CASE STUDY-FOREIGN EXCHANGE MANAGEMENT ACT, 1999

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CASE STUDY-FOREIGN EXCHANGE MANAGEMENT ACT, 1999

 

CASE STUDY-FOREIGN EXCHANGE MANAGEMENT ACT, 1999

 

Question:  One couple purchase house property jointly. After death of lady ownership of her part transfer to two children. They sold house property. Long Term Capital Gain arises. But one child who is resident of US wants to transfer his part in US. Is it possible ?

 

SOLUTTION: the answer in this case if YES, child residing in US can transfer his part in US.

 

The General Permission is available to NRI/PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India subject to following terms and conditions;

 

  1. The amount should not exceed USD 1 Million , per financial year;

 

  1. This is subject to production of documentary evidence in support of acquisition/ inheritance of assets and an undertaking by the remitter and certificate by a Chartered Accountant in the format prescribed by CBDT vide Circular No. 4/2009 dated June 29,2009;

 

  • In case of Deed of Settlement made by either of his parents or a close relative ( as defined in Section 6 of the Companies Act, 1956 and Section 2(77) of the Companies Act, 2013) and settlement taking effect on the date of death of his mother or settlor;

 

  1. The original Deed of Settlement and Tax Clearance Certificate /No Objection Certificate form Income Tax Department should be produced for remittance of sale proceeds.

 

  1. Where remittance as above is made in more than one instalments , the remittance of all such instalments shall be made through the same Authorized Dealer.

 

 

 

  1. In case of a foreign national, sale proceeds can be repatriated if the property is inherited from a person resident outside India with the prior permission of RBI. The Foreign National has to approach the RBI with required documentary evidence in support of inheritance of the immovable property and a Certificate by CA as prescribed by CBDT.
REPATRIATION OF SALE PROCEEDS OF IMMOVABLE PROPERTY

A) Immovable property acquired by way of purchase;

(a) A person referred to in sub-section (5) of Section 6 of the Foreign Exchange Management Act , or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of any immovable property referred to in that sub-section.

 

(b) In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by a person resident outside India who is a citizen of India or a person of Indian origin, the Authorised Dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:

 

(i) the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations;

 

(ii) the amount to be repatriated does not exceed:

·       the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels, or

·       the amount paid out of funds held in Foreign Currency Non-Resident Account, or

·       the foreign currency equivalent (as on the date of payment) of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property; and

 

 

 

(iii) in the case of residential property, the repatriation of sale proceeds is restricted to maximum two such properties.

 

(B) Immovable property acquired by way of inheritance/ legacy/ out of Rupee funds;

A Non-Resident Indian (NRI) / Person of Indian Origin (PIO) may remit an amount, not exceeding US $ 1,000,000 (US Dollar One million only) per financial year out of the balances held in NRO accounts / sale proceeds of assets by way of purchase / the assets in India acquired by him by way of inheritance / legacy/ out of Rupee funds. This is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and a tax clearance / no objection certificate from the Income Tax Authority for the remittance. Remittances exceeding US $ 1,000,000 (US Dollar One million only) in any financial year requires prior permission of the Reserve Bank.

 

In cases of deed of settlement made by either of his parents or a close relative (as defined in Section 6 of the Companies Act, 1956 and Section 2(77) of the Companies Act, 2013) and the settlement taking effect on the death of the settler, the original deed of settlement and a tax clearance / No objection certificate from the Income-Tax Authority should be produced for the remittance.

Where the remittance as above is made in more than one installment, the remittance of all such installments shall be made through the same Authorised Dealer.

 

Source: https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8095#5

 

PLEASE NOTE THAT

  1. The General Permission for repatriation of sale proceeds of immovable property is not available to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afganistan and Iran, Hongkong, or Macau and that person is required to seek Specific Permission of RBI.

 

  1. The Sale Proceeds of immovable property of a citizen resident in Nepal or Bhtan shall be made only in India Rupee.

 

DISCLAIMER:  the case law presented here is only for sharing information and knowledge with the readers. The views are personal. In case of necessity do consult with tax professionals.

 

 

 

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