NRI's

Q. Are there any formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission?
A. 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 consideration amount, whichever is later.
Q. Can sale proceeds of such property if and when sold be remitted out of India?
A. In respect of residential properties purchased on or after 26th May 1993, Reserve Bank considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of the property for two such properties. The balance amount of sale proceeds if any or sale proceeds in respect of properties purchased prior to 26th May 1993, will have to be credited to the ordinary non-resident rupee account of the owner of the property.
Q. Can such property be sold without the permission of Reserve Bank?
A. 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.
Q. Are there any formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission?
A. 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 alongwith a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

Home Loans

Q. When will the loan be disbursed?
A. Your loan will be disbursed on:
1. Your identification and selection of the property.
2. Submission of the legal documents.
3. Legal and technical clearance of the property
4. Investment of your contribution towards the property

Q. When can I apply for a loan?
A. You can apply for a home loan even before you have selected your property. The loan amount would be sanctioned or approved for you, based on your repayment capability.
Q. What are the various types of loans available?
A. 1. Home Loans
2. Land Loans
3. Home Equity Loans
4. Office Premises Loans
All of these are available on an adjustable rate or a fixed rate.

Q. What security/collateral do I have to provide?
A. Typically the security for the loan is a first mortgage of the property to be financed, by way of deposit of title deeds and/or such other collateral security as may be necessary. The title to the property should be clear, marketable and free from any encumbrances.
Q. Is a personal guarantor a must?
A. No, there is no personal guarantor required in most cases.
Q. Who can be the co-applicants for the loan?
A. You could include your spouse as a co-applicant for the loan and we shall include his/her income to enhance your loan amount. Further, in case there are any other co-owners they also need to be co-applicants.
Q. How much time will it take for my loan to be approved?
A. It takes a week for your loan to be sanctioned after you have submitted all the documents.
Q. What security/collateral do I have to provide?
A. Typically the security for the loan is a first mortgage of the property to be financed, by way of deposit of title deeds and/or such other collateral security as may be necessary. The title to the property should be clear, marketable and free from any encumbrances.

Tax Benefits

Q. Benefits of taking a home loan for Section 88 of the Income Tax Act
You get a 20% rebate on repayment of principal during a financial year. Once again, over the years, the principal repayment eligible for rebate has been enhanced from Rs 10,000 to the current limit of Rs 20,000. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount.

Going back to our earlier example:

1. Taxable income of Rs 4 lakh
2. Taxable income stands reduced to Rs 2.5 lakh
3. Tax before rebate and surcharge: Rs 49,000 (no surcharge is computed as surcharge is applicable on tax payable after allowing for rebate under Section 88)
4. Rebate of Rs 4,000 (20% of Rs 20,000 being principal repayment)
5. Tax less rebate of Rs 4,000 + surcharge @ 2%= Rs 45,900
6. Tax saved = Rs 49,900 (Rs 45,900 as shown above plus rebate of Rs 4,000).

Q. Benefits of taking a home loan for Section 24 of the Income Tax Act
Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.

This is now a substantial amount. It started off with the Income Tax Department offering Rs 15,000 as the maximum amount eligible for deduction in the case of self-occupied property. This later got doubled to Rs 30,000. It did not stop there. After getting enhanced to Rs 75,000, it was then taken to a limit of Rs 1 lakh. Presently, the limit stands elevated to Rs 1.5 lakh.

So, should you borrow money to acquire, construct, repair, renew or reconstruct property on or after April 1, 1999, you get a deduction of up to Rs 1.5 lakh. The criteria being: the property has to be acquired or constructed by March 31, 2003 and be self-occupied.

When put in figures, this is quite an amount:

1. Assume taxable income of Rs 4 lakh, placing the assessee in the highest tax bracket.
2. Assume interest payment during the first financial year is Rs 1.60 lakh
3. Taxable income stands reduced to Rs 2.5 lakh (Rs 4 lakh – Rs 1.5 lakh being the maximum limit)
4. Total tax amounts to Rs 49,980 (tax of Rs 49,000 + surcharge of Rs 980)
5. Tax saved is Rs 45,900 (tax @30% on Rs 1.5 lakh plus 2% surcharge as the investor is in the highest tax bracket)


Stamp Duty

Q. What is Registration of Property Documents?
A. Registration is the process of recording a copy of a document, transferring the title in immovable property to the office of the Registrar. Registration acts as proof that a transaction has taken place. The registration of a document serves as a notice of the transaction, to the persons affected by the transaction. Registration also serves as an implied notice to any person subsequently acquiring interest in the property, covered by the registered document. When a document, which is compulsorily to be registered, is not registered, it fails to confer any title given by the document. The real purpose of registration is to ensure that every person dealing with property for which compulsory registration is required, can confidently rely on the statement contained in the register, as being a full and complete account of all transactions by which the title may be affected. A certificate of Registration is mere evidence that a document has been registered. It is not proof that it has been executed. When the execution of a document is directly in dispute between two parties, the fact that the document is registered is not sufficient to prove its genuineness. Registration does not automatically dispense with the necessity of independent proof that the document was executed. Registration is done after the parties execute the document. The agreement should be registered with the Sub-Registrar of Assurance under the provisions of the Indian Registration Act, 1908 within four months from the date of execution of the document. However, if due to any unavoidable circumstances, the document is not registered within the time limit, then the document can be registered only on making an application to the Sub-Registrar of Assurance within a further period not exceeding four months and on payment of appropriate fine.
Q. Is registration compulsory for all types of transfer of immovable properties?
A. Except in case of transfer of shares of a co-operative housing society and housing limited company where registration is optional, virtually in all cases of transfer of immovable property like family arrangement, agreement to sell, conveyance, gift deed, lease deed (above one year), leave and license agreement, tenancy agreement, declaration deed, power of attorney to sell for consideration etc. has to be registered compulsorily under Indian Registration Act,1908 otherwise the proper legal title will not pass on to the purchaser/transferee i.e. the title will be defective if registration is not done.
Q. In what languages should the document be written so that it can be registered in Mumbai?
A. It should be normally be written is English, Hindi, Marathi and Gujarati only.
Q. If any person who has executed the document is unable to come to sub- registrar?s office on medical grounds, then what should he do?
A. In case a person is unable to attend the office of the sub-registrar on medical grounds, then he should apply to the sub-registrar through a duly authorized representative stating the fact. The sub-registrar is bound to visit such person after office hours i.e. morning 9.00 a.m. to 10.00 a.m. and in the evening 5.00pm to 6.00 pm. That person shall admit in execution in presence of that sub- registrar, affix his photograph and sign and put his thumb impression on the document. The sub-registrar will take the document with him and complete all the formalities and process of registration