Power of Attorney (POA) for an NRI is a major tool for buying and selling property in India. The Real Estate sector in India is often sought after by the Non-Resident Indians (NRIs) to establish a valuable asset that will provide good returns in the future. In the entire process, most NRIs find it convenient to appoint someone as a power of attorney holder and he/she becomes the decision maker for them. However, with power comes responsibility and giving someone a power of attorney is a very delicate task. You need to keep in mind certain risks involved and take a lot of precautions to not let your decision backfire. In this article, we will discuss the types of Power of Attorney for an NRI, their benefits and how to minimize the risk factor while opting for the same.
Before we get into anything else, let’s start by understanding the benefits of appointing a Power Of Attorney.
Benefits of Power of Attorney
Staying abroad makes it difficult to micro-manage your bank accounts and other financial transactions or investments in India. A reliable and trustworthy Power of Attorney can ease out your difficulties with:
- Operating your Bank Accounts
- Issuing cheques from your account
- Buying, Managing and Selling Real Estate Property
- Renting out your property
- Getting Home Loans or purchasing property insurance
- Settling claims and entering into contracts
- Signing your tax forms etc.
Note: The Power of Attorney Holders can’t open a new bank account on your behalf, they can only operate accounts once they are opened. Also, according to the Reserve Bank of India (RBI), a resident holder of POA can’t repatriate funds outside India. He/She can only repatriate funds to the foreign bank account of the grantor.
Appointing a Power of Attorney has multiple benefits. In the next segment, we will explore the various types of Power of Attorney.
Types of Power of Attorney
Power of attorney is a written deed to provide authority to a person on your behalf for legal matters or business transactions. The person providing the authority is the principle, donor, or grantor and the person receiving the power is the holder or agent.
In this segment, we will understand about the different types of Power of Attorney, which are:
- General Power of Attorney: A General Power of Attorney provides complete substantial authority to the holder to replace the grantor. It is generally not very much preferable because of its vulnerability towards frauds.
- Special Power of Attorney: A Special Power of Attorney provides specific authorities that are mentioned in the terms and conditions of the deed. It is more preferable because of precise definitions of powers that help to avoid issues at times of execution of the deed. Corrections can be made to a general power of attorney to create a special power of attorney.
- Admit Power of Attorney: An Admit Power of Attorney provides the authority to Power holders to represent the grantor only at the registration office.
A power of attorney is the most common document used for forgery and frauds with respect to NRIs in India. There have been cases where power holders have accepted payments in hard cash and then disappeared. So, it is essential for an NRI to be cautious about such factors and have a sound knowledge about the General Procedure and Rules of Power of Attorney. Therefore, in the next segment we will go through these basic information.
General Procedure and Rules of Power of Attorney
A power of attorney can be given to one or multiple people who can be your family, friends or neighbours. The basic element involved here is trustworthiness. The procedure to create them has certain steps that you need to follow. Let’s explore:
Step 1: You have to create two copies (two original copies) of Power of attorney in a plain white paper with detailed terms and conditions. Do not sign the copies by yourself at your home. You should only sign the deed in the presence of an Indian Embassy Consulate.
Step 2: The Power of attorney must be signed by two witnesses belonging to your local residence. The witnesses must also sign the Power of Attorney in the presence of the Indian Embassy Consulate. If the witnesses cannot be present in the embassy to sign in the presence of the Consulate, then their signatures need to be notarized additionally.
The steps require certain documentation to run along with it. Let’s take a glance through that as well.
Documents required to attest the Power of Attorney by the Indian Consulate
- Two copies of the POWER OF ATTORNEY document
- Original Passport
- Address proof in the country of your residence. For example; driving license, bank statement, etc.
- Two passport size photo
- Applicable fee at the time of attestation, if any
- Witnesses going to the consulate should have (any) identity proof documents for verification
A power of attorney for an NRI after its initiation needs to be registered in India. One copy of the power of attorney deed (signed by you and notarized by the Indian Embassy Consulate) should be registered by the holder who is receiving the power of attorney in India at the Registrar office. Registering the Power of Attorney is a simple process. Let’s understand the process step by step:
- The holder needs to register the Power of Attorney within 90 days of receipt
- Two witnesses are required along with the holder and all of them need to provide their identity proofs for verification in the registration office
Note: However, a recent update from the office of Inspector General of Registration said in a clarification notice that, the power of attorney related to any immovable property executed outside of India does not require compulsory registration provided the necessary details of the property in the deed.
Remember, precaution is always better than the cure. Giving a power of attorney to anyone brings in a factor of risk on the table. You need to be cautious as it can never be predicted what leads a man or woman to change their minds. So in the next segment, we will list out some precautions that you MUST always follow to avoid taking a loss.
Precautious Points to Remember while executing the Power of Attorney Deed
- Always prefer a special power of attorney over the general power of attorney
- Always mention the details of the concerned property in the deed if you are making a power of attorney for the purpose of selling it
- Always opt for a time frame for the validity of the power of attorney
- Always double-check the wordings and their consequences
- A life certificate may be required by the registrar in India, even though it is not mandatory. If the Power Of Attorney is dated or signed before 30 days, a registrar can demand a life certificate of the grantor. But it is dependent upon the chairperson in the Sub-Registrar or Registrar office
- To avoid issues after execution, opt for an indemnity clause in the terms of the deed. (An indemnity clause is a contractual understanding and transfer of risk between the two contractual parties generally to prevent loss or compensate for a loss which may occur as a result of a specified event by any one of the party)
In addition, always keep in check the payment procedure to an NRI seller. Most of the frauds happening in India routes through this very loophole. There has been a case in Himachal Pradesh (2015) where a Power of Attorney holder used it to get away with a fraud of Rs. 68 Lakhs. After the initial payment of Rs.18 Lakhs was made to the NRI grantor through Real-Time Gross Settlement (RTGS), the remaining payment was done to the power holder in hard cash (Rs. 68 Lakhs) which never reached the grantor. The case was finally settled in 2019.
Therefore, to avoid the pain of legal fights, loss of money and peace of mind, make sure that you follow the right way of payments. In the next segment, let’s explore how you can pay an NRI seller in the best possible way.
Payment Procedure to NRI Seller
Follow these procedures to avoid the kinds of issues that involve physical and mental harassment coupled with wealth loss.
- Payments must be made to the NRE/NRO (Non-Resident External) / (Non-Resident Ordinary) accounts of the NRI Seller only
- An NRI (grantor) seller can only authorize the holder to accept the direct payment on his behalf but cannot authorize the payment to the holder itself. But even if the NRI authorizes the holder to receive payment on his behalf, the buyer should avoid such kind of transactions, because it can bring taxation problems to the buyer in the future
- In case of multiple NRI sellers i.e. for property owned by more than one person, payments must always be made in the proportion of ownership of the property
Another resort to avoid major issues can be revoking your power of attorney for one or many reasons. Let’s understand what are the different preferences concerning revoking of a power of attorney in the next section.
Revoking the Power of Attorney
It is pretty simple to revoke the power of attorney, based on the revoking preference, which is categorised as:
- Revocable Power of Attorney: A revocable Power of Attorney can be revoked by public notification of revocation in any two reputed newspapers in the locality of residence of the holder and sending a copy of the revocation document to the Power of Attorney holder.
- Irrevocable Power of Attorney: An irrevocable Power of Attorney can only be revoked by a Judiciary court through approaching a lawyer and applying for adjudication against the Power of Attorney holder. Public notification of revocation/cancellation of power of attorney in two newspapers in the locality of residence of the holder is also required.
Note: A Power of Attorney eventually comes to an end if the grantor is deceased. But this is not the case in an irrevocable power of attorney. If the Power of Attorney holder is the spouse of the grantor and gets a divorce then the Power of Attorney is not valid after the date of divorce. But a formal revocation notice may be sent to the holder to avoid unwanted conflicts.
A power of attorney needs to be created with utmost caution as one wrong move can backfire too bad. In conclusion, there are certain elements that creates the perfect power of attorney for an NRI:
- The right holder
- Terms and Conditions of the deed
- Notarizing the deed
- Revocation of the deed
You might require a lawyer’s supervision to formulate a Power of Attorney Deed keeping in mind the essential pointers. So, if you need further assistance from experts, click on the button below to get personal power of attorney advisory.