5 Essentials Legal & Tax checks for NRI’s purchasing property in Kolkata, West Bengal, India
Posted on October 01 2020
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Non Resident Indians (NRIs), Person of Indian Origin (PIO) and Overseas Citizens ofIndia (OCI) are all allowed to invest in real estate, residential and commercial property, in India. In general there are no limits to the number or quantity of investments (subject to a few restrictions).
For NRI / OCI / PIO, real estate investment is governed by certain rules under the ForeignExchange Management Act (FEMA) and there will be other laws like the Income Tax Act, Transfer of Property Act and a few other Acts, governing the various aspects of the property purchase or sale.
The 5 essential legal checks that the Non Resident Indians (NRIs), Person of Indian Origin (PIO) and Overseas Citizens of India (OCI) should do when purchasing a property in Kolkata (West Bengal), India are:
1. Search Report: A search report traces the history of a property - who was the original owner of the property and how it has moved hands over a period of time before reaching the present seller. A title certificate states whether the property is unencumbered and has a clear marketable title. This document will state if there is any existing mortgage, litigation, condition or claim, which is likely to affect the title of the buyer adversely. A clear and marketable title means the seller should be genuine and the actual owner of the property. The report acts as a security for the purchase of a property. The report gives comfort to the purchaser that the title of the property he is planning to purchase is good and he will not face any problems at a later stage due to some pre-existing charges or encumbrance, or legal dispute on the property.
2. Documents: Property documents are a vital part of any property investment, be it an empty plot or a fully furnished apartment. If the documents are not clear then the property will have a fraction of the actual market value of the property. Hence it is very important to check and verify the original legal documents of the property through a qualified and experienced lawyer. The documents to be checked are the Mother Deed, Sanction Plan, Mutation, Corporation/Municipal Taxes among other documents.
3. Registration: Registration means recording of the contents of a document (or the title of ownership of the property) with a registering officer (or any specified government department/officer). As per section 17 of the Registration Act, 1908 the documents sale and purchase of immovable properties are required to be registered necessarily. Under Section 2(6) of the Registration Act, 1908 the term 'immovable property' includes: "Land, buildings, hereditary allowances, rights to ways, lights, fisheries or any other benefit to arise out of land, and things attached to the earth, or permanently fastened to any thing which is attached to the earth, but not standing timber, growing crops nor grass." In general as per various applicable laws, the right to the property comes to you only post registration of your purchase deed.
4. Valuation: The valuation process evaluates the value of the property. The valuation can be done by various methods depending on the objectives. The valuation report may be required for varied reasons and the value of the property could accordingly be the market value, resale value, registration value, government value, stamp duty value or value for taking a loan like determining the market. The valuation report will take into account various factors and will provide a close approximate to the value with the specified objective. The valuation report is required to determine the value of the stamp duty to be paid for the registration and purchase of the property.
5. Mutation: Mutation is the change of title ownership from one person to another in government records with the land department, when the property is sold or transferred. By mutating a property, the new owner gets the property recorded on his name in the land revenue department and the government is able to charge property tax from the rightful owner. The documentation procedure and the fee payable vary from state to state. The mutation of a property should ideally be taken periodically, say every six months, from the revenue office in order to check for any fraudulent transaction on the property. In case of inheritance after the death of the owner, the property should be mutated immediately in the name of the beneficiary.
Keep your property documents and title absolutely neat and clean. You already have enough in your plate. You definitely do not want another unnecessary issue.
Our qualified and experience Lawyers and Advisors have in-depth experience, especially in NRI / OCI / PIO property purchase and property sale transactions. We specialise in Cross Border Tax, Legal and RBI/Banking assistance for your Transactions with reference to property laws in India, US, UK, Singapore and DTAA.
Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.
With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.
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