NRI Property Disputes in India
Non-Resident Indians may have property interests in India while living and working abroad. Disputes can arise concerning ownership, inheritance, possession, sale, partition, tenancy, succession or the validity of property documents.
An NRI property dispute lawyer in Mumbai can be of great help with examining property records, identifying the applicable law, preparing legal documents and representing an NRI before the appropriate authority or court. Adv. Kanchan Talreja has represented many NRIs during her decade-long career and successfully helped settle such contentious matters.
The legal position depends on the nature and location of the property, the parties involved, the manner in which the property was acquired, and the law applicable to the transaction or succession.
Common NRI Property Disputes
Property disputes involving NRIs may concern:
Ownership of residential or commercial property
Inherited property
Ancestral property
Partition between family members
Disputes between legal heirs
Unauthorised occupation
Sale or transfer of property
Property held through a power of attorney
Disputes concerning tenants
Fraudulent or disputed documents
Succession and inheritance
Possession of property
The appropriate legal remedy depends on the facts and documents relating to the property.
01
NRI Property in India: FEMA, RBI and Related Property Laws
For an NRI or OCI, ownership of property in India is governed not only by property law but also by the foreign-exchange framework under the Foreign Exchange Management Act, 1999 (FEMA) and the regulations made under it. The distinction between residential or commercial property and agricultural land, plantation property or a farmhouse is particularly important. The RBI’s current framework permits NRIs and OCIs to acquire immovable property in India, subject to specified conditions, but does not generally permit them to purchase agricultural land, plantation property or a farmhouse.
02
What Property Can an NRI or OCI Acquire?
Under the FEMA regulations, an NRI or OCI may generally acquire immovable property in India other than agricultural land, plantation property or a farmhouse. The acquisition may be by purchase, subject to the prescribed payment routes. Payment must ordinarily come through banking channels by inward remittance or from permitted non-resident accounts such as NRE, FCNR(B) or NRO accounts, as applicable. Payment through travellers’ cheques or foreign currency notes is not permitted under this framework.
03
Agricultural Land, Plantation Property and Farmhouses
A significant restriction under the FEMA framework is that an NRI or OCI cannot acquire agricultural land, plantation property or a farmhouse by purchase under the general permission available for other immovable property. The RBI specifically distinguishes these categories from residential and commercial property.
04
Repatriation of Sale Proceeds
Selling an Indian property and transferring the proceeds outside India are two separate legal questions. An NRI or OCI may be permitted to repatriate sale proceeds of eligible immovable property, but the ability to do so depends upon the manner in which the property was acquired and the source of the original consideration.
Under the FEMA regulations, an Authorised Dealer may permit repatriation of sale proceeds of immovable property other than agricultural land, plantation property or a farmhouse where the applicable conditions are satisfied. These include that the property was acquired in accordance with the foreign-exchange law applicable at the time of acquisition and that the acquisition consideration was funded through permitted foreign-exchange or non-resident-account routes. For residential property, the regulations restrict repatriation of sale proceeds to not more than two such properties under this route.
05
TDS When an NRI Sells Property in India: Section 195
The tax position also differs when the seller is a non-resident.
Where an immovable property in India is sold by a non-resident, the buyer is required to examine the tax-deduction obligation under Section 195 of the Income-tax Act, rather than applying the 1% TDS mechanism under Section 194-IA that applies to purchases from resident sellers. The Income Tax Department expressly states that Section 194-IA does not apply where the seller is a non-resident and that TDS is instead governed by Section 195.
The amount and rate of deduction depend upon the nature of the income and the applicable provisions. The Income Tax Department currently states that, for a non-resident seller, long-term capital gains on immovable property held for more than 24 months are subject to the applicable Section 195 rate; for transfers on or after 23 July 2024, the stated rate for the relevant long-term capital gains category is 12.5%, subject to applicable surcharge and health and education cess and the possible application of a relevant tax treaty.
06
Benami Transactions and NRI Property
The Benami Transactions (Prohibition) Act, 1988, as amended in 2016 and now titled the Prohibition of Benami Property Transactions Act, 1988, is another important consideration where the person shown as the owner and the person who actually provides the consideration are different.
The Act prohibits benami transactions and provides mechanisms for attachment, adjudication and confiscation of benami property. The Government has specifically stated that property held benami can be confiscated without compensation and that the Act also contains penal consequences.
07
NRI Property Ownership in India
An NRI may hold property in India subject to the laws and regulations applicable to the particular transaction.
Ownership should be examined through documents such as title deeds, registration records, previous conveyances and other records relevant to the property.
The Transfer of Property Act, 1882 contains provisions governing transfers of property by acts of parties, including sales, mortgages, leases, exchanges and gifts.
08
Inherited Property
An NRI may have inherited property situated in India from a parent, spouse or other relative. The applicable succession law depends on the circumstances of the deceased and the nature of the succession. For example, the Hindu Succession Act, 1956 contains provisions concerning intestate and testamentary succession among persons to whom the Act applies.
09
Property Sale Through Power of Attorney
NRIs may use a power of attorney to authorise a person in India to undertake specified property-related acts.
The authority granted should be clearly stated. A power of attorney does not give the attorney unrestricted ownership rights over the property.
Before relying on a power of attorney for a property transaction, it is important to examine its execution, scope, validity and compliance with all legal requirements.
Disputes can arise if an attorney acts beyond the authority granted or where the principal disputes a transaction carried out on their behalf.
10
Illegal Possession of NRI Property
An NRI may discover that a property in India is occupied by a person who does not have a valid right to remain in possession. The appropriate remedy depends on the legal status of the occupant, the title of the owner, the nature of the possession and the documents available. An owner should avoid assuming that a particular remedy will apply without examining the title and possession history.
Where necessary, court proceedings may be considered for recovery of possession or other appropriate relief.
11
NRI Property and Succession
Succession can become complicated where a person who owns property in India dies while residing abroad. The rules governing succession can depend on the type of property, the deceased’s domicile, personal law and whether a valid will exists.
The Indian Succession Act, 1925 contains provisions concerning succession and testamentary matters, while other succession laws may apply depending on the circumstances. For immovable property situated in India, the applicable legal framework concerning succession must be examined carefully.
12
Property Documents for NRIs
An NRI dealing with an Indian property dispute may need documents such as:
The required documents may vary according to the nature of the dispute.
13
Property Disputes and Court Proceedings
An NRI may need to participate in civil proceedings concerning property situated in India.
Depending on the nature of the proceeding, a lawyer may represent the client where permitted. However, personal participation, verification, evidence or other procedural requirements may arise in particular circumstances.
The court having jurisdiction will depend on the nature and location of the property and the applicable procedural law.
Legal Assistance for NRI Property Matters
Legal assistance in an NRI property dispute may include examining title documents, succession records, powers of attorney and previous transactions.
It may also involve preparing legal notices, replies, applications, civil proceedings or other documents appropriate to the matter.
Where several family members are involved, the legal position of each party may need to be examined separately.
Property disputes involving NRIs should be assessed by an experienced NRI property dispute lawyer in Mumbai like Adv. Kanchan Talreja, based on the documents and facts of the individual matter. The ownership position, available remedies, duration of proceedings and outcome cannot be determined without examining the specific circumstances.
References
- The Transfer of Property Act, 1882, India Code, Ministry of Law and Justice, Government of India. India Code – Transfer of Property Act, 1882
- The Hindu Succession Act, 1956, India Code, Ministry of Law and Justice, Government of India. India Code – Hindu Succession Act, 1956
- The Indian Succession Act, 1925, India Code, Ministry of Law and Justice, Government of India. India Code – Indian Succession Act, 1925
