Here we are offering some vital information for the NRIs. The following point and the preceding FAQ's shall be of vital.

1. Non-resident Indians holding Indian passport do not require any permission from RBI for acquiring Immovable Property for bonafide residential purposes as section 31 of FERA 1973 is not applicable to them.

2. Non-resident Indians holding Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO Account or out of NRE Account or out of FCNR Account.

3. RBI has granted General Permission to Non-resident Indians holding Foreign Passport (i.e. Foreign Citizens of Indian Origin) to acquire, hold, transfer or dispose off by way of sale or inheritance immovable properties situated in India provided :

1. The property is for the Purchaser's bonafide residential purpose.

2. The purchase consideration is met either by remittance of funds from abroad through normal banking channels or out of NRE/FCNR Account or out of FCNR Special Deposit Account.

4. Foreign citizens of Indian origin are however required to declare the properties to RBI within a period of 90 days from the date of purchase in Form IPI 17. The following documents must be submitted along with the declaration.

1. A certified copy of the purchase deed or a certificate from the Co-operative Housing Society or an Association of the apartment owners as an evidence of transfer / registration of the property in the declarant's name.

2. Certificate from the declarant's bankers in India evidencing receipt of inward remittance(s) in foreign exchange through normal banking channel or withdrawal of funds from the declarant's NRE/FCNR account/ FCNR Special Deposit Account and payment of consideration for the property out of those funds.

5. Where a Foreign Citizen of Indian origin wishes to acquire a property, out of funds held in NRO Account then the permission from RBI will be required which can be applied for in Form IPI 1.

6. Where a Foreign Citizen of Indian origin wishes to acquire a property from the sale proceeds of another property, prior permission of RBI is essential and may be obtained by applying in Form IPI 1.

7. Any number of properties can be acquired by non-resident Indians regardless of whether they are holding Indian passport provided they are required for bonafide residential purposes.
Under Section 29 of the Foreign Exchange Regulation Act 1973, the Reserve Bank of India has granted General Permission to Foreign Citizens of Indian origin and Indian citizens residing outside India to let out their immovable properties (Commercial / Residential).
The rental income or proceeds of any investments out of such income shall be repatriable outside India subject to Income tax being paid.

The Reserve Bank of India on an application in Form IPI I may consider favourably the acquisition of residential property by Foreign Nationals of Non-Indian origin provided:
1. The purchase consideration is met out of funds remitted from abroad.
2. The property is acquired for bonafide residential use.
3. The foreign National of Non-Indian origin undertakes not to repatriate the sale proceeds.

Following are some of the most common questions asked by NRIs:

Q. Do non-resident Indian citizens/ foreign citizens of Indian origin require permission of Reserve Bank to acquire residential property in India?
A. Reserve Bank has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase immovable property in India for their bona fide residential purpose. They are, therefore, not required to obtain permission of Reserve Bank.

Q. In what manner the purchase consideration for the residential immovable property should be paid by foreign citizens of Indian origin under the general permission?
A. The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India.

Q. Are there any formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission?
A. They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration alongwith a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

Q. Can such property be sold without the permission of Reserve Bank?
A. Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.

Q. Can sale proceeds of such property if and when sold be remitted out of India?
A. In respect of residential properties purchased on or after 26th May 1993, Reserve Bank considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of the property for two such properties. The balance amount of sale proceeds if any or sale proceeds in respect of properties purchased prior to 26th May 1993, will have to be credited to the ordinary non-resident rupee account of the owner of the property.

Q. Are any conditions required to be fulfilled if repatriation of sale proceeds is desired?
A. Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later.

Tax Benefits

The benefits of taking a home loan The income tax authorities look with favour upon those servicing a housing loan from specified financial institutions. And, it is up to you to be wise enough to take advantage of this.

• Let's start with Section 24 of the Income Tax Act.

Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.

This is now a substantial amount. It started off with the Income Tax Department offering Rs 15,000 as the maximum amount eligible for deduction in the case of self-occupied property. This later got doubled to Rs 30,000. It did not stop there. After getting enhanced to Rs 75,000, it was then taken to a limit of Rs 1 lakh. Presently, the limit stands elevated to Rs 1.5 lakh.

So, should you borrow money to acquire, construct, repair, renew or reconstruct property on or after April 1, 1999, you get a deduction of up to Rs 1.5 lakh. The criteria being: the property has to be acquired or constructed by March 31, 2003 and be self-occupied.

When put in figures, this is quite an amount:
1. Assume taxable income of Rs 4 lakh, placing the assessee in the highest tax bracket.
2. Assume interest payment during the first financial year is Rs 1.60 lakh
3. Taxable income stands reduced to Rs 2.5 lakh (Rs 4 lakh - Rs 1.5 lakh being the maximum limit)
4. Total tax amounts to Rs 49,980 (tax of Rs 49,000 + surcharge of Rs 980)
5. Tax saved is Rs 45,900 (tax @30% on Rs 1.5 lakh plus 2% surcharge as the investor is in the highest tax bracket)

• That brings us to Section 88 of the Income Tax Act.

You get a 20% rebate on repayment of principal during a financial year. Once again, over the years, the principal repayment eligible for rebate has been enhanced from Rs 10,000 to the current limit of Rs 20,000. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount.

Going back to our earlier example:
1. Taxable income of Rs 4 lakh
2. Taxable income stands reduced to Rs 2.5 lakh
3. Tax before rebate and surcharge: Rs 49,000 (no surcharge is computed as surcharge is applicable on tax payable after allowing for rebate under Section 88)
4. Rebate of Rs 4,000 (20% of Rs 20,000 being principal repayment)
5. Tax less rebate of Rs 4,000 + surcharge @ 2%= Rs 45,900
6. Tax saved = Rs 49,900 (Rs 45,900 as shown above plus rebate of Rs 4,000)

Society Info

• Co-operative Societies

There are basically four types of Co-operative Societies connected with the housing:

(i) Open Plot Societies
In Open Plot Societies, members purchase or take on lease a plot of land and themselves construct the building.

(ii) Flat Owners Societies
When a builder constructs flats and sells them to Flat Owners, the Society when formed is called Flat Owners' Society.

(iii) Tenant Societies
When Landlord forms a Society of tenants, it is called Tenants Society.

(iv) Housing Board Societies
When a Society is formed by Allottees of flats and building is constructed by the Housing Board Authorities, i.e. Mumbai Housing and Development Board, then the Society so formed is of the type of Housing Board Society.

• Procedure for Registration of Society

The procedure for Registration of a society begins with electing a Chief Promoter in a meeting of the Promoters. The builder under the Flat Owners type of co-operative society has the first right to act as the chief promoter. The developer / flat purchasers should call for a meeting of the Promoters by issuing the notice under Agenda of the meeting giving at least 14 days notice to the Promoters.

In this meeting, a Chief Promoter is elected who can exercise such powers and carry out such functions as are mentioned in the minutes of the Promoters of the proposed Co-operative Society. After electing the Chief Promoter, the proposed name of the society has to he decided by the Promoters. It is a common belief that the Society should consist of at least 10 members. If the number is less than 10 then special permission from Government has to be taken. In such cases, the garages / car parking may be allotted to other relatives of the promoter to reach number of 10.

On allotment of name and permission to open a bank account by the Registrar, the Chief Promoter has to collect Share Capital, Entrance Fees from promoters and deposit the same in the branch of the bank permitted by the Registrar. It should be noted that the amount cannot be withdrawn from the Bank till the Society is Registered or its Registration is refused, except with prior written permission of the Registrar. The Chief Promoter should submit Registration Proposal to the Registering Authority within a period of 3 months from the date of issue of Letter of Reservation in the name of the proposed Society. The documents that are normally to be submitted to the Registering as under :-

1. Application for registration of Society in Form A along with Statement A. Enclosure to application for Registration as per Rule 4(1) of Maharashtra Co-operative Societies Rules, 1961.
2. Information about proposed society in Statement 'B' (vide Govt. Circular dated 2-5-1980)
3. Information about promoter members of the proposed society in Statement 'C' (vide Govt. Circular dated. 2-5-1980)
4. A Statement of Accounts as per Form D.
5. Model Bye-laws.
6. Bank Balance Certificate
7. R.B.I. / Treasury Challan for payment of Registration Fee of Rs. 2500/-
8. Title Clearance Certificate from an Advocate.
9. A true copy of the approved Building Plan.
10. Letter of Authority granting permission to commence construction work/Completion Certificate (if applicable)
11. Affidavit on Rs.20/- Stamp Paper from at least 10 promoter members to the effect that they are residing in the area of operation of the Society (Proposed), made before a Competent Authority.
12. Affidavit from the Chief Promoter on Stamp Paper of Rs.20/- executed before the Competent Authority in form 'Y'.
13. Certified True Copy of agreement made on Stamp Paper and Registered between the builder, promoter and purchasers of flat.

Once the Proposed Society is registered it is to be noted that the Builder/Promoter/Developer has no say with respect to the said building