immovable Property Transactions: Direct Tax and FEMA Issues for NRIs

INTRODUCTION

This article is the fourth part of a series on “Income Tax and Foreign Exchange Management Act (FEMA) issues related to NRIs”. The first article focused on the provisions of the Income Tax Act, whereas the second one was on the applicability of the treaty on the definition of Residential Status. The third one was focused on the Residential Status under FEMA Regulations and this one deals with the “Immovable property Transactions – Direct Tax and FEMA issues for NRIs.

BACKGROUND

Immovable property refers to any asset, which is attached to the earth and is immobile, and includes land. Typically, the term “immovable property” is used to mean land and/or buildings attached to the land. Owning an immovable property, especially a residential house, in India has often been considered an aspirational goal. The lure of owning a property in India also attracts Non-resident Indians (“NRIs”), who have moved out of India but have an investible surplus available with them. Additionally, many NRIs also inherit ancestral or family properties and continue to hold them and enjoy the passive income therefrom. As these NRIs identify better or alternative opportunities outside India, the properties are sold,and sale proceeds are sought to be repatriated outside India.