A. NRI/OCI Acquiring Immovable Property Through Gift:
An NRI or OCI can acquire Indian immovable property as a gift from another NRI, OCI, or a person resident in India, provided the donor is a relative.
1. Type of Immovable Property Received Through Gift:
As per FEMA (Foreign Exchange Management Act) rules, an NRI is permitted to acquire any immovable property in India through a gift, except for agricultural land, farmhouse, and plantation property.
2. Definition of Relative:
As defined under the Companies Act, 2013, the term “relative” refers to the following persons:
- A member of a Hindu Undivided Family (HUF),
- Husband and wife,
- As prescribed by law (Father, including stepfather; Mother, including stepmother; Son, including stepson; Son’s wife; Daughter; Daughter’s husband; Brother, including stepbrother; Sister, including stepsister).
3. Case-Based Examples:
| Example | Condition of Law | Allowed or Not |
|---|---|---|
| A resident grandfather, Devendra, gifting his property to his NRI grandson, Rohan | A grandfather is not considered a “relative” under Company law and cannot gift property to a grandson. | Not Allowed |
| Arjun (NRI) receiving property from his NRI brother, Vikram | The donor and recipient are both NRIs, and brothers are considered relatives under the law. | Allowed |
| Meera (NRI) receiving a farmhouse from her Indian resident father, Shankar | Farmhouses cannot be gifted to an NRI under FEMA, even if the donor is a relative. | Not Allowed |
| Raj (NRI) receiving a flat in Pune as a gift from his Indian resident friend, Neel | Gifts can only be made by relatives under the law, not by non-relatives. | Not Allowed |
B. NRI/OCI Gifting Indian Immovable Property to Resident Indian:
An NRI or OCI can gift immovable property located in India to a Resident Indian. The gifted property must be held by the NRI/OCI in accordance with the provisions of FEMA (Foreign Exchange Management Act).
1. Type of Immovable Property Transfer Through Gift:
- An NRI can gift any type of immovable property to a resident, subject to the condition that the property must be held by the NRI/OCI in accordance with FEMA regulations.
- Even if agricultural land is received under inheritance, it can be gifted to a resident Indian.
2. Tax Implications for Resident Indian:
- If the property is gifted to a relative (as defined in the Income Tax Act, 1961), it will not be subject to tax in India for the recipient.
- Under the Income Tax Act, the term “relative” includes:
- Spouse of the individual
- Brother and sister of the individual
- Brother and sister of the spouse of the individual
- Brother and sister of either of the parents of the individual
- Any lineal ascendant and descendant of the individual
- Spouse of the person referred in “b” to “e”
- If the property is gifted to anyone other than the relatives as defined above, such a gift of immovable property will be taxed in India.
3. Case-Based Examples:
| Example | Condition of Law | Allowed or Not | Tax Implication as per Income Tax Act |
|---|---|---|---|
| John (NRI) gifting a flat in Delhi to his Indian resident brother, Rahul | An NRI can gift any type of immovable property, provided it is held according to FEMA regulations. | Allowed | No tax as it is covered under the relative definition in the Income Tax Act. |
| Sophie (OCI) gifting agricultural land in Punjab, which was received through inheritance from her deceased mother to her Indian friend, Harvinder | Agricultural land received through inheritance can be gifted to a Resident Indian in compliance with FEMA regulations. | Allowed | Tax implication arises as Harvinder is not a relative under the Income Tax Act. |
4. Tax Implication for NRIs Receiving Gifts/Inheritances for Indian Properties:
Although such gifts/inheritances are not subject to taxes in India (provided such gifts are received from relatives), there might be tax implications for the receiving NRI in their host country if the host country/country of residence provides for taxability on gifts/inheritances.
This document ensures compliance with FEMA and Income Tax Act regulations while outlining the conditions under which NRIs and OCIs can acquire or gift immovable property in India.