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Section 2(v) of FEMA, 1999 has given definition of “Person resident in India” and from the definition one has to conclude whether he or she is Non-Resident India or not. Following is the definition of Person resident in India.
- A person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include –
- A person who has gone out of India or who stays outside India, in either case
- For or on taking up employment outside India
- For carrying on outside India a business or vocation outside India
- For any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period
- A person who has come to or stay in India, in either case, otherwise than
- For or on taking up employment in India
- For carrying on in India a business or vocation in India
- For any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period
- A person who has gone out of India or who stays outside India, in either case
- Any person or body corporate registered or incorporated in India
- An office, branch or agency in India owned or controlled by a person resident outside India
- An office, branch or agency outside India owned or controlled by a person resident in India Explanation – Section 2(u) clarifies that a person includes –
- An individual
- A Hindu undivided family
- A company
- A firm
- An association of persons or a body of individuals, whether incorporated or not
- Every artificial juridical person, not falling within any of the preceding sub-clauses
- Any agency, office or branch owned or controlled by such person.
FEMA 1999 has not given definition of Person of India Origin. However, Reserve Bank of India in its various FEMA Notifications issued under FEMA, 1999 has defined a Person of India Origin as under:
- For the purpose of opening non-resident bank accounts in India Person of India Origin means a citizen of any country other than that of Bangladesh or Pakistan, if –
- He at any time held India passport
- He or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India of the Citizenship Act, 1955 (57 of 1955)
- The person is a spouse of an India citizen or a person referred to in sub-clause (a) or (b) above
- For the purpose of investing in shares/debentures etc. in India Person of Indian Origin means a citizen of any country other than that of Bangladesh or Pakistan if-
- He at any time held India passport
- He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India of the Citizenship Act, 1955 (57 of 1955)
- The person is a spouse of an India citizen or a person referred to in sub-clause (a) or (b) above
- For the purpose of acquiring immovable property in India Person of Indian Origin means a citizen of an country other than that of Bangladesh or Pakistan or Sri Lanka or Afghanistan or China or Hong Kong or Macau or Iran or Nepal and Bhutan if-
- He at any time held India passport
- He or whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India of the Citizenship Act. 1955 (57 of 1955)
- For the purpose of establishing a branch or office in India Person of Indian Origin means a citizen of any country other than that of Bangladesh or Pakistan or Sri Lanka or Afghanistan or China or Iran of Hong Kong or Macau if –
- At any time held India passport
- He or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India of the Citizenship Act. 1955 (57 of 1955)
- The person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b) above
- For the purpose of acquiring PIO Card Person of Indian Origin means a citizen of any country other than that of Bangladesh or Pakistan, if –
- He at any time held an India Passport
- He/she or either of his/her parents or grandparents or great grandparents was born in India and permanently resident in India as defined in the Government of India Act, 1935 and other territories that became part of India thereafter provided neither was at any time a citizen of any country as may be specified by Central Government from time to time
- Who is a spouse of a citizen of India or a Person of Indian Origin as mentioned above
An NRI or PIO can purchase a property either through an inward remittance in foreign exchange through normal banking channels or through the funds available in the NRE/NRO/FCNR accounts maintained in India by the Investor.
No! NRIs and PIOs do not require the permission of the RBI in order to transfer immovable property to any Indian Citizen, NRI or PIO.
Yes! NRIs can definitely appoint a Power of Attorney to complete all loan formalities towards the purchase of a property in India, considering the fact that an NRI wouldn’t be in India for long periods. The stringent formalities followed by Indian banks, only means that the appointment of a Power of Attorney would be ideal.
There is no restriction on number of residential/commercial property that NRI/PIO can purchase under the general permission available.
Usage of power of attorney
Even before the COVID-19 crisis, travelling frequently was not an option for many NRIs,
because of their jobs, busy schedules and even affordability. Consequently, a majority
of them used the power of attorney (PoA) instrument, to conduct various businesses in
the country of their origin. Under this legal arrangement, one can entrust anyone to
represent them, in order to conduct specific businesses on their behalf. Even if the NRI
is able to come back to India to make the purchase, at some point they have to hire a
legal representative, for asset management purposes. Using the PoA instrument, an
NRI can conduct various real estate-related businesses in India, including sale,
purchase, renting, leasing, mortgaging, dispute management, etc. Also, if a property is
jointly held, it might be difficult for all the co-owners to present themselves and complete
a transaction. By way of granting a PoA to one person, the joint owners can get past
any hassles.
Types of power of attorney (PoA)
There are three types of PoA – general power of attorney (GPA), special power of
attorney (SPA) and durable power of attorney (DPA). Under a GPA, your representative
is given general rights to make decisions on your behalf, while the SPA is granted to
conduct specific businesses. A DPA, on the other hand, remains valid for the entire
lifetime of the executor. Also, while the SPA loses its legal validity as soon as the task is
performed, a GPA can be revoked by the executor as and when he wants.
How to draft a power of attorney deed?
You could make the draft of the content for the PoA on your own, but hiring a legal
expert with specialization in sale/purchase of properties involving NRIs, is preferable.
Irrespective of who is doing it, be certain to include these details in the draft:
Your details: Name, age, overseas address, Indian address and occupation.
Your signature: The principal has to sign on each page of the PoA draft.
Your representative’s details: Name, age, address and occupation.
Purpose of the POA: State the specific purpose for which the PoA is being created.
Validity period: The time when the POA comes into force and when it is terminated.
To give it a legal validity, the draft will now have to be authenticated by the local
authorities.
How to execute a power of attorney?
Depending on your availability, you could get the PoA executed in India or in the country
of your current residence.
PoA execution outside India
In case you are in another country where you are a resident, you could get the PoA
legalised though the Indian embassy in that country. There are two ways to do this.
Apostillisation: Under the provisions of the Hague Convention, 1961, the PoA draft
must be verified by the local authorities in the country where you are currently living to
give it legal authenticity. This process, known as apostillisation, would also ensure
nothing prescribed in the draft is in conflict with the local laws. An apostille, also known
as superlegalisation, is a legal certificate, which confirms and verifies the signature/seal
of the person who authenticated the document. The deed must also comply with Indian
laws, such as the Indian Registration Act, 1908 and the Power of Attorney Act, 1882. A
stamp duty must also be paid to complete the apostillisation.
Legalisation: In this process, one has to get the deed notarised by a local judge or
such authority and then get that judge’s signature authorised by the Indian embassy.
This is important, because the notary would get a legal validity only after an authorised
officer of the Indian embassy authenticates it. This is prescribed under Section 3 of the
Diplomatic and Consular Officers (Oaths and Fees) Act, 1948. This PoA must be
stamped and registered in India within three months of its execution. A stamp duty
would be payable, according to Section 2(17) read with Schedule-I of the Indian Stamp
Act, 1899, when the deed is presented for registration in India. The deed should be sent
by a registered post to an Indian address.
How to revoke a power of attorney?
As and when the executor thinks he must revoke the PoA, a due process has to be
followed to perform that task. If the PoA was registered at the sub-registrar’s office, for
instance, it has to be cancelled from there. A PoA is also revoked, when the grantor
dies, becomes insane, or is declared insolvent.
Before revoking the PoA, the executor must inform all parties concerned and do the
cancellation as per the terms and conditions specified in the document. This information
must also be published in the local media, depending on the size of the property and
impact of the decision. A notice in this regard should also be posted on the said
premises, for informational purposes.
Important facts about power of attorney
- You have to be mentally stable to execute a PoA.
- A notarised PoA does not have legal validity as a registered PoA.
- The PoA loses validity after the death of the executor.
- A PoA executed outside India should be registered in India, to have legal validity.
- Any errors in the draft would render it null and void.
- You cannot transfer ownership of the property through a PoA.
- You have to provide an address in the country of your current residence in the
PoA draft. - Any misuse of the PoA by the attorney might land you in trouble.
- NRIs can ask their attorney to accept payment on his behalf. However, the
attorney cannot receive the payment in his account.
It is advised that the Power of Attorney is preferably a Resident of India. Having said that, there would be certain procedures which have to be followed in order to execute the same:
i. The execution of the power of attorney must be done on a stamp paper or plain paper, as the case may be in the country where the power of attorney is being executed.
ii. The signatures of the executants have to be attested by an official of the Indian Embassy, Indian Consulate or Trade Commissioner, in the country where the executants reside.
iii. The signature of the attorney should be verified in India by a Notary, his employer or his banker on a separate piece of paper which should be submitted to SHFL together with the Power of Attorney.
Yes! The sale proceeds of immovable property can be remitted out of India to the home country of the NRI or PIO, up to the maximum limit of the consideration amount originally remitted from abroad to purchase the property. However, the property has to be sold after a period of three years, from the date of the final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later.
Additionally, the following points also need to be adhered to in this respect:
i. The immovable property was acquired by the seller in accordance with the provisions of the Exchange Control Rules/Regulations/Laws in force at the time of acquisition, or the provisionsof the Regulations framed under the Foreign Exchange Management Act, 1999;
ii. The amount to be repatriated does not exceed:
the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in foreign currency non-resident account(s) or
the foreign currency equivalent, as on the date of payment, of the amount paid where such payment was made from the funds held in non-resident external account(s) for acquisition of the property; and
in case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
iii. Finally, application for the purpose of repatriation is required to be made to the Central Office of Reserve Bank within 90 days of the sales of property in Form IPI 8.
- Resident Type: Non Resident Indians (NRIs) or Persons of Indian Origin (PIOs)
- Minimum Age: 18 years
- Maximum Age: 60 years
- Loan Tenure: up to 30 years.
- Income:
Minimum monthly income of $2000. (Criteria may differ for different HFC’s)
The stability of employment or business is also looked into.
- Payment Options: EMI to be routed through the person’s NRE/NRO account.
- No. of Dependents: Eligibility also determined by the number of dependents of the applicant, assets and other liabilities.
List of papers/ documents applicable to all applicants:
- Employer Identity Card
- Attested copy of valid Passport and visa.
- Address proof mentioning the current overseas address
- Copy of Continuous Discharge Certificate (CDC)-for applicants employed in the merchant navy.
- PIO Card issued by Government of India. (in case of PIOs)
- The attestation of documents may be done by FOs/Rep. Offices or Indian Embassy/Consulate or Overseas Notary Public or officials of Branch/Sourcing outfits based in India.
- Loan Application: Completed loan application form duly filled with 3 Passport size photographs
- Proof of Identity (Any one): PAN/ Passport/ Driver’s License/ Voter ID card
- Proof of Residence/ Address (Any one): Recent copy of Telephone Bill/ Electricity Bill/Water Bill/ Piped Gas Bill or copy of Passport/ Driving License/ Aadhar Card
Property Papers:
- Permission for construction (where applicable)
- Registered Agreement for Sale (only for Maharashtra)/Allotment Letter/Stamped Agreement for Sale
- Occupancy Certificate (in case of ready to move property)
- Share Certificate (only for Maharashtra), Maintenance Bill, Electricity Bill, property tax receipt
- Approved Plan copy (Xerox Blueprint) & Registered Development agreement of the builder, Conveyance Deed (For New Property)
- Payment Receipts or bank A/C statement showing all the payments made to Builder/Seller
Account Statement:
- Bank account details for the previous 6 months overseas account showing salary and savings and Indian account if any.
- If any previous loan from other Banks/Lenders, then Loan A/C statement for last 1 year
Income Proof for Salaried Applicant/ Co-applicant/ Guarantor:
- Valid work permit
- Employment contract – an English translation duly attested by employer/ consulate / our foreign office / Embassy in case it is in any other language
- Last three months’ salary certificate/slip
- Last six months’ Bank Statement showing salary credit
- Latest salary certificate /slip in original and copy of identity card issued by the current employer
- Duly acknowledged copy of last year Individual Tax Return except for NRIs/PIOs located in Middle East countries and employees in the Merchant Navy.
Income Proof for Non-Salaried Applicant/ Co-applicant/ Guarantor:
- Business address proof
- Proof of income in case of self-employed professionals/businessmen.
- Last 2 years Audited/C.A. certified Balance Sheet and P&L accounts,
- Last 2 years Individual Tax Return except for NRI/PIO located in Middle east countries
- Last six months’ Bank Statement of overseas account in the name of individual as well as company/unit