Useful Information

STAMP DUTY
Stamp Duty is a tax collected by the Government on every document by which any right, title, interest or liability is created, transferred, extended, extinguished or recorded. Stamp duty is prerequisite condition which has to be paid before taking possession of the flat.

(1) Stamp Duty for Flats:-
Present rates of stamp duty for residential premises in Maharashtra above Rs.5,00,000/- is Rs.7600/- plus 5% of the remaining value. (2) Stamp Duty for Shops/ Galas/ Office Premises & Garage :-
The rate of Stamp Duty for Shops/Galas/Office Premises and Garage even if used for car parking is 5% in Mumbai.

Additional Stamp Duty :-
1% ZP Tax in form of additional Stamp Duty has to be paid for properties in Kharghar, Panvel, Kamothe.

Procedure for Stamp Duty :-
When the Flat-Purchaser is desirous of entering into an Agreement, he/she has been given the stamp duty amount which is calculated as per the Agreement Value or Market Value whichever is higher. Once the stamp duty amount has been given to the Flat-Purchasers have been told to get the Pay-Order. The pay-order is given for franking of the agreement and later on the said agreement is duly filled and signed by the respective parties.

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REGISTRATION
Registration means recording of the contents of a document with a Registering Officer and preservation of copies of the original document. The documents are registered for the purpose of conservation of evidence, assurance of title, publicity of documents and prevention of fraud. Also, registration helps an intending purchaser to know if the title deeds of a particular property have been deposited with any person or a financial institution for the purpose of obtaining an advance against the security of that property.

(1) Registration fees :-
The registration fee at present fixed for registering documents relating to property transactions are approximately 1% of the market value or agreement value whichever is higher subject to Maximum of Rs.30,000/-. The registration fee for the immovable property transactions is leviable on the market value of property on which stamp duty is charged.

(2) Registration Procedure :-
At the time of lodging a document for registration of any instrument, the original document which should be printed on one side only have to be submitted to the Registering Officer. The registration procedure also requires the presence of two witnesses and the payment of the appropriate registration fees.

For detail information about the procedure and legality of Stamp Duty & Registration please visit the following link:-

http://igr.maharashtra.gov.in/faq/default.htm#1

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REAL ESTATE LAWS FOR NRIs and PIOs

Registration means recording of the contents of a document with a Registering Officer and preservation of copies of the original document. The documents are registered for the purpose of conservation of evidence, assurance of title, publicity of documents and prevention of fraud. Also, registration helps an intending purchaser to know if the title deeds of a particular property have been deposited with any person or a financial institution for the purpose of obtaining an advance against the security of that property.

Quest. Do non-resident Indian citizens require permission of The Reserve Bank to acquire residential/commercial property in India?
Ans. No. All Indian citizens are entitled to buy property in India, irrespective of their residential status

Quest. Do foreign citizens of Indian origin require permission of the Reserve Bank to purchase immovable property in India for their residential use? Ans. Yes. However, the RBI 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 separate permission of The Reserve Bank.

Quest. Who is a foreign citizen of Indian Origin?
Ans. A foreign citizen is deemed to be of Indian Origin if : i) he held an Indian Passport at any time or ii) he or his father or paternal grand father was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955. However this does not apply to citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka or Nepal)

Quest. How should the purchase of residential immovable property be paid for by foreign citizens of India origin under the general permission?
Ans. The purchase consideration should be met either out of inward remittance in foreign exchange through normal banking channels, or out of funds from NRE/FCNR accounts maintained with banks in India.

Quest. What formalities have to be completed by foreign citizens of Indian origin to purchase residential immovable property in India under the general permission?
Ans. 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 along with a certified copy of the documentary evidence for the transaction and bank certificate for the money paid.

Quest. Can such property be sold without the permission of Reserve Bank?
Ans. Yes. 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.

Quest. Can sale proceeds of such property (if and when sold) be remitted out of India?
Ans. For residential properties purchased on or after 26 May 1993, the Reserve Bank considers applications for repatriation of sale proceeds. Approval is usually granted for up to the consideration amount remitted in foreign exchange in acquiring the property for a maximum of two such properties. The balance amount of sale proceeds, if any, or sale proceeds for properties purchased prior to 26 May 1993, will have to be credited to the ordinary non-resident rupee account of the owner of the property.

Quest. Are any conditions required to be fulfilled if repatriation of sale proceeds is desired?
Ans. 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 the consideration amount, whichever is later.

Quest. What is the procedure for seeking such repatriation?
Ans. Applications for necessary permission for remittance of sale proceeds should be made in form IPI 8 to the Central Office of The Reserve Bank at Mumbai within 90 days of the sale of the property.

Quest. Can foreign citizens of Indian origin acquire or dispose residential property by way of gift?
Ans. The Reserve Bank has granted general permission to foreign citizens of Indian origin to acquire or dispose of properties up to two houses by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin, whether resident in India or not, provided gift tax has been paid.

Quest. Can immoveable property held in India be transferred by way of gift to in India?
Ans. General permission has been granted by Reserve Bank to non-resident persons (foreign citizen) of Indian Origin to transfer, by way of gift, immoveable property held by them in India to relatives and charitable trusts / organisations subject to the condition that the provisions of all other laws, as applicable are complied with

Quest. Can foreign citizens of Indian origin acquire commercial properties in India?
Ans. Properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchaser's NRE/FCNR accounts maintained with banks in India. A declaration has to be submitted to the Central Office of Reserve Bank in form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.

Quest. Can they dispose of such properties?
Ans. Yes.

Top Quest. Can foreign citizens of Indian origin acquire commercial properties in India?
Ans. Properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchaser's NRE/FCNR accounts maintained with banks in India. A declaration has to be submitted to the Central Office of Reserve Bank in form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.

Quest. Can sale proceeds of such property be remitted out of India?
Ans. Yes. Repatriation of original investment in respect of properties purchased by foreign citizens of Indian origin on or after 26 May 1993 can be remitted up to the consideration amount originally remitted from abroad provided the property is sold after a period of three years from the date of the final purchase deed or from the date of payment of final instalment of consideration amount, which ever is later. Applications for the purpose are required to be made to the Central Office of Reserve Bank within 90 days of the sale of property in form IPI 8.

Quest. Can the properties (residential/commercial) be given on rent if not required for immediate use?
Ans. The Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income are eligible for repatriation.

Quest. Can NRIs obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance?
Ans. The Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC and authorised dealers to grant housing loans to non-resident Indian nationals for acquisition of a house/flat for self-occupation, subject to certain conditions. Criteria regarding the purpose of the loan, margin money and the quantum of loan will be at par with those applicable to resident Indians. Repayment of the loan should be made within a period not exceeding 15 years, out of inward remittance through banking channels or out of funds held in the investors' NRE/FCNR/NRO accounts.

Quest. Can Indian companies grant loans to their NRI staff?
Ans. The Reserve Bank permits Indian firms to grant housing loans to their employees deputed abroad and holding Indian passport subject to certain conditions.

Quest. Can an authorised dealer grant a housing loan to non-residents of Indian nationality where the NRI is the principal borrower with his resident close relative as a co-obligant / guarantor or where the land is owned jointly by such NRI borrower with his resident close relative?
Ans. Yes. However in such cases the payment of margin money and repayment of loan instalments should be made by the NRI borrower.

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PROPERTY INVESTMENT SAVES CAPITAL GAINS

- BRIEF REPORT -

There are some useful roll-over provisions in the Income-Tax Act, 1961 for exempting capital gains. Section 54 exempts capital gains made on sale of a residential house where the profit is re-invested in purchasing another residential house, subject to fulfillment of certain stringent conditions. The second provision is under section 54-F which requires investment of sale proceeds of any capital asset in a residential house, again subject to stringent conditions. s

The third roll-over provision is under section 54-EC which permits exemption of capital gains which are invested in certain notified bonds. While the third form of exemption is relatively simple, requiring the capital gains in respect of any long-term capital asset to be invested in notified bonds within six months of its sale, the first two provisions bristle with onerous conditions and the non-fulfillment of even one of them would deprive the tax-payer of a very valuable exemption.

Some of the common conditions applicable both under sections 54 and 54-F are discussed hereafter. The first condition is that the exemption is available only in respect of capital assets which are sold. Therefore, if business assets, trading assets, current assets like raw materials, stock-in-trade are sold, the benefit of the capital gain exemption would not be available because profits arising on sale of these business or current assets would be taxable under the head "profits or gains from business or profession". The second condition is that the capital asset must be transferred. The word "transfer" must fall within the scope and ambit of section 2(47) of the Income-tax Act, 1961.

The third common condition is that the capital asset must be a long-term asset as defined under section 2(29-A), read with section 2(42-A). The fourth condition under both sections 54 and 54-F is that the new residential property should be purchased one year before or two years after the date on which the old asset was transferred. The fifth condition would apply where residential property is not purchased but is constructed, for which a period of three years is allowed after the date of transfer of the old capital asset.

It is important to note that under both sections 54 and 54-F, the new asset must be a residential house. Therefore, it cannot be a pure commercial or industrial property. Of course, if the residential house is partially used for commercial purposes, but the predominant use is for residential purpose, the condition would be satisfied.

The sixth condition under both sections 54 and 54-F is that until the residential property is purchased or constructed within the stipulated time, the amount is required to be deposited in a special account with a nationalised bank and the amount needed to purchase or acquire the residential property should be withdrawn only from such account. The last condition common to both sections 54 and 54-F is that the residential house purchased or constructed should be retained for atleast three years.

Needless to add, to claim exemption under sections 54 and 54-F it is necessary that the tax-payer who has sold his long-term capital asset must purchase or construct the residential property in his own name. If he purchases the residential property in the name of any of his family members, the exemption would not be available to him. In other words, gifts to family members should be made by the tax-payer only after three years of holding the property, after which the property may be gifted, transferred or sold.

Turning to the distinguishing features, section 54 applies only where a residential property is sold which has been held for three years. On the other hand, section 54-F applies where any other long-term capital asset is sold like land, jewellery, shares, gold ornaments, etc. In case of shares and securities which are listed on a recognized stock exchange, the period for being treated as long-term capital asset is reduced to one year as against three years in the case of other capital assets. Of course, if the shares are held as stock-in-trade by a person who carries on the business of buying and selling shares, the benefit of section 54-F would not be available because such shares will be treated as business assets and not capital assets under section 2(14).

Under both sections 54 and 54-F, the amount of capital gains or the sale consideration respectively has to be utilised for the purchase or construction of a residential house which could of course be a second-hand property as well. In other words, a residential house need not be newly constructed.

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