What repatriation laws impact profit withdrawal from industrial land investments?

Repatriation laws govern how foreign investors can withdraw profits or returns from industrial land investments in India. These rules are primarily regulated under the Foreign Exchange Management Act (FEMA) and administered by the Reserve Bank of India (RBI). Proper compliance is essential to avoid delays, penalties, or restrictions when transferring funds abroad. Below are five key areas where repatriation laws apply to such investments:

1. Repatriation of Profits, Dividends, and Interest

• Profits earned by foreign investors, including dividends or interest from industrial real estate SPVs (Special Purpose Vehicles), are freely repatriable if:
  
  • The investment is made in compliance with FDI policy under the automatic or government route.
    
  • Taxes (e.g., dividend distribution tax, capital gains tax) are duly paid.
    
  • The business is engaged in permitted activities (e.g., infrastructure, industrial operations, warehousing).
    
• Transfers must be routed through authorized dealer banks with proper documentation.

2. Repatriation of Sale Proceeds and Capital Gains

• Foreign investors may repatriate net proceeds from the sale of their stake in an Indian entity or asset, subject to:
  
  • Valuation norms are set by the RBI or SEBI (if listed).
    
  • Payment of applicable capital gains tax under Indian Income Tax laws.
    
  • Use of an official banking channel with proof of original inward remittance.
    
• Restrictions apply if the investment was made in prohibited sectors or via non-compliant structures.

3. Lock-In and Minimum Holding Periods

• Certain real estate-related FDI may be subject to lock-in clauses—often three years—from the date of capital investment before repatriation is allowed.
  
• These apply more frequently in cases of construction-development projects or leasehold industrial land with incentives.
  
• Exceptions may exist for investments in fully operational industrial units or SEZs.

4. Tax Clearance and Certification Requirements

• Before profit or capital repatriation, the investor must obtain:
  
  • Chartered Accountant (CA) certificate (Form 15CB) certifying tax compliance.
    
  • Tax clearance or undertaking (Form 15CA) filed electronically with the Indian tax department.
    
• These documents confirm that no dues remain and that the repatriation is under a permitted category.

5. Currency and Banking Controls

• All repatriation must occur in freely convertible foreign currency (e.g., USD, EUR) through RBI-authorized dealer banks.
  
• Funds must flow through non-resident accounts, such as:
  
  • NRO account (non-repatriable except under special conditions)
    
  • NRE/FCNR account (repatriable without restriction, subject to origin of funds)
    
• RBI may require disclosure of the source of funds, end use, and beneficiary details during scrutiny.