Overseas Indian Citizens hold a vast scope of assets in India. According to a report by the World Bank, in 2022, for the first time a single country, India, is on track to receive more than $100 billion in yearly remittances. The figure includes Overseas Indians and highlights the crucial role played by the diaspora in the Indian economy.
Furthermore, it also suggests that the number of Indian citizens living overseas and holding Indian assets is steadily increasing. Overseas Indian Citizens make up a significant portion of this group, with over 30 million OCIs residing in various countries across the globe. Countries like the United States, Canada, and Australia have the highest concentration of OCIs.
This article details crucial insights for Overseas Indian Citizens who hold assets in India and what they should be aware of as we head towards year end 2023.
Indian Assets: Overseas Indian Citizens
- Non Residents, OCI, and Foreign Citizens hold significant Indian assets. These include real estate properties, bank deposits, and financial investments.
- OCI (Overseas Citizen of India) and Foreign Citizens are individuals who may not hold Indian citizenship. However, Individuals may have significant assets and investments in India.
- Real estate properties are one of the most popular investments. This is mainly due to the long-term value held. And, that they are tangible asset that can be managed and maintained.
- Bank deposits and financial investments are also popular as they provide a stable source of income and offer various investment opportunities in the Indian market.
- Many of these individuals have a deep-rooted connection with India, either due to their ancestry or personal relationships, and often visit India for business or personal reasons.
- The Indian government has also introduced various schemes and policies to encourage investment from NRIs, OCIs and foreign citizens in India, such as the Foreign Direct Investment (FDI) policy, which allows foreign investment in various sectors of the economy.
- The Indian government also provides various tax benefits to NRIs and OCIs, such as exemption from income tax on income earned outside India, as well as various other benefits such as the ability to purchase property and repatriate funds outside India.
Becoming An Indian Property Owner
The most common ways for overseas Indians to own property in India – ancestral property and self-buy.
1. Ancestral property: Many overseas Indians inherit property in India from their parents or grandparents. This property can be in the form of land, house, or other real estate. The property can be transferred to the overseas Indian through the process of inheritance. In this case, the overseas Indian needs to obtain the necessary legal documents to establish their ownership of the property, such as a will or a succession certificate.
2. Self-buy: Another way for overseas Indians to own property in India is through self-buying. They can purchase residential or commercial property in India by following the legal process and complying with the necessary regulations. The payment for the property can be made through inward remittances or through funds held in NRE, NRO or FCNR accounts.
Common Challenges Faced: Inheriting Property
Inheriting property in India may pose a number of challenges for overseas Indians. One common issue is the difficulty of managing the property from abroad. Finding reliable property managers or tenants can be a challenge. Furthermore, managing repairs and maintenance remotely can be cumbersome.
Another challenge is the legal complexity of the inheritance process in India. The process can be time-consuming, expensive, and involve a significant amount of paperwork. Overseas Indians may also encounter difficulties related to taxes, as they may be required to pay both Indian and foreign taxes on the property. Seeking legal guidance can help eliminate some of the issues of not knowing.
Inheriting property in India also presents cultural and social challenges. Overseas Indians may find it challenging to navigate the social and cultural norms of their ancestral homeland. Again, particularly if they have lived outside of India for an extended period. This can result in misunderstandings and frustrations, making it difficult for individuals to fully enjoy the benefits of their inherited property. In some cases, a trusted representative may help eliminate some of these issues.
Bank Accounts & Inherited Funds
Overseas Indians have several options for obtaining bank accounts in India. Both through inheritance and by opening new accounts.
- In the case of inheritance, the account may already exist and be transferred to the inheritor.
- For new accounts, the process can be initiated outside of India or by visiting a branch of the chosen bank in India. Typically, Overseas Indians are eligible to open Non Resident Ordinary and NRE accounts. Most major Indian banks abroad provide a range of services and banking products.
One type of account that may be particularly useful for overseas Indians is a Non-Resident Ordinary (NRO) account. This type of account allows individuals to maintain their income earned in India, in Indian rupees. It is also used to make payments for expenses in India, such as bills and fees. Property sale proceeds would also be credited to an NRO account.
Challenges: RBI Regulatory Updates
The Reserve Bank of India (RBI) has taken several steps recently. One of these steps involves banks requiring proof of Indian origin from their customers. Particularly for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs).
To comply with this requirement, many banks in India now ask customers to provide documents such as their birth certificate, PAN Card, or other identity documents that serve as proof of Indian origin.
Customers who are unable to provide such documentation may face difficulties in operating their accounts or may even see their accounts closed in accordance with RBI regulations. It is crucial for overseas Indians to be aware of these requirements and ensure they have the necessary documentation to open and operate bank accounts in India.
In addition to the proof of Indian origin, banks may also require customers to provide other documents such as proof of address, driver’s license etc.
Managing Asset Transactions In India: Power of Attorney
As an overseas Indian citizen, you may encounter situations where you need to authorize someone to act on your behalf in India. One such situation could be selling your property in India. This is where a Power of Attorney (POA) comes into play.
For instance, you own a property in India, but you are currently residing in the United States. You have found a potential buyer for your property in India, but you cannot travel to India to complete the sale.
In this case, you can consider executing a POA to grant authority to someone in India to act on your behalf to complete the sale.
Scope of Power of Attorney
To create a valid POA, you need to follow certain legal procedures.
You need to draft a legal document that specifies the scope of authority you are granting to the person you are appointing as your attorney-in-fact. The document must be signed and notarized in the presence of witnesses. Once the POA is legalized and executed, your attorney-in-fact can take all necessary steps to complete the sale of your property.
How The Power of Attorney Can Act On Your Behalf
They can sign the sale deed, receive payment on your behalf, and complete other legal formalities.
Selecting Your Power of Attorney
It is important to choose your attorney-in-fact carefully. You need to select someone you trust and who has the necessary skills and experience to handle the sale. You should also ensure that they understand the scope of their authority and that they act in your best interests at all times.
1. Trustworthiness: When selecting a power of attorney, it is crucial to choose an individual who is trustworthy and responsible. This person should be someone who will act in your best interests and not abuse their power.
2. Understanding of Indian laws: If you are an NRI or Overseas Citizen of India, it is important to choose a power of attorney who has a good understanding of Indian laws and regulations pertaining to assets. They should be able to manage your assets in compliance with the laws and regulations of India.
3. Clear communication: The power of attorney should be someone who is able to communicate clearly and effectively with you. They should be able to keep you informed about any decisions they make on your behalf and should be accessible. Remember, cultural norms when communicating cannot be ruled out, and a POA would need to address issues on your behalf.
Indian Law Consultation
If you are inheriting Indian assets, it is important to understand the legal procedures and requirements involved in the process. Consulting with a legal professional can help you understand the process and ensure that you comply with all the legal requirements in the following ways:
- Understand the legal implications of your inheritance, and guidance on any questions or concerns you may have.
- Consider legal advice and guidance on the legal procedures involved in transferring the ownership of the inherited property.
- Document checks, legalisation and validity, etc
- Including the documents required, the timelines involved, and any legal fees that may be required.
- Become aware of navigating any legal hurdles that may arise during the process.
For Overseas Indian Citizens, managing and maintaining their assets in India involves several legal and ground processes. With India progressing in various sectors, the overall environment maybe becoming more promising for Foreign Citizens and maintaining links to the country.
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