Mode of Acquisition of Immovable Property outside India by a resident of India

In terms of section 6(4) of FEMA, 1999 a person resident in India may hold, own, transfer, or invest in foreign currency, foreign security, or any immovable property situated outside India if such currency, security, or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.

A resident Indian can acquire immovable property outside India by way of inheritance, gift, or purchase from another resident Indian, provided such resident Indian has acquired the property as per the law in force at the time of such acquisition.

A resident Indian may acquire immovable property outside India from a non-resident by way of inheritance, by way of purchase out of money held in an RFC account in India, or by way of remittance under the provisions of the LRS scheme (maximum USD 250000 or equivalent per year), or jointly with a person resident outside India or Out-of-income or sale proceeds of assets outside India (other than Overseas Direct Investment or ODI.

Returning Indians who had acquired immovable property abroad, when he was a resident outside India, can continue to hold, own, or transfer such immovable property. However, if the income from the overseas immovable property acquired such as rent, sale proceeds, etc. is not reinvested, it should be brought back to India within a period of 180 days from the date of such receipt.

A resident Indian cannot borrow and remit funds abroad under LRS for acquiring overseas immovable property.

A person resident in India may freely utilise all their eligible assets abroad as well as income on such assets or sale proceeds thereof received after their return to India for making any payments or to make any fresh investments abroad without approval of the Reserve Bank, provided the cost of such investments and/or any subsequent payments received therefore are met exclusively out of funds forming part of eligible assets held by them and the transaction is not in contravention to extant FEMA provisions.

The income Tax Department should be informed about the overseas immovable property held by the resident individual in his income-tax return under the schedule of foreign assets. The income from such immovable property such as rent, sale proceeds, etc., would also be taxable in India as a resident would be subject to tax on his global income.

The Foreign Exchange Management (Overseas Investment, or OI) Rules, notified by the Reserve Bank of India (RBI) on 22 August 2022, supersedes the erstwhile provisions governing the acquisition of immovable property overseas by a resident individual. The acquisition of immovable property outside India by a Person Resident in India [PRII] can be done by following the Rules as specified in Foreign Exchange Management (Overseas Investment) Rules, 2022.

Rule 21 of the Foreign Exchange Management (Overseas Investment) Rules, 2022 specifies that:

“Save as otherwise provided in the Act or this rule, no person resident in India shall acquire or transfer any immovable property situated outside India without general or special permission of the Reserve Bank of India”.

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