ACQUISITION OF PROPERTY
BY NRI's (Non-Resident Indians) IN INDIA :

Foreign exchange regulations and Wealth tax law ; Implications on such acquisitions.

  A   NRI who acquired an immovable asset can  repatriate  the 
  sale   proceeds  in  foreign  currency  if   the   following 
  conditions are full filled.

  NRIs  holding  passports can acquire residential property  in 
  India only;

  i) against remittance of funds from abroad

  ii)  and  subject to registration with the Reserve  Bank  of 
  India within three month of completion of purchase. 

  iii)  If  the sale is of the property is three  years  after 
  acquisition  can  repatriate the proceeds to  the  extent  of 
  original inward remittance made. 

  The  balance  of  earning by way of rent,  interest  on  sale 
  proceeds  and  capital gains has  to be credited  to  a  NRO 
  account and cannot be repatriated.
       
     
  WEALTH TAX LIABILITY:

  In  the assessment year 1994-95 an exemption was  given  for 
  one residential house for assess under Sec. 5(1) (vi) of the 
  Wealth-tax  Act. it stands to reason that where a tax  payer 
  has  more than one house,he can avail himself of   exemption 
  for the house with the highest value. since the exemption is 
  a  general one, it is available for both resident  and  non-
  residents.     

  That most financial investment out of foreign funds ars  not 
  subject to Wealth -Tax.  
  
  There  is  no exemption from Wealth-Tax merely  because  the 
  purchase  is  financed  by foreign  exchange.  However,  the 
  property may well be exempt if the assessee, who is a person 
  of  India  origin  or a citizen of  India,  has  permanently 
  return  to India and has purchased the house out  of  moneys 
  repatriated  on  such return. Any property acquired  out  of 
  such moneys will exempt for a period of seven years from the 
  date of return to India under Sec.5 of the Wealth -Tax  act, 
  Assets  acquired  out of moneys already  available  in  non-
  resident external accounts are also treated as acquired out 
  of moneys brought by the Tax payer into India on the date of 
  arrival.  The  moneys should have been brought to  India  at 
  least   within  One year immediately preceding the  date  of 
  return  or  at any time there after. 

  As  for  any rent which the non-resident  obtains  from  the 
  property,  it  is certainly taxable as  his  Indian  income. 
  capital gain on sale of such property is also taxable.   


  Disclaimer :

  The discussion in this forum is non-obligatory and therefore 
  no   authenticity  is  attached.  It  is  purely   academic. 
  Individual  doubts relating to Indian Laws as applicable  to 
  NRI's  will  be discussed in this forum. Any  one  can  send 
  their questions by e-mail to :

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