Can NRIs Buy Property in India? FEMA Rules Explained Simply

Quick Summary: NRI Property Purchase Under FEMA

• NRIs and OCIs can freely buy residential and commercial property in India — no RBI approval needed.
• Agricultural land, plantation property, and farmhouses CANNOT be purchased (only inherited/gifted).
• All payments must be routed through NRE / NRO / FCNR accounts or direct foreign remittance.
• Repatriation of sale proceeds is capped at USD 1 million per financial year (via NRO account).
• New – Forms 15CA and 15CB have been replaced by Form 145 and Form 146 respectively under the Income Tax Act 2025, effective 1 April 2026. Authorised Dealer banks will not process remittances on old form numbers.
• New – TDS on NRI property sales is governed Section 393(2) [Serial no. 17] of the Income Tax Act 2025 (earlier section 195).

Buying property in India as a Non-Resident Indian (NRI) is not only allowed—it’s quite common. However, the process is governed by specific regulations under the Foreign Exchange Management Act (FEMA), 1999 and misunderstanding these rules can lead to compliance issues. This guide breaks down FEMA provisions in a clear, practical way.

Who Qualifies as an NRI?

Under FEMA, an NRI is an Indian citizen who has resided outside India for more than 182 days in the preceding financial year for purposes of employment, business, or any other circumstance indicating an intention to stay abroad for an uncertain period. This is distinct from the Income Tax Act definition — if you are interacting with banks, RBI, or structuring a property purchase, the FEMA definition governs.

Overseas Citizens of India (OCIs) (And erstwhile Persons of Indian Origin (PIOs)) are generally treated on par with NRIs for property transactions.

What Type of Property Can NRIs Buy?

NRIs and OCIs can freely purchase:

• Residential properties (apartments, villas, houses)
• Commercial properties (offices, shops)

There is no restriction on the number of such properties you can buy.

What’s Not Allowed?

NRIs cannot purchase:

• Agricultural land
• Plantation property
• Farmhouses

Such properties can only be acquired through inheritance or gift from a resident Indian, subject to FEMA conditions.

Joint Ownership

NRIs can co-own with a resident Indian (spouse, parents) or another NRI/OCI. Ownership shares must be stated in the sale deed; both parties’ KYC documents are required.

Do NRIs Need RBI Approval?

In most cases, no prior RBI approval is required for purchasing residential or commercial property in India. This is one of the most significant simplifications FEMA introduced. The transaction is permitted under general permission, as long as payment rules and other conditions are followed.

How Should NRIs Pay?

All payments must be made through proper banking channels:

• Funds remitted via normal banking channels from abroad
• Funds held in NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts
• FCNR (Foreign Currency Non-Resident) accounts — fully repatriable and equally valid for property payments.

Payment cannot be made in cash or traveller’s cheques. This ensures transparency and FEMA compliance.

Documents Required at Purchase:

Ensure you have the following documents ready:

• PAN Card — mandatory for all property transactions above Rs. 50 lakhs and for any transaction involving bank financing, TDS compliance, or repatriation. The transaction cannot proceed without a valid PAN.
• Passport, OCI card
• NRE/NRO account details
• Visa and address proof abroad

Home Loans for NRIs

NRIs can avail home loans in India from Indian banks and housing finance companies. Loan repayment must be made through NRE/NRO accounts or foreign remittances.

 Costs at Purchase:

* Rates are indicative and subject to change. Verify current rates for your state.

Can NRIs Sell Property in India?

Yes, NRIs can sell property, but with certain conditions. Property can be sold to:

• A resident Indian
• Another NRI/OCI (only for residential/commercial property)

Agricultural Land inherited by NRIs can also be sold, though certain restrictions apply.

Repatriation of Sales Proceeds

Repatriation is not automatic and is subject to limits:

• Repatriation of sale proceeds is permitted for a maximum of two (2) residential properties per financial year. This is not a lifetime cap — it is a limit on how many properties’ proceeds can be repatriated in a single financial year.
• The amount repatriated cannot exceed the original amount paid in foreign exchange.
• Where sale proceeds are held in or routed through an NRO account, repatriation is subject to a ceiling of USD 1 million per financial year, inclusive of all capital account transactions.
• Property purchased entirely using NRO balances or rupee-denominated loans carries significantly restricted repatriation rights. Where no foreign exchange was originally remitted for the purchase, there may be no repatriation entitlement at all beyond the USD 1 million annual cap. This is a critical distinction — always structure the original funding correctly before purchase.

Inherited property: If the property was inherited (not purchased), repatriation of its sale proceeds is also subject to the USD 1 million per year cap. The two-property limit applicable to purchased properties does not apply to inherited property.

Forms 145 & 146 (Applicable from 1 April 2026)

With effect from 1 April 2026, Forms 15CA and 15CB under the Income Tax Act, 1961 have been replaced by Form 145 and Form 146 respectively under the Income Tax Act 2025 and the Income Tax Rules, 2026. Forms 15CA and 15CB no longer apply to any remittance made on or after 1 April 2026.

Form 146 (earlier Form 15CB) is a certificate issued by a Chartered Accountant confirming that the applicable taxes on the remittance have been paid or provided for and that the remittance is eligible under the Income Tax Act 2025 and FEMA.

Form 145 (earlier Form 15CA) is an electronic declaration filed by the remitter on the Income Tax e-filing portal (www.incometax.gov.in) before the funds are remitted. A copy must be submitted to the Authorised Dealer bank along with Form 146.

Without Form 145 and Form 146, Authorised Dealer banks will not process outward remittance of property sale proceeds. If your banker refers to Form 15CA or Form 15CB, please note these have been replaced by Form 145 and Form 146 with effect from 1 April 2026

Tax Implications NRIs Must Know

While the following rules fall under the Income Tax Act rather than FEMA, they are directly relevant to NRI property transactions and must be understood alongside FEMA compliance.

TDS (Tax Deducted at Source)

The buyer is required to deduct TDS as follows:

• TDS deducted must be deposited by the 7th of the month following the month of deduction. For TDS Deducted in the month of March, the due date is 30th April. Failure to deduct TDS on time attracts interest at 1% per month and 1.5 % for non-deposit of TDS from the date on which tax was deductible to the date of actual deduction under Section 398(3)(a)(i). TDS deducted but not deposited can also result in prosecution.

TDS Deposit: Buyer’s PAN Instead of TAN (FY 2026–27 Onwards)

Lower / Nil TDS Certificate — Section 395

Without a lower or nil TDS certificate, buyers frequently deduct TDS on the entire sale consideration — and not merely on the actual capital gain — resulting in substantial short-term cash flow blockage for NRI sellers.

To avoid excessive withholding, NRI sellers may apply in advance for a Lower or Nil Deduction Certificate under:

• Section 395 of the Income Tax Act 2025 (earlier Section 197 of the Income Tax Act, 1961)

Once issued, the certificate authorises the buyer to deduct tax at a reduced rate or nil rate, as specified by the Income-tax Department.

Where no such certificate is obtained:

• TDS is often deducted conservatively on the gross transaction value, 
• and excess tax must later be claimed as a refund while filing the income tax return. 

This refund process can involve significant delays and working capital blockage for NRIs.

Capital Gains Tax

The indexation benefit on long-term capital gains from property was removed effective 23 July 2024. The rate is now a flat 12.5% without indexation. For properties acquired before 23 July 2024, transitional provisions may apply — seek specific advice on the applicable computation method.

Capital Gains Exemptions Available to NRIs

NRIs can claim capital gains exemptions under the Income Tax Act 2025 on the same basis as resident Indians, subject to applicable conditions:

• Section 82 of the Income Tax Act 2025, (earlier section 54): Exemption on long-term capital gains from sale of a residential property if the gains are reinvested in a new residential property in India within the prescribed time limits (2 years for purchase, 3 years for construction). The new property must be held for at least 3 years.
  
• Section 85 of the Income Tax Act 2025, (earlier section 54EC): Exemption on long-term capital gains from sale of any long-term capital asset if the gains are invested in specified bonds (currently NHAI and REC bonds) within 6 months of the sale. The investment is capped at Rs. 50 lakhs per financial year.

The NRI must consult a CA to confirm eligibility and the applicable section numbers under the Income Tax Act 2025, as the Act is a full recodification and all section references from the 1961 Act have been updated.

Inheritance and Gifting Rules

• NRIs can inherit any type of property, including Agricultural Land.
• NRIs can receive property as a gift from a resident relative.
• However, gifting Agricultural Land remains restricted.

The term ‘relative’ carries the specific meaning defined under Section 2(77) of the Companies Act, 2013. This is a closed list and does not include extended family members such as uncles, aunts, cousins, or grandparents. Gifting property to or from anyone outside this list will not be FEMA-compliant even if a genuine family relationship exists. Always verify the definition before structuring any gift transaction

Buying Remotely: Power of Attorney (PoA) 

Many NRIs manage property transactions without visiting India, using a Power of Attorney granted to a trusted resident — a family member, friend, or lawyer. This is legally valid, but execution requirements are strict. 

1. Execute the PoA document: Draft the PoA with the help of a legal professional, clearly defining the scope of authority.
2. Notarise and apostille abroad: The PoA must be properly notarised and apostilled in your country of residence. An unnotarised or unapostilled PoA is not valid in India.
   
3. Register in India: The PoA must be registered at the Sub-Registrar’s office in India. This step is commonly skipped — and it creates title and transaction validity issues that can be costly to resolve later.

Key Compliance Tips 

• Always verify title and land-use classification before purchase.
• Ensure all payments are traceable through banking channels.

• Maintain documentation for repatriation and tax filings.

• Seek professional advice for TDS and capital gains planning.

• Apply for a Lower or Nil TDS Certificate under Section 395 of the Income Tax Act 2025 (earlier Section 197 of the Income Tax Act, 1961) well in advance of any property sale. Without this certificate, TDS will be deducted on the full sale consideration and not just the actual capital gain, causing significant cash flow blockage.

• Use a Power of Attorney (PoA) if managing property remotely.

• Obtain professional advice on capital gains planning, including the applicability of exemptions under Sections 82 and 85 of the Income Tax Act 2025 before concluding a sale.

Common Mistakes NRIs Should Avoid

• Investing in prohibited property types unknowingly.
• Using informal payment methods.
• Ignoring TDS obligations during sale.
• Assuming repatriation is automatic.
• Not applying for a Lower TDS Certificate in advance, resulting in TDS being deducted on the entire sale consideration rather than the actual gain.
• Using an unregistered Power of Attorney, which creates title defects that can hold up the transaction or sale.
• PIO card holders assuming their old status remains valid — PIO cards issued before 31 December 2024 are no longer valid. OCI cards must have been obtained. Any property transaction attempted using an expired PIO card will face rejection.

Frequently Asked Questions (People Also Ask)

These are the most common questions NRIs ask about property purchase under FEMA:

Q1: Can an NRI buy agricultural land in India?

No. NRIs and OCIs cannot purchase agricultural land, plantation property, or farmhouses in India. Such property can only be acquired by way of inheritance or gift from a resident Indian, subject to FEMA conditions.

Q2: Is RBI approval required for NRIs to buy residential property?

No RBI approval is required for NRIs or OCIs to purchase residential or commercial property in India. The purchase is permitted under general permission granted by FEMA, provided all payment and documentation conditions are met.

Q3: How many properties can an NRI own in India?

There is no restriction on the number of residential or commercial properties an NRI can own in India. However, repatriation of sale proceeds outside India is permitted for a maximum of two residential properties per financial year. This is not a cap on how many properties an NRI can own — it is a limit on how many properties’ sale proceeds can be repatriated in a single financial year.

Q4: Can an NRI repatriate the full sale proceeds of a property?

Not automatically. Repatriation is capped at USD 1 million per financial year (where routed through NRO accounts) and cannot exceed the original amount paid in foreign exchange. Property purchased using rupee-denominated loans has significantly more restricted repatriation rights.

Q5: What TDS must be deducted when buying property from an NRI?

Under Section 393(2) [Serial no. 17] of the Income Tax Act 2025 and (not covered u/s 194-IA). Applicable form to file will be Form 141(effective from Oct 2026). The buyer must deduct TDS at 12.5% on long-term capital gains (property held more than 24 months) and at applicable slab rates on short-term gains, plus surcharge and Health and Education Cess at 4%. TDS is deducted on the full sale consideration unless the NRI seller has obtained a Lower or Nil TDS Certificate in advance under Section 395.

Q6: Does an NRI need to physically visit India to buy property?

No. NRIs can purchase property remotely using a valid Power of Attorney (PoA). However, the PoA must be notarised and apostilled / consularised (as applicable in the country of execution) and must be registered at the Sub-Registrar’s office in India — a step many NRIs overlook.

Q7: I bought my property using a mix of NRE funds and a rupee home loan. How much of the sale proceeds can I repatriate?

Repatriation eligibility is determined source by source. Only the portion of the original purchase price that was funded through foreign exchange — meaning NRE account funds or direct inward remittance — is eligible for repatriation without being counted against the USD 1 million annual cap. The portion funded through the rupee loan repaid from NRO funds or Indian income does not carry repatriation entitlement in the same way. In practice, your Authorised Dealer bank will ask you to establish the original source of funds at the time of purchase — which is why maintaining bank certificates and payment records from the date of purchase is critical. If those records are lost, repatriation becomes significantly more difficult to establish.

Q8: I sold two properties this year but could only repatriate proceeds from one within the financial year. Can I carry the second property’s proceeds forward to next year?

Yes, in principle. The two-property limit applies per financial year. If sale proceeds from the second property are sitting in your NRO account, you can apply for repatriation in the next financial year subject to the USD 1 million cap applicable in that year. However, your Authorised Dealer bank will need to be satisfied that the funds in the NRO account are identifiable as sale proceeds from a specific property transaction. This is why it is advisable to keep sale proceeds in a separate NRO account or at minimum maintain clear credit entries and supporting documentation linking the deposit to the specific sale transaction.

Q9: I inherited a property from my father who was a resident Indian and who originally purchased it with rupee funds. Can I repatriate the sale proceeds?

Yes, you can repatriate the sale proceeds of inherited property, but subject to the USD 1 million per financial year cap applicable to your NRO account. The important distinction here is that since the original purchase was made with rupee funds by your father, there is no foreign exchange component to establish as the original cost. The repatriation entitlement therefore comes entirely from the USD 1 million annual NRO cap and not from any separate foreign exchange equivalence calculation. You will need to provide the Authorised Dealer bank with the succession documents — will or legal heir certificate — along with the original sale deed in your father’s name, the deed by which the property was transferred to you, and the sale deed of the current transaction.

Q10: My uncle wants to gift me his flat. Does uncle fall within the definition of relative for FEMA purposes?

No. For FEMA-compliant gift transactions involving immovable property, the term relative carries the specific meaning under Section 2(77) of the Companies Act, 2013. Under that definition, uncle is not included. The list covers spouse, father, mother, son, son’s wife, daughter, daughter’s husband, brother, and sister. It is a closed list. Paternal uncle, maternal uncle, and their spouses are all outside this list. A gift of immovable property from your uncle to you as an NRI would therefore not be FEMA-compliant. If your uncle wishes to transfer the property to you, the appropriate route is a sale transaction at fair market value with proper valuation and banking channel payment rather than a gift.

Q11: I sold agricultural land that I inherited from my grandfather. Can I sell it and to whom? Can I repatriate those proceeds?

An NRI who has inherited agricultural land may sell it, but only to a person who is resident in India. You cannot sell inherited agricultural land to another NRI or OCI — that restriction applies specifically to agricultural land regardless of how it was acquired. Once sold, the sale proceeds can be credited to your NRO account and repatriation is subject to the USD 1 million per financial year cap. You will need to establish the inheritance chain clearly — typically through the will or succession certificate — to satisfy the Authorised Dealer bank that the acquisition was by way of inheritance and not by purchase, since NRIs cannot purchase agricultural land at all.

Q12: I want to build a house on agricultural land I inherited. Is that allowed under FEMA?

This is a grey area that requires careful professional advice before any steps are taken. The FEMA restriction is on the acquisition and holding of agricultural land by an NRI. If you convert the agricultural land to residential or non-agricultural use through the appropriate state government process and then construct a residential property on it, the resulting property is residential property which NRIs are permitted to hold. However, the conversion process itself is governed by state land laws and not FEMA, and the FEMA position on whether the act of construction on inherited agricultural land during the conversion process creates a compliance issue has not been uniformly settled. Always obtain written advice before proceeding.

Q13: I receive rental income from my Indian property every month. Can I remit that income abroad?

Yes. Rental income received from Indian property is current account income and is generally freely remittable abroad under FEMA. The rental income would typically be credited to your NRO account first. From the NRO account, current income such as rent, interest, and dividends is remittable after payment of applicable taxes. You do not need to use the USD 1 million capital account limit for this — that limit applies to capital account transactions such as sale proceeds. However, you must ensure that TDS has been correctly deducted by your tenant where applicable, that you have filed your Indian income tax return disclosing the rental income, and that the Authorised Dealer bank is provided with Form 145 along with Form 146 before processing the remittance.

Q14: Can I buy a commercial property in India and rent it out as an NRI?

Yes. NRIs and OCIs can freely purchase commercial property in India without any RBI approval and can receive rental income from it. The rental income is taxable in India as income from house property and TDS is applicable where the tenant is making payments above threshold amounts. The rental income can be remitted abroad as current account income as described above. There is no restriction on the number of commercial properties you can hold.

Q15: I gave a Power of Attorney to my brother in 2015 for a property purchase and it was never registered at the Sub-Registrar. Can this be fixed now?

An unregistered PoA creates a title defect that can affect the validity of any transaction carried out using that PoA. Whether this can be remedied depends on the nature of the transaction already completed. If the property was purchased using the unregistered PoA and the sale deed was registered in your name on the basis of that PoA, the registration of the sale deed itself is what confers title — but the PoA’s validity to authorise those acts can be challenged. The practical remedy depends on your specific situation: if the original PoA grantor is still alive and willing, a fresh registered PoA can be executed and registered. If transactions have already been completed, a conveyancing lawyer in India should review the title chain and advise on whether any rectification deed or confirmatory deed is required. Do not attempt to sell or mortgage the property without getting a title opinion from a lawyer first.

Q16: I am moving back to India next year and will become a resident. What happens to my NRE account and my NRO account under FEMA?

Once you become a resident Indian under FEMA — which happens when you return to India with the intention of staying for an uncertain period — your NRE and FCNR accounts must be redesignated. An NRE account must be converted to a resident rupee account or a Resident Foreign Currency account within a reasonable period, typically within 3 months of becoming resident. The freely repatriable status of the NRE account ceases once you become resident. Your NRO account can continue as a resident account. The property you hold as an NRI continues to be yours as a resident — there is no requirement to sell or restructure it simply because your residential status changes. However, your tax obligations on rental income and capital gains will change because you will now be taxed as a resident Indian.

Q17: Is there a deadline to remit sale proceeds abroad after selling the property, or can the money stay in my NRO account indefinitely?

FEMA does not prescribe a fixed deadline by which sale proceeds must be repatriated after a property sale. The money can remain in your NRO account indefinitely. However, there are practical reasons not to leave it indefinitely. First, NRO account interest income is taxable in India at applicable rates and TDS is deducted. Second, if you delay repatriation across multiple financial years and the amount exceeds USD 1 million in the year you eventually remit, you will face the annual cap constraint. Third, the longer you wait, the harder it becomes to establish the source and nature of the funds to the satisfaction of the Authorised Dealer bank — documents get lost, branch staff changes, and what was a clean and clear remittance becomes complicated. It is advisable to repatriate within the same financial year or the following financial year at the latest, while all documents are fresh and available.

Q18: Can my Power of Attorney holder sell the property on my behalf or only purchase?

A Power of Attorney can authorise either or both — it entirely depends on how the PoA document is drafted. If the scope of authority in the PoA document specifically includes the power to sell, transfer, execute sale deeds, receive sale consideration, and sign all related documents, then your PoA holder can sell the property on your behalf. If the PoA was drafted only for the purpose of purchasing the property, it will not cover a sale. Always have a lawyer review the existing PoA document before assuming it covers a sale transaction. If the scope is insufficient, a fresh PoA with broader authority must be executed, notarised, apostilled, and registered before the sale proceeds.

Q19: I have been receiving rental income from my Indian property for the last 5 years and have never filed an income tax return in India. What is my exposure?

This is a tax compliance issue and not strictly a FEMA matter, but it is directly connected. From a FEMA perspective, rental income is current account income and is remittable, but the Authorised Dealer bank will require evidence of tax compliance before processing outward remittances. If returns have not been filed, the bank may refuse to process remittances until compliance is established. From an income tax perspective, five years of unfiled returns with rental income creates exposure to penalties for non-filing, interest on unpaid tax, and potentially a notice from the income tax department. The practical approach is to file the outstanding returns for the years within the limitation period, pay the tax due along with interest, and then regularise going forward. Seek advice from a CA on the limitation period applicable to your specific situation before making any voluntary disclosure.

Q20: My tenant is paying me Rs. 60,000 per month in rent. Are they required to deduct TDS?

Yes. TDS on rent paid to a non-resident landlord needs to be deducted regardless of the rent amount (no threshold limit) at an effective rate of 31.2% (30% base rate along with 4% Health and Education Cess at 4%). Since you are an NRI, the standard non-resident TDS provisions apply rather than the simplified resident landlord rules. Your tenant must deduct TDS at the applicable rate, deposit it with the government, and provide you with a TDS certificate. If TDS is not deducted, the tenant faces disallowance of the rental expenditure and potential interest and penalty. You as the landlord should factor this into your rental arrangement and ensure your tenant is compliant, as it also affects the credibility of your banking trail when you eventually wish to repatriate rental income.

Final Thoughts

FEMA has made property ownership in India relatively straightforward for NRIs, but compliance is crucial. While buying residential or commercial property is largely liberalized, areas like taxation, repatriation, and documentation still require careful handling.

S K Patodia & Associates LLP

FEMA & Cross-Border Compliance Advisory

• Advising NRIs and OCIs on permissible property transactions and FEMA compliance requirements;
• Reviewing funding structures and account usage for compliance before purchase or sale;
• Assessing repatriation eligibility and structuring sale transactions accordingly;
• Advising on TDS obligations, capital gains planning, and exemption strategies under Sections 82 and 85;
• Applying for lower / nil TDS certificates for NRI property transactions;
• Reviewing and advising on Power of Attorney documents for NRI property transactions;
• Ensuring gift and inheritance transactions are structured within FEMA-compliant parameters;
• Liaising with Authorised Dealer banks on documentation and regulatory clarifications;
• Providing ongoing FEMA compliance support for NRIs with multiple or complex property holdings in India.

We hope that the Article has provided you with the required insights into NRI property ownership under FEMA. If you have any queries or wish to review your specific situation, feel free to get in touch with our team.