The acquisition and transfer of immovable property in India are governed by various laws and regulations, primarily under Indian Contract Act, Transfer of Property Act, 1882, FEMA (Foreign Exchange Management Act, 1999), Indian Income Tax Act, and Registration Act, 1908. These laws apply to both residents and non-residents, and there are specific guidelines for Non-Resident Indians (NRIs) and Foreign Nationals (Foreigners) looking to acquire or transfer property in India.

1. Acquisition of Immovable Property in India

By Indian Residents

• General Provisions: Any Indian citizen or company can acquire immovable property in India, provided the transaction complies with the laws under the Transfer of Property Act, 1882 and the Indian Contract Act.
• Title Search and Registration: Before acquiring property, a title search should be conducted to ensure the property has a clear title (i.e., it is free from legal encumbrances). The sale deed must be registered under the Registration Act, 1908.
• Payment Process: Payment for the acquisition must be made through normal banking channels. Cash transactions in property deals are prohibited by law to prevent money laundering.
• Stamp Duty: Stamp duty is payable on the transaction value and varies by state in India. It must be paid to the local authorities for the transfer to be legally valid.

By NRIs and Foreign Nationals

1. NRIs (Non-Resident Indians):
   • Eligibility: NRIs are allowed to acquire immovable property in India. However, the property must be residential or commercial in nature. NRIs are not allowed to purchase agricultural land, farmhouses, or plantations.
   • Source of Funds: The property must be purchased using funds from either:
     • Funds received through normal banking channels (such as remittance from abroad).
     • Income earned in India (such as salary, business income).
     • Repatriation of funds may be allowed in certain circumstances, but only within the limits set by FEMA.
   • Financing the Property: NRIs can avail themselves of home loans in India for purchasing property. These loans are offered by Indian banks and financial institutions, subject to compliance with RBI guidelines.
2. Foreign Nationals:
   • Foreign nationals who are not citizens of India are generally not allowed to acquire immovable property in India unless they meet certain conditions.
   • Eligibility for Foreign Nationals: A foreign national who is a citizen of a country (other than Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, or Bhutan) and who has resided in India for more than 182 days during the preceding 12 months is permitted to buy property in India.
   • Types of Properties: Foreign nationals are allowed to purchase residential or commercial properties in India. They cannot acquire agricultural land unless they have specific approval from the government or the RBI.
   • Financing: Foreign nationals may be required to finance the purchase using Indian funds and not through foreign loans unless permitted by RBI guidelines.

Regulatory Compliance for Acquisition:

• FEMA Compliance: All property acquisitions by NRIs, foreign nationals, or foreign companies must comply with FEMA regulations to ensure the transfer of funds is done via authorized channels.
• PAN Card: A Permanent Account Number (PAN) is required for purchasing property in India. NRIs and foreign nationals are also required to provide their PAN details.
• Due Diligence: Ensuring that all title documents are clear and the property is free from encumbrances is crucial before the acquisition.

2. Transfer of Immovable Property in India

By Indian Residents

• Sale of Property: The transfer of immovable property through sale is governed by the Transfer of Property Act, 1882. A sale deed is drafted and signed by the buyer and seller, and the transaction must be registered with the local sub-registrar under the Registration Act, 1908.
• Tax Implications:
  • Capital Gains Tax: If the property is sold for more than the acquisition cost, the seller will incur capital gains tax.
    • Short-Term Capital Gains: If the property is sold within 2 years of purchase, it is subject to short-term capital gains tax (STCG), which is taxed at the individual’s applicable income tax slab.
    • Long-Term Capital Gains: If the property is held for more than 2 years, long-term capital gains (LTCG) tax applies at the rate of 20% (with indexation benefits).
  • Stamp Duty: A stamp duty is payable on the sale transaction. The rate varies depending on the state.

By NRIs or Foreign Nationals

1. NRIs (Non-Resident Indians):
   • Transfer of Property by NRIs: NRIs can sell property in India, subject to the same regulations that apply to residents.
   • Repatriation of Sale Proceeds: If an NRI sells immovable property, the sale proceeds can be repatriated abroad, but there are specific conditions to follow:
     • The property must be held for a minimum of 10 years.
     • The amount repatriated must not exceed the amount that was originally remitted to India to purchase the property.
     • The repatriation is allowed only after payment of applicable taxes and the completion of necessary FEMA formalities.
   • Capital Gains Tax: Similar to Indian residents, NRIs are subject to capital gains tax on the sale of property in India, with the same rates for short-term and long-term capital gains. However, tax relief may be available under the Double Taxation Avoidance Agreement (DTAA), if applicable.
2. Foreign Nationals:
   • Sale by Foreign Nationals: Foreign nationals who meet the eligibility criteria for property acquisition can also sell property in India. The same tax rules apply, with capital gains being taxed.
   • Repatriation of Sale Proceeds: Foreign nationals may not be allowed to repatriate proceeds from the sale of property unless the property was acquired in accordance with the provisions of FEMA and the sale proceeds are remitted through authorized channels in compliance with RBI regulations.
   • Capital Gains Tax: Similar to NRIs, foreign nationals will be subject to capital gains tax upon selling property in India. Tax rates will depend on whether the property is held for less than or more than two years.

Stamp Duty and Registration:

• Stamp Duty: Both buyers and sellers must ensure that the property transfer is duly stamped, and the deed is executed according to the stamp duty laws of the state in which the property is located.
• Registration: The property transfer must be registered with the Sub-Registrar of Assurances as per the Registration Act, 1908.

3. Special Considerations

• Agricultural Land: Non-Indian residents (including NRIs) are prohibited from acquiring agricultural land, plantations, or farmhouses in India unless they meet specific exceptions or get approval from the Indian government (for instance, NRIs can acquire agricultural land for agricultural purposes in certain cases, but they must apply for permission).
• FEMA Guidelines for NRIs and Foreign Nationals: FEMA regulations lay down specific guidelines for NRIs and foreign nationals regarding the repatriation of funds, the sale of property, and the remittance of sale proceeds. Compliance with FEMA is necessary to avoid penalties or legal issues.
• Taxation: NRIs and foreign nationals must be aware of taxation laws in both India and their home country, particularly the Double Taxation Avoidance Agreement (DTAA), which provides relief from paying tax twice on the same income.

Conclusion

The acquisition and transfer of immovable property in India involve complex regulations, especially when dealing with NRIs or foreign nationals. Indian residents can freely buy and sell property in India, while NRIs must follow FEMA guidelines for acquiring and transferring property. Foreign nationals have restrictions but can acquire property under certain conditions. Both Indian residents and non-residents must comply with the provisions of the Transfer of Property Act, Income Tax Act, Stamp Duty, and Registration Act, while ensuring compliance with tax laws to avoid issues with capital gains tax. Proper due diligence is crucial when acquiring or transferring property to ensure clear title and legal compliance.