Quick answer: NRIs/OCIs can freely buy residential and commercial property in India (but not agricultural/plantation/farmhouse), pay via NRE/NRO/FCNR or inward remittance, and repatriate sale proceeds under specific RBI limits. If you buy from an NRI seller, TDS applies under Section 195; LTCG on property sold on/after 23 July 2024 is 12.5% without indexation (with limited grandfathering). (Reserve Bank of India, LexComply, Income Tax India, Press Information Bureau)
Last updated: 15 August 2025
Why this matters
Real estate often anchors an Indian family’s wealth. For NRIs, FEMA/RBI rules, taxation, and repatriation make it more complex than a typical resident transaction. This guide distils what you can do, can’t do, and the friction points to plan for.
What can NRIs/OCIs buy, sell, and hold?
Permitted & prohibited assets
- Permitted to purchase: Residential and commercial property. No RBI approval needed. (Reserve Bank of India)
- Prohibited to purchase: Agricultural land, plantation property, farmhouses (inheritance is allowed; special conditions apply). (Reserve Bank of India, indianembassyqatar.gov.in)
- Country restrictions: Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan need RBI permission to acquire/transfer immovable property in India (beyond short leases). (Reserve Bank of India)
Featured table — Allowed vs. restricted
| Action | Residential/Commercial | Agricultural/Plantation/Farmhouse |
|---|---|---|
| Buy | Allowed (general permission) | Not allowed |
| Inherit | Allowed | Allowed (with conditions) |
| Gift (receive) | Allowed from resident/NRI/OCI (relative rules apply) | Generally not allowed to purchase; inheritance may be possible |
| Sell | Allowed | Sale subject to restrictions/Indian citizen-only in some cases |
Sources: RBI FAQs/notifications and Embassy guidance. (Reserve Bank of India, indianembassyqatar.gov.in)
Payment, banking & loan basics
- How to pay: Funds via inward remittance or by debit to NRE/NRO/FCNR(B) accounts. No cash. (LexComply)
- Home loans: Indian banks lend to NRIs; EMIs must be serviced from NRE/NRO/FCNR(B) balances or foreign remittance. (iob.in)
- Operational tip: Use an NRO account for India-sourced receipts (rent, sale proceeds); NRE/FCNR(B) for foreign-sourced funds with full repatriability. RBI permits up to USD 1 million/year outward remittance from NRO (subject to documentation). (Reserve Bank of India)
Repatriation: getting money out
There are two key routes to take money abroad after a sale:
- Special facility for two residential properties purchased with foreign funds
Repatriation is allowed up to the original foreign exchange paid for not more than two such properties. Excess goes to NRO; you may then use the general USD 1 million window. (Reserve Bank of India) - General USD 1 million facility from NRO
NRIs/OCIs can remit up to USD 1 million per financial year from NRO balances/sale proceeds (including inherited assets) with a CA certificate (Form 15CB) + 15CA and bank documentation. (Reserve Bank of India)
Note: Certain citizens (e.g., Pakistan, Bangladesh, etc.) do not get the repatriation facility on sale proceeds of property. (Reserve Bank of India)
Taxes when buying from/selling to an NRI
If you are buying from an NRI seller
- TDS applies under Section 195 (not 194-IA). The buyer must deduct TDS at rates in force and typically needs a TAN, file Form 27Q quarterly, and issue Form 16A. For remittances abroad, the bank will ask for 15CA/15CB. (Income Tax India, TATA AIG, Income Tax Department)
- Rate to deduct: For long-term gains on property transferred on/after 23 July 2024, the LTCG rate is 12.5% (without indexation); surcharge/cess may apply. Short-term gains are taxed at slab rates. Practically, many buyers deduct at 12.5%+ on the gains once a CA/Assessing Officer computes them; otherwise conservative deduction on gross consideration is common to avoid exposure. (Press Information Bureau)
Checklist for buyers of NRI-owned property
- Obtain TAN; insert TDS clauses in the sale deed.
- Seek the seller’s lower/nil deduction certificate (AO/Section 197) if applicable.
- Deduct & pay TDS, file 27Q, deliver 16A.
- If funds go overseas, ensure 15CA/15CB before bank remittance. (Income Tax Department)
If you are an NRI selling property
- LTCG rate change (23 July 2024 onward): Long-term capital gains on land/building are 12.5% without indexation. Government FAQs and ITD materials confirm the new regime; limited grandfathering allows indexation for certain pre–23 July 2024 acquisitions in specific cases—take CA advice for your facts. (Press Information Bureau, Income Tax India)
- Section 54/54EC/54F benefits (rollovers to house/bonds/equity-linked cases) continue, subject to updated limits and timelines—plan before closing. (General note; confirm current thresholds with your CA.)
- Rental income to NRI is subject to TDS under Section 195 by the payer; net taxable income enjoys 30% standard deduction like residents (Section 24(a)).
Practical challenges NRIs face (and how to de-risk)
- Title and legacy issues
- Missing links in chain of title, unregistered family arrangements, or Benami risks.
- Mitigation: Independent title search, public notices, RERA verification, and special PoA vetted by Indian counsel; notarisation/apostille as needed.
- Builder delays & RERA compliance
- Possession/OC timelines slip; amenities differ from brochures.
- Mitigation: Buy RERA-registered projects, escrow-linked payment plans, and compensation clauses aligned with RERA state rules.
- TDS mechanics & cashflows
- Buyers often over-deduct on sale value instead of gains, straining NRI liquidity.
- Mitigation: Have a CA compute capital gains and help the buyer obtain AO certificate / lower TDS order, then route net funds appropriately. (Income Tax India)
- Bank documentation for repatriation
- Incomplete paperwork delays outward remittance.
- Mitigation: Prepare sale deed, past purchase proofs, tax paid challans, CA’s 15CB, 15CA, Form A2 upfront; align with your AD bank’s checklist. (SBI, Income Tax Department)
- Country-of-citizenship restrictions
- Specific citizenships require prior RBI permission; banks will decline transactions without it.
- Mitigation: Obtain approval first; structure alternatives (inheritance or lease) where permitted. (Reserve Bank of India)
Calculating investment returns (simple frameworks)
- Gross Rental Yield
Gross Yield=Annual RentPurchase Price×100\text{Gross Yield} = \frac{\text{Annual Rent}}{\text{Purchase Price}} \times 100
Net Yield (more realistic)
Net Yield=Annual Rent−Maintenance−Property Tax−VacancyAll-in Cost×100\text{Net Yield} = \frac{\text{Annual Rent} – \text{Maintenance} – \text{Property Tax} – \text{Vacancy}}{\text{All-in Cost}} \times 100
- Post-tax Yield (for NRI)
Post-tax Yield=Net Yield×(1−Effective Tax Rate under s. 115/DTAA)\text{Post-tax Yield} = \text{Net Yield} \times (1 – \text{Effective Tax Rate under s. 115/DTAA})
- CAGR on exit
CAGR=(Net Sale Proceeds after TDS and CostsAll-in Cost)1/n−1\text{CAGR} = \left(\frac{\text{Net Sale Proceeds after TDS and Costs}}{\text{All-in Cost}}\right)^{1/n} – 1
Design cue (for infographic):
Use Light Blue #f0f9ff background; Dark Blue #001344 bars for “Net vs Post-tax Yield”; Greyish Blue #a0acc1 axes; Beige #bc9673 callouts for “TDS under s.195” and “USD 1 mn NRO window”.
Documentation quick list (seller side)
- PAN, OCI/NRI status proof
- Original purchase proof & payment trail (NRE/NRO/FCNR/inward remittance)
- No-dues, society/NOC, occupancy certificate (as applicable)
- Capital gains working + CA certificate (Form 15CB)
- Form 15CA acknowledgement for remittance
- Bank’s Form A2 and repatriation request pack (if sending abroad) (Income Tax Department, SBI)
FAQs
1) Can an OCI buy a flat in India?
Yes, OCIs are treated at par with NRIs for purchase of residential/commercial property (not agricultural/plantation/farmhouse). (Reserve Bank of India)
2) How much can I repatriate after selling property?
Up to USD 1 million per FY from NRO (general facility). If the property was purchased with foreign funds, you may repatriate up to the original amount for not more than two residential properties, with excess through the USD 1 mn route. (Reserve Bank of India)
3) I’m buying from an NRI. Is 1% TDS under 194-IA enough?
No. Section 195 applies for NRI sellers; deduct TDS at rates in force, file 27Q, issue 16A, and complete 15CA/CB for outward remittance. (Income Tax India, TATA AIG, Income Tax Department)
4) What is the LTCG tax rate now?
For transfers on/after 23 July 2024, 12.5% without indexation. Limited grandfathering applies to qualifying pre-23 July 2024 acquisitions—seek CA advice. (Press Information Bureau, Income Tax India)
5) Can tenants pay rent to my NRE account?
Rental income is India-sourced; credit to NRO is typical. Repatriation of current income (rent) is generally allowed after taxes, with 15CA/CB where required. (Reserve Bank of India)
Key takeaways for NRIs
- Know the boundaries: Buy homes/offices; avoid farm/agri purchases. Check citizenship-specific restrictions. (Reserve Bank of India)
- Structure funds smartly: Use NRE/NRO/FCNR for payments; plan your repatriation route early. (LexComply, Reserve Bank of India)
- Get the tax workflow right: Section 195 TDS, 27Q, and 15CA/CB are non-negotiable. The 12.5% LTCG regime is now the baseline. (Income Tax India, Income Tax Department, Press Information Bureau)
- De-risk execution: Title diligence, RERA checks, and a strong PoA can save months.
Compliance note: FEMA/RBI and tax rules evolve. Before transacting, coordinate with your bank’s Authorised Dealer desk and a qualified CA for rate computations, lower TDS certificates, and repatriation documentation.