00:00Hello everyone, I am Advocate Ashna Singh, Legal Associate from NRI Legal Services.
00:06In our day-to-day work queries, one of the frequent questions asked is
00:10Does a POA allow NRIs to buy or sell property in India?
00:17There might be numerous equations in an individual's life
00:21wherein he may be required to manage assets, properties, financial balances and so forth.
00:28However, under certain circumstances, he may not be in the right condition
00:34to fittingly execute his or her obligations because of unanticipated conditions
00:40like being sick, being abroad or the individual is too old to perform his obligations.
00:47Therefore, during conditions where a monetary exchange must be completed,
00:53in situations where the presence of the individual who cannot show up physically,
00:58at that point, the primary arrangement towards this is to delegate his powers,
01:04i.e. to act on behalf of the person.
01:07This procedure of delegation of power is called power of attorney or POA.
01:13An unanticipated circumstance where the legitimate proprietor cannot use his capacity
01:19property is the point at which a power of attorney deed is to be executed.
01:24The very first question which is to be answered here is that what is a POA?
01:29Well, a power of attorney in terms of property and real estate is a legal authorization or responsibility
01:38granted to a person for carrying out the dealings or transactions relating to the property.
01:45Since an NRI is a person of Indian origin who resides outside India,
01:51their presence for the purpose of carrying out arrangements or transactions cannot be guaranteed at all times.
01:57In such cases, where a POA has been executed,
02:02the person authorized by the NRI for this purpose can control or manage such property belonging to the executant on
02:10their behalf.
02:11This relationship is that of a principal and agent which can only be created by law for a specific or
02:19general purpose.
02:19The main requirement for the validity and execution of a POA is the competency of parties.
02:27It is important that both the principal and the agent working on their behalf must have reached the age of
02:35majority,
02:36i.e. must be of 18 years or above and secondly must be of sound mind.
02:41This concept comes under the purview of the Power of Attorney's Act 1882 and the Indian Stamp Act 1899.
02:50In the case of real estate, a POA can be used for the following purposes.
02:55Mortgage, sell, lease, exchange, grant, borrow or collect rent from a property.
03:02Then, manage and settle disputes.
03:04Perform requisite acts as required by banks, insurance companies or financial institutions to enter into contract or deal with bonds.
03:15Then, payment of taxes, taking a home loan for a home improvement loan and finally insuring the property.
03:23In order to regulate the POA, the paper should be incorporated with all the vital powers for its execution.
03:30The POA must be given a strict interpretation and no additional rights should be interpreted except if they are explicitly
03:38referred.
03:39For example, if the POA refers to option to rent, the option to sell cannot be credited to it.
03:46The representation needs to act inside the scope and cannot bind the proprietor by the act which are beyond his
03:54power.
03:54As an NRI, you cannot be sued or considered answerable for the extortion of the agent except if it is
04:03demonstrated that the misrepresentation was done in conspiracy with you.
04:08Now, moving on to the types and appointment of the POA.
04:13First, there is a general POA which grants a wide range of powers to the agent in relation to the
04:20property owned by the principal.
04:22It is executed for the performance of routine tasks.
04:27Then, there is a special POA which is executed for specific tasks and grants limited powers to the agent.
04:37Registration of POA is mandatory under the Registration Act 1908 for the purpose of establishing legal validity of the document.
04:46And it remains valid till the purpose for which it was executed is fulfilled.
04:52The SPA is terminated on completion of the task assigned whereas the GPA may be either revoked by the executor
05:01or in case of a death it is cancelled.
05:03The agent is bound to function within the scope of the powers entrusted to him by the POA.
05:10Further, let me explain in brief that how a POA can be executed.
05:16The POA has to be executed at the office of sub-registrar that lies within the jurisdiction of the person
05:23giving the power.
05:24If the principal resides abroad, the POA should be attested by the Indian consulate in that country and must be
05:32embossed within 3 months from the date of execution to make it a valid document.
05:36Now, discussing about the sale and purchase of property in India by NRIs.
05:44An NRI may buy any property in India commercial or residential and can transfer the same to a person resident
05:52in India or another NRI.
05:54However, there are restrictions on the purchase of certain properties such as agricultural land, farmhouses or plantations under the Foreign
06:06Exchange Management Act Acquisition and Transfer of Immovable Property Regulations 2018.
06:12These properties may only be acquired through inheritance from a person resident in India or purchased with the express approval
06:22of the Reserve Bank of India.
06:24Property transactions through a registered and notarized power of attorney have become a common practice in many parts of India
06:33considering the financial benefits.
06:35All transactions of property initiated by an NRI are governed by the provisions of Foreign Exchange Management Act 1999 and
06:46the guidelines framed by Reserve Bank of India.
06:49FEMA empowers the RBI to restrict and regulate the acquisition and transfer of immovable property in India by persons resident
06:58outside.
06:59Conveyance of property may only be affected through a stamped and registered conveyance deed and payment of stamp duty as
07:07per law.
07:07There have been numerous situations where individuals resort to property deal through POA to evade instalment of stamp obligation which
07:16is illegal.
07:17Besides, selling properties where the proprietor has just right over possession and no right over ownership through POA is additionally
07:27illegal.
07:28A fair exchange of title and proprietorship cannot occur if the deal is done through a POA and not using
07:35a sale deed.
07:36The Supreme Court of India in 2011 announced that a power of attorney is not an instrument of transfer concerning
07:45any right, title or interest in an immovable property.
07:49Following the equivalent, the Indian apex court coordinated the metropolitan bodies not to change or register properties dependent on such
07:58archives.
07:59The Supreme Court notwithstanding restored those legitimate exchanges that have been brought out through GPA would be lawful.
08:09The court additionally stated,
08:11Nothing keeps influenced parties from getting registered deeds of conveyance to complete their title.
08:17The said exchanges may likewise be utilized to acquire explicit execution or to protect ownership under Section 53A of the
08:28Transfer of Property Act 1882.
08:31Because of the Supreme Court order, various states across India disallowed the registration of properties which were being sold through
08:40a general power of attorney.
08:41Notwithstanding, after a total restriction on such properties was forced, the Delhi government at long last consented to allow registration
08:51of properties for the legitimate proprietor's spouse, children, siblings as well as any other family member or individual of trust
09:00of the enlisted proprietor.
09:02Similarly, in 2019, the Honorable Supreme Court again ruled that transactions of property done through a GPA are protected under
09:12law.
09:13Transfers on the basis of a conveyance deed which is duly registered is permissible and an NRI may delegate a
09:20POA for the execution of a valid sale deed.
09:24Moving on to the revocation of power of attorney.
09:27A power of attorney can be cancelled or revoked at any time as long as the principal of POA is
09:36mentally fit and competent.
09:38If the principal wishes to cancel the POA, the principal must inform the agent in writing, duly sign the revocation
09:46letter in front of a notary public and deliver it to the attorney in fact.
09:50The letter must be sent to all the third parties the agent is in contact with.
09:57In case a POA was executed in the recorder's office, the revocation letter should also be signed on the same
10:04premise.
10:05Additionally, I would also like to throw light on the tax implications by the NRIs on purchased property.
10:13An NRI does not require any express permission from the RBI to buy commercial or residential property in India.
10:23Further, there is no restriction on the number of properties that may be purchased.
10:28However, an NRI buying property in India has to comply with certain tax implications on such properties.
10:35An NRI looking to sell his property in India need to pay tax on short or long-term capital gains
10:43from that property.
10:45In case of a self-occupied residential property, an NRI is not liable to pay any tax unless he owns
10:52more than one of such properties.
10:54Rental income received on any property owned by an NRI is taxable as per the Income Tax Act under the
11:01head income from house property.
11:03An NRI who purchases an immovable property in India must deduct TDS which is calculated based on the residential status
11:12of the person selling his property from the nature of capital gains.
11:17If an NRI purchases immovable property in India from a resident, he must deduct TDS at 1% if the
11:26sale consideration exceeds 50 lakhs.
11:28If the NRI purchases a property from a non-resident and if long-term capital gains are applicable, then TDS
11:35should be calculated at 20%.
11:37In case of short-term capital gains are applicable, TDS at 30% needs to be deducted.
11:44Short-term capital gains are applicable when a property is sold within 2 years or less of acquiring it.
11:50If the property is sold 2 years after it is acquired, then is a long-term capital gain.
11:57Also remember that the tax deducted is to be deposited within 30 days of such deduction.
12:04Non-deduction or late deduction of tax will attract late deduction of TDS penalty at the rate of 1%
12:11per month.
12:12It is applicable from the date on which tax was deductible to the date of actual deduction.
12:18The IT Act also provides certain tax exemptions to NRIs under Section 54 if they don't buy or sell properties
12:26for short or long-term gains.
12:29Tax exemptions will be applicable based on how the property is used like self-occupied or let-out.
12:35Lastly, the payment of purchase of property is to be made in Indian currency only with funds received in the
12:42country through the recognized banking channels.
12:45These funds are to be maintained in non-resident account under the regulations imposed by FEMA and the Reserve Bank
12:53of India.
12:54To conclude, as an NRI living abroad, it is usually difficult to keep up to date over the new procedures
13:02and dive into the basic essential details of buying or selling.
13:07Consequently, allotting a POA is not just practical yet additionally accorded protection.
13:14If due to a new rule imposed by the government or property developer, an NRI may be required to sign
13:21some documents,
13:22his or her POA can sign them on their behalf.
13:26Alternatively, if an NRI is a victim of fraud during the real estate dealings,
13:31the POA can present evidence in court of law on behalf of the NRI.
13:36We hope that you find this video informative and productive.
13:40In case of any query, you can email us at query at nrilegalservices.com
13:46Also, don't forget to share, like and subscribe our channel.
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