After moving back to Kerala a few years ago, I have faced queries on whether a resident in India can invest in a residential property outside the country. For some strange reason, there is a notion that unless an NRI, one can’t do that.
Under the Liberalised Remittance Scheme, authorised dealers may freely allow remittances by resident individuals up to $2,50,000 per financial year for any permitted current or capital account transactions or both.
Interestingly, according to the scheme, remittances can be consolidated in respect of family members. Consequently, in a family of four, the maximum permissible remittance would be $1 million subject to each individual member. Resident individuals are free to acquire and hold shares or any other asset outside India without prior approval of the RBI. This scheme is opening up avenues of potential investment, especially in holiday home space.
A study by a leading consulting firm noted that overseas homes offer an annual rental yield of 4 to 8 per cent of the value unlike in the Indian context, where homes yield rental income of just 2-5 per cent. Considering the stringent laws and stiff penalties, overseas developers are more likely to meet deadlines.
The study noted that countries like Malaysia, Sri Lanka, Singapore, Switzerland, Mauritius and Dubai were preferred for investment reasons. The UK and the USA were the preferred destinations to settle primarily.
While investing in properties outside India, one would need to evaluate the related laws governing investment in real estate. Dubai, for instance, freely welcomes expatriates to purchase property. Non-GCC expatriates are permitted to acquire freehold land in designated areas approved by the Ruler of Dubai.
Furthermore, residency and visa rules also play an important part in Cyprus, Hungary, Portugal, Ireland, Malaysia, Bahamas and the UAE. Taxation aspects also play a key role in deciding related jurisdiction for investment.
The taxability of the related gains in India would depend on the residential status of the individual at the time of disposal of the property and the related provisions of the concerned tax treaty.
(The writer is a practising lawyer who specialises in tax and corporate laws)
