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Hindustan Times
5 hours ago
- Business
- Hindustan Times
5 things NRIs should keep in mind before investing in property in India
Anita Reddy, an NRI residing in the US, has decided to purchase a residential flat in Hyderabad to stay during annual visits. She has checked RBI rules, verified the property title, and applied for a home loan. She has authorized her father in India with power of attorney. NRIs can legally purchase residential and commercial properties in India under Foreign Exchange Management Act (FEMA) rules, but are not allowed to buy agricultural land, plantation property, or farmhouses unless acquired through inheritance or specifically approved by the Reserve Bank of India (RBI). When acquiring property, if the purchase is funded from abroad, the funds should be remitted into an NRE (Non-Resident External) account. 'The payment for the property must be made through this NRE account. It is important to retain the bank statement as proof of the source of funds. This documentation will be crucial if the NRI wishes to repatriate the proceeds from the sale of the property back to their country of residence,' says Ankit Jain, Partner, Ved Jain and Associates, chartered accountancy firm. 'They are also eligible for home loans from Indian banks and housing finance companies, with loan repayments made using these accounts as per RBI guidelines' says Anupam Rastogi, co-founder and chief business officer, Square Yards, a real estate marketplace. If the purchase is funded through income or funds already held in India, the NRI can use any domestic bank account for the payment. Additionally, while making payment to the seller, the NRI must ensure that Tax Deducted at Source (TDS) is properly deducted on the sale consideration, even if the NRI does not regularly file tax returns in India. Failure to deduct and deposit TDS can lead to a tax liability for the buyer. 'It is also advisable that, after acquiring the property, the NRI files annual income tax returns in India, even if the income generated from the property is below the taxable threshold. Maintaining a consistent tax record can simplify compliance and tax calculations when the property is eventually sold,' says Jain. Under the old tax regime one claims deductions on home loan principal under Section 80C and home loan interest under Section 24(b) of the Income Tax Act, if they have taxable income in India. The 3.5% US excise tax on remittances by non-US citizens increases the cost of investing in India, as it is charged to the sender and not creditable in India. 'NRIs should account for this cost, remitting more to receive the desired amount in INR. India does not tax inward remittances, so funds received through banking channels can be fully used. Where possible, joint remittance with a US citizen family member may reduce the burden,' says Gagandeep Sood, Associate Director, Fox Mandal Global, a professional services firm. India does not impose any limit on the amount NRIs can remit inward for property investment. Such remittances are freely permitted, provided the funds are from legitimate sources and routed through authorised banking channels. There is no tax on inward remittances by NRIs in India. Also Read: Government proposes bill for online property registration, documents. Here's what it means for you 'NRIs should maintain NRE accounts, as funds brought in through authorised banking channels comply with FEMA regulations. Although Indian Income Tax authorities do not require documentation for the 3.5% US remittance tax, it is advisable to retain records of the sender, transaction details, and purpose to establish the legitimacy and source of funds, especially in high-value transactions,' says Sood. These are the following documents that NRIs need to have in place when they plan to buy a property in India. Passport and OCI/PIO card:A valid passport is mandatory. If you hold an Overseas Citizen of India (OCI) or Person of Indian Origin (PIO) card, you can use it instead of an Indian passport. PAN card:Required for tax purposes, especially if you plan to rent out the property or sell it later. Proof of address: Both Indian and overseas address proof (utility bills, bank statements, or rental agreements) may be required. Power of attorney (if applicable): 'If you're not physically present in India for the transaction, you may need to authorize someone via a registered and notarized Power of Attorney (PoA),' says Ravi Shankar Singh, managing director, Residential Transaction Services, Colliers India, a real estate services firm. Proptech has really simplified the buying process for NRIs in India. Developers are also setting up camps in countries with a large Indian population. Most NRIs today are IT professionals or engineers who have gone abroad for short to medium term projects and with an intention to return to India. While deciding on this high involvement purchase NRIs should keep certain things in mind. They should choose a reputed developer with a credible track record. 'The selected city should offer employment upon their return. The location and city should offer great physical and social infrastructure, And finally it should have international airport connectivity,' says Shankar. 'Before finalizing a property deal, NRIs should verify the property's title, check for any legal encumbrances, ensure all government approvals and permits are in place, and consult a real estate lawyer. This due diligence helps avoid legal disputes, fraud, and ensures a smooth transaction,' adds Rastogi. Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics
Indian Express
16 hours ago
- Business
- Indian Express
SC pulls up ED: What are the powers of India's financial crime watchdog?
— Kannan K The Supreme Court recently reprimanded the Enforcement Directorate (ED) for 'crossing all limits' and 'violating the federal structure' by conducting raids on government-run liquor retailer Tamil Nadu State Marketing Corporation (TASMAC). Chief Justice of India (CJI) B R Gavai described the central agency's actions against the State corporation as a violation of the Constitution's federal structure. Notably, the TASMAC case is not the first time the apex court has pulled up the ED. Earlier this month, the Court criticised the body for making 'allegations without any reference to anything' in a liquor scam case in Chhattisgarh. In another case in Chhattisgarh, it had called out the agency for paying scant heed to the 'fundamental rights of the accused'. These developments warrant revisiting the formation and evolution of India's economic intelligence agency, and its role in enforcing economic laws and combating financial crimes. The ED was established on May 1, 1956, as the 'Enforcement Unit' under the Department of Economic Affairs within the Ministry of Finance for handling violations of exchange control laws under the now-repealed Foreign Exchange Regulation Act, 1947/1973 (FERA). Later on, it was renamed the Enforcement Directorate and was transferred to the administrative control of the Department of Revenue, and subsequently entrusted with the enforcement of a broader range of financial laws. The enactment of the Foreign Exchange Management Act (FEMA), which replaced FERA in 1999, and the Prevention of Money Laundering Act (PMLA) in the early 2000s, increased the power of ED. These moves aligned its functions with international standards to combat financial crimes, notably those recommended by the Financial Action Task Force (FATF). In 2006, India received observer status in FATF – which was created in 1989 to coordinate anti-money laundering efforts across the world – and in 2010, it became its member state. While the ED has a broad mandate to investigate offences related to money laundering and foreign exchange violations, it's mandated to enforce the following key laws: — The Prevention of Money Laundering Act, 2002 (PMLA): The ED traces assets from money laundering activities and is responsible for ensuring the prosecution of offenders and confiscation (permanent seizure of ownership, usually after conviction) of such assets. — The Foreign Exchange Management Act, 1999 (FEMA): The law enforcement agency is also responsible for imposing penalties on offenders of FEMA and in the cases pertaining to violations committed prior to the repeal of the FERA of 1973, which FEMA replaced, thus being responsible for the handling of legacy FERA cases. — The Fugitive Economic Offenders Act, 2018 (FEOA): The ED is mandated to attach (temporarily seizing of property without assuming ownership to prevent sale, usually during trial phase) and confiscate properties of economic offenders evading Indian law by fleeing abroad — The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA), 1974: The Directorate is the sponsor of cases under the law and can initiate preventive detention proceedings on FEMA violations based on COFEPOSA. ED's power and federal structure Thus, as the primary body to enforce economic laws, the ED enjoys significant powers to investigate, detect, and prevent economic crimes. For instance, under the PMLA, the central agency is empowered to summon individuals, enforce their attendance, and record their statements, which are valid as evidence. The ED also has the authority to conduct searches and seize property or documents linked to money laundering, provided there's a recorded 'reason to believe' and the statutory prerequisites are met. It can also make arrests based on material evidence and written justification – but with the condition that the grounds for arrest are communicated to the accused. This is a higher threshold than that required for arrests under the Bharatiya Nagarik Suraksha Sanhita (BNSS). The ED also has the power to attach properties suspected to be proceeds of crimes for up to 180 days to prevent their sale during investigation. A distinctive feature of PMLA is the reversal of the burden of proof, where the onus often shifts to the accused to prove innocence by showing the legitimacy of the attached assets. Under the FEMA, the ED has adjudication powers and acts as a quasi-judicial body to impose penalties for foreign exchange regulation violations. Further, the FEOA grants the ED powers to attach and confiscate properties of economic offenders who have absconded from India. Taken together, these wide range of powers to investigate, secure evidence, attach and confiscate assets strengthen the ED's objective of protecting the integrity of India's financial system. However, these powers are subject to constitutional limits rooted in federalism. The Supreme Court has repeatedly warned the ED on overreaching its jurisdiction, stressing the need to respect state autonomy and to avoid causing any disruption to the union-state balance. These instructions are relevant, particularly in light of allegations regarding the use of the ED as a tool to interfere in investigations that fall under state jurisdiction. While the ED has an important role in safeguarding India's financial integrity, its functioning has regularly drawn scrutiny and raised significant concerns, as seen in the Supreme Court's recent criticism of the TASMAC case. The CJI's observation regarding a violation of the Constitution's federal structure coupled with concerns about the agency's operational independence and allegations of partisan motivations underlined the need for introspection. A significant criticism faced by the ED is regarding its low conviction rate under the PMLA, despite a substantial number of cases registered and properties. Of the 5,297 cases registered under the PMLA from 2014 to 2024, only 40 cases have seen convictions, prompting the apex court to direct the agency to 'focus on quality prosecution and evidence' in August 2024. This has raised questions about the intent and effectiveness of the ED's investigative and prosecution mechanisms in securing convictions. The extensive powers granted to the ED, particularly under PMLA, including the power to arrest, provisionally attach assets, and the unique provision of a reversed burden of proof, have led to debates regarding their potential impact on due process and civil liberties. It has been alleged that the provision placing the burden of proof on the accused to prove their innocence has been used as a political tool to stifle the opposition. The Supreme Court's observations regarding a pattern of accusations without proof, and dismissal of multiple cases due to lack of evidence, substantiate such concerns. Critics argue that such powers are likely to be misused for political gain. The recent arrest of a high-ranking ED official by the CBI on grounds of taking bribes apparently contributed to eroding public trust in the body. Concerns have also been raised regarding the operational independence of the ED. Allegations of political influence and targeting of specific individuals or entities have frequently surfaced, impacting public perception and the agency's credibility. The need for greater transparency in its case selection process, investigations, and conviction rates is widely discussed. Additionally, the ED's actions sometimes overstep its jurisdictions, taking up cases that fall under the states' ambit, as seen in the TASMAC case, leading to federal friction. The ED would benefit from certain reforms aimed at increasing its effectiveness and improving the public perception regarding its functioning. A key step perhaps could be to place the agency under stronger judicial oversight, particularly the investigation, arrest, and attachment processes to prevent overstepping of jurisdiction. Another step could involve strict adherence to due process to counter allegations of political interests and harassment, which could be supported by establishing clear Standard Operating Procedures (SOPs) and effective training and capacity-building for ED personnel. Reorienting the ED's functioning to make investigations intelligence-driven and focussing on convictions through strong evidence might further help to dispel the perception of bias. To conclude, an economic intelligence agency such as the ED is a necessity to protect the economic integrity of India, ensuring the prevention of financial crimes. Reforms that keep pace with the times and strict adherence to due process and constitutional norms will be essential to ensure its fair and effective functioning. How has the ED's mandate evolved over time since its inception in 1956? What are the key laws enforced by the Enforcement Directorate, and how do they define its jurisdiction? How does the ED's role intersect with federal principles enshrined in the Indian Constitution? The Supreme Court criticised the Enforcement Directorate (ED) for 'crossing all limits' and 'violating the federal structure' in the Tamil Nadu State Marketing Corporation (TASMAC) case. Evaluate the concerns raised by the Court. Do you think the political misuse of agencies like the ED impact democratic institutions and public trust in governance? What is the significance of the ED's powers to attach and confiscate property under different laws like PMLA, FEMA, and FEOA? (Kannan K is a doctoral candidate in Political Science at the Centre for Economic and Social Studies, Hyderabad.)
Time of India
4 days ago
- Business
- Time of India
Dalmia Bharat gets SC relief in ₹500 crore KKR investment tax dispute
The Supreme Court has put a hold on income tax reassessment proceedings against Dalmia Bharat and its subsidiaries. This involves a Rs 500 crore investment by KKR Mauritius Cement Investments in Dalmia Cement back in 2010-2011. The court is seeking a response from the income tax department regarding the reassessment. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The Supreme Court on Friday stayed the income tax department 's decision to initiate reassessment proceedings against Dalmia Bharat and its two subsidiaries - Dalmia Cement (Bharat) and Dalmia Power - for assessment year issue relates to an investment of Rs 500 crore made by KKR Mauritius Cement Investments KKR ) in Dalmia Cement (Bharat) in financial year 2010-2011 (Assessment Year 2011-2012). KKR was allotted 37.92 million equity shares, accounting for 14.99% of the stake in the company. The shares were bought back by Dalmia Bharat (DBL) in 2016 for Rs 1218 crore.A Bench led by Chief Justice BR Gavai sought response from the income tax department on three separate appeals by Dalmia group firms challenging the Madras High Court's order upholding the income tax department's reassessment and its two subsidiaries argued that the transaction of the alleged purchase of shares by DBL from KKR is not even applicable in the relevant AY - 2011-2012 as there wasn't even a buyback. It was a simple sale transaction from KKR to DBL, senior counsel D Seshadri Naidu, appearing for the companies, submitted that even the jurisdictional requirement of Section 147 of the Income Tax Act, as to 'where income chargeable to tax has escaped assessment' is not satisfied in the Reasons for Reopening (Explanation 2 to section 147 of the IT Act).The Reasons for Reopening do not even justify reopening of the assessment after a period beyond four years, the appeals filed through counsel Mahesh Agarwal from the fact that all investments were through banking channels and RBI approvals, the investment itself was disclosed in the audited accounts with the Ministry of Corporate Affairs (compliances under Companies Act, 1956) and Reserve Bank of India for compliances under Foreign Exchange Management Act, 1999, the companies said.'Details of KKR's investments in petitioner, therefore, have been disclosed to various regulatory authorities, including the tax authorities in the relevant AY 2011-2012,' the appeals stated, adding that the Reasons for Reassessment are 'wholly vague and ambiguous.'Dalmia told the SC that no income is alleged to have escaped assessment on account of the investment KKR. On the contrary, the department had alleged that the shareholding of KKR in DCBL has been bought back by DBL from KKR at a value more than Rs 1200 crore and the whole transaction needs to be investigated properly to find out if any black money has been used and whether transaction had escaped any income tax Assessing Officer (AO) had proposed to reopen the tax assessments of the three companies as this amounted to round-tripping, the counsel the tax reassessment proposal, the companies had moved a single-judge bench of the HC, which had ruled against reopening on the grounds that Dalmia Cement (Bharat) had disclosed the investment made by KKR in their tax returns. However, the division bench ruled to the contrary relying on the AO's materials that prima facie indicated that KKR was a shell company and there was also round tripping.
The Hindu
4 days ago
- Business
- The Hindu
ED raids exports firm for FEMA violations
The Directorate of Enforcement (ED) raided four premises linked to a private firm, Sri Kumaraswamy Mineral Exports Pvt. Ltd., in Bengaluru and Mangaluru on May 27, for alleged violations of Foreign Exchange Management Act, 1999, in the matter of various 'undisclosed transactions in overseas jurisdictions.' The ED said in a statement on Friday that the premises linked to the directors of the firm, Santesh Gureddi and Jyothi Gureddi, Bhavani Prasad Tapal and Renuka Devi and Ravindranath, and Uma Alva, were also raided. 'The ED had initiated investigation based on intelligence input received from the Income Tax Department wherein it was prima facie revealed that part of the export proceeds of Sri Kumaraswamy Mineral Exports Pvt. Ltd. were diverted by its buyers in the bank accounts of overseas companies wherein directors of the firm were shareholders. Further, it is understood that Shantesh Gureddi had acquired immovable property in London, valued at £6.4 million, partly out of the said proceeds,' ED said in the statement. The agency further said that the directors had incorporated multiple entities in overseas jurisdiction for receipt of profit derived by the company and diversion of part of export proceeds through these overseas entities. 'It is also revealed that multiple bank accounts were opened abroad by the directors for parking of funds outside India and for further diversion of funds to multiple bank accounts maintained overseas for purchase of properties outside India in their name and in the name of their family members,' ED said.
Time of India
22-05-2025
- Politics
- Time of India
HC notice to Cong leader over alleged violation of land purchase rules
Hyderabad: Justice CV Bhaskar Reddy of the Telangana high court has issued notices to Hanumandla Jhansi Reddy, Congress party in-charge of Palakurthy assembly constituency and mother-in-law of sitting MLA Yashaswini Reddy, seeking her response to allegations of illegally purchasing agricultural land despite holding NRI status. The petition, filed by P Damodar Reddy, a resident of Wardhannapet, contends that Jhansi Reddy is a US citizen and that she violated the provisions of the Foreign Exchange Management Act by acquiring agricultural land in India—an act prohibited for Non-Resident Indians. The petitioner stated that both Jhansi Reddy and her husband, Rajender Reddy, also a US citizen, purchased 75 acres of agricultural land in Gurthur village of Thorrur mandal in Mahabubabad district. Damodar Reddy claimed that he had submitted representations to both revenue authorities and the Enforcement Directorate requesting an investigation into the transaction, but received no response. Taking cognisance of the matter, the judge directed the ED to submit its position on the allegations and asked the relevant revenue officials to file their counter-affidavits. The case has been posted for further hearing on June 19.
