Acquisition of Overseas Properties by Resident Indian

Ways of Acquisition of Immovable Property Outside India

Acquisition from a Person Resident Outside India

A person resident in India may acquire immovable property outside India from a person resident outside India by:

1. Inheritance or Gift:Property acquired through inheritance or as a gift from a non-resident.
2. Purchase Out of Foreign Exchange in a Resident Foreign Currency Account: Property acquired using foreign exchange held in a Resident Foreign Currency (RFC) account.
3. Purchase via Liberalised Remittance Scheme (LRS): Property acquired through remittances sent under the Liberalised Remittance Scheme (LRS), of USD 250000 per year for per resident person, which can be consolidated if sent for relatives including minor members of the family.
4. Joint Acquisition with a Non-Resident Relative: Property acquired jointly with a relative who is a non-resident.
5. Income or Sale Proceeds of Overseas Assets: Property acquired out of income earned outside India or sale proceeds of assets excluding Overseas Direct Investment.

Acquisition from a Person Resident in India

A person resident in India may acquire immovable property outside India by:

1. Inheritance or Gift from PRI: A Resident Indian shall acquire property outside India through inheritance or as a gift.
   1. Purchase from a Person Resident in India: Property acquired from a person resident in India who has acquired the property in compliance with foreign exchange provisions applicable at the time of acquisition.

Liberalized Remittance Scheme

Under the Liberalised Remittance Scheme (LRS), all resident individuals, including minors, are permitted to remit up to USD 2,50,000 per financial year for various purposes, including the purchase of immovable property outside India. This annual remittance limit is per individual, and it applies to both adults and minors.

Additionally, the LRS allows the pooling of remittances from relatives. For example, if a family consists of four members (say two adults and two minors), the family can collectively remit up to USD 1,000,000 (i.e., USD 2,50,000 x 4 members) in each financial year to purchase immovable property abroad, provided the remittances comply with the guidelines set by the Reserve Bank of India.

Issues to be considered:A resident Indian is allowed to own immovable property outside India in the following ways:

• Individually – The property can be owned solely by the resident Indian.
• Jointly with Other Resident Indians – The property can be owned jointly with other residents of India.
• Jointly with Relatives Who Are Non-Residents – The property can be held jointly with relatives who are residents outside India.

Restrictions on acquiring Immovable property outside India:

• No Joint Ownership with Non-Resident Non-Relatives – Resident Indians are prohibited from holding property jointly with a non-resident who is not a relative.
• Prohibition on Agricultural Land, Plantations, or Farmhouses – Resident Indians are not permitted to acquire agricultural land, plantation properties, or farmhouses abroad. Agricultural land can only be inherited, not purchased, and must comply with the laws of the country where the property is located.
• Prior RBI Approval for Investments Above LRS Limit – A resident Indian must obtain prior approval from the Reserve Bank of India if the investment exceeds the limit allowed under the Liberalised Remittance Scheme (LRS), which is USD 2,50,000 per year. Practically these approvals are not granted.
• Acquisition of property on loan/ instalments etc- in many cases overseas builders/ brokers are selling overseas properties on loans/ under construction plans/instalments etc. Since as resident Indian, any overseas loans are regulated by RBI under FEMA, such arrangement of acquisition of overseas properties may not be legally valid.
• Gift from NRIs: this is again another big noncompliance area. As of now, Resident Indian are not allowed to have overseas immovable properties as gift from non-resident including relatives.