The Foreign Exchange Management Act (FEMA), 1999 governs the acquisition and transfer of immovable property in India by Non Resident Indians (NRI). Section 6 of FEMA is particularly relevant to NRIs who seek to invest or hold property in India. This section imposes certain conditions, restrictions, and procedures that must be followed by NRIs for transactions involving the purchase, sale, or transfer of immovable property in India.
Section 6(1) of FEMA states that an NRI can acquire any immovable property in India other than agricultural land, plantation property or a farm house. However, this acquisition must be through purchase from funds remitted overseas or through inward remittance from a bank situated outside of India.
In addition to this condition, there are also restrictions on the amount an NRI can repatriate from selling any such acquired properties. The maximum amount that can be repatriated is equal to the initial investment made using foreign exchange i.e., up to $1 million per financial year.
Furthermore, Section 6(5)(b) & (c) restricts NRIs’ ability to gift their Indian-based properties except among family members subject to certain defined conditions. Similarly inherited properties may not be sold within three years of acquiring them without prior approval from RBI.
There have been several cases where individuals have violated these provisions leading them into legal issues. For example one such case was Hussainbhai Abdulrahim Shaikh v/s State Bank Of Indore which led accused were charged with violation under section 13(2) read with Sections 3(a),4(a),26(1)(a)&26(l)(f )and punished as per sec-15 &16 OF FERA/FEMA
Another significant case relating to FEMA violations occurred when a Singaporean national was found guilty for circumventing FEMA laws related asset transfers and acquisitions which resulted outflowing more USD20mn overseas without a proper declaration may lead to financial penalties ,imprisonment or deportation.
To ensure that NRIs comply with these conditions and restrictions, it is essential that they understand all applicable laws concerning acquisition and transfer of property in India. NRIs should also obtain expert legal advice while making such transactions involving immovable properties in India.
In conclusion, Section 6 of the Foreign Exchange Management Act (FEMA), 1999 imposes specific provisions on the acquisition and transfer of immovable property by NRIs. These provisions are designed to protect the interests of NRIs as well as regulate cross-border capital flows. For any NRI who seeks to invest or hold property in India, it is crucial that they adhere strictly to FEMA guidelines and regulations to avoid complications or issues which could undermine their investment plans.