⚠️ Not tax, legal, or financial advice. FEMA + Income Tax rules change; consult a Chartered Accountant (CA) in India + a licensed CPA in your country of residence for specific transactions. Verify current rules on rbi.org.in + incometax.gov.in.

NRIs buying, selling, or renting Indian property face a specific regulatory + tax framework — FEMA (Foreign Exchange Management Act), RBI rules, and Indian Income Tax Act. This 2026 guide walks through what to know at each stage: purchase, holding period, rental income, sale, and repatriation. All rules must be verified with a Chartered Accountant before specific transactions.

FEMA Basics — What NRIs Can + Cannot Buy

Allowed for NRIs

  • Residential property (any number)
  • Commercial property (offices, shops, warehouses)
  • No restriction on number of properties

NOT Allowed for NRIs (without RBI permission)

  • Agricultural land
  • Plantation land (tea, coffee, rubber estates)
  • Farmhouse land
  • Exception: NRIs can INHERIT agricultural/farm land from parents but not purchase

Purchase funding rules

  • Purchase via NRE, NRO, or FCNR accounts
  • Payment must be from NRI's legitimate foreign earnings + Indian income
  • Cash purchases are RESTRICTED — all payments through banking channels
  • Rupee-denominated home loans from Indian banks + NBFCs are available to NRIs

NRI Bank Accounts for Real Estate

NRE (Non-Resident External) account

  • Denominated in INR; funded from foreign remittance
  • Interest tax-free in India + fully repatriable
  • Real estate purchase from NRE = repatriable proceeds

NRO (Non-Resident Ordinary) account

  • Denominated in INR; for Indian-source income (rent, dividends, inheritance)
  • Interest TAXABLE in India (30% TDS)
  • Repatriation LIMIT: $1 million per financial year (subject to conditions)

FCNR (Foreign Currency Non-Resident) account

  • Fixed-tenure deposit in USD/GBP/EUR/AUD/CAD
  • Interest tax-free in India + fully repatriable
  • Cannot directly be used for real estate purchase (must convert to NRE/NRO first)

TDS on Property Purchase

When you BUY property in India:

  • If seller is Indian resident: 1% TDS on transactions above ₹50 lakh
  • If seller is NRI: 20% TDS on the sale value + surcharge + cess (higher for LTCG properties)
  • Buyer's responsibility to deduct + deposit TDS
  • File Form 26QB (resident seller) or Form 27Q (NRI seller)

Capital Gains Tax on Sale

Short-term capital gains (STCG)

  • Property held less than 24 months
  • Taxed at NRI's applicable income tax slab rate (up to 30%)
  • Plus surcharge + cess

Long-term capital gains (LTCG)

  • Property held 24 months or more
  • Post-July 2024 Union Budget: 12.5% LTCG rate WITHOUT indexation OR 20% WITH indexation (taxpayer's choice — grandfathered for pre-Budget acquisitions)
  • Section 54 exemption available if reinvested in another residential property (conditions apply)
  • Section 54EC bonds (NHAI/REC) up to ₹50 lakh for LTCG exemption

TDS on NRI sale

  • Buyer must deduct 20% TDS on LTCG (with certificate from tax officer) OR 30% on total sale value (without certificate)
  • NRI seller can apply for LOWER TDS Certificate under Section 197 by filing an application to tax officer BEFORE sale
  • NRIs must file Indian tax return after sale even if only source of income

Rental Income Tax

Basic tax treatment

  • Rental income from Indian property is INDIAN-SOURCE income taxed in India
  • Deductions allowed: municipal tax paid, 30% standard deduction (repair + maintenance), home loan interest
  • Net income added to NRI's Indian income tax slab

TDS on rent

  • Tenant paying rent to NRI landlord: MUST deduct 30% TDS on gross rent
  • Tenant deposits TDS via Form 27Q
  • NRI landlord can claim refund if TDS exceeds actual tax liability (via return filing)

DTAA relief

  • India has Double Taxation Avoidance Agreements (DTAA) with USA, UK, Canada, Australia, and 90+ countries
  • Rental income taxed in India first (with TDS)
  • Foreign tax credit available in country of residence (up to India tax paid)
  • Consult a CA + local CPA for specific DTAA application

Repatriation Rules

NRE-account funded property

  • Sale proceeds credited to NRE = FULLY repatriable
  • No limit on repatriation from NRE account

NRO-account funded property (or inherited)

  • Sale proceeds credited to NRO account
  • Repatriation LIMIT: $1 million per financial year (April 1 - March 31)
  • Requires CA-certified Form 15CA + Form 15CB before repatriation
  • Includes real estate sale + inherited assets + dividends + interest combined

Practical repatriation process

  1. Sell property + credit proceeds to NRO account
  2. File Indian income tax return (declare sale + pay LTCG)
  3. Obtain CA-certified Form 15CB (certificate confirming taxes paid)
  4. File Form 15CA online with Income Tax Department
  5. Bank processes repatriation to NRE or foreign account

NRI Home Loans in India

  • Available from major Indian banks (SBI, HDFC, ICICI, Axis, Kotak) + NBFCs (LIC HFL, Bajaj Housing Finance)
  • Typical NRI home loan interest: 8.5-10.5% p.a. in 2026
  • Maximum tenure: 30 years (subject to age at maturity)
  • LTV (loan-to-value): 80-85% for property up to ₹1 crore; 75-80% for higher
  • Repayment via NRE/NRO account remittance

Interest deduction

  • Section 24(b): Interest paid on home loan up to ₹2 lakh/year deductible against rental income (self-occupied deemed rent for second/third homes)
  • Section 80EEA additional benefit (specific conditions)

RERA Compliance — Critical Checks

Since May 2016, the Real Estate (Regulation and Development) Act (RERA) mandates registration of most projects. NRI buyers should:

  1. Verify RERA registration number on the state RERA portal (e.g., karnataka.rera.gov.in)
  2. Check builder track record + past project completion
  3. Review builder's pending consumer complaints
  4. Ensure NOC from bank/statutory bodies before signing sale agreement
  5. Insist on registered sale agreement (not just allotment letter)

Documents Required for NRI Purchase

  • PAN card (mandatory for property transactions above ₹5 lakh)
  • Aadhaar (recommended, some transactions require it)
  • Passport (with valid visa/OCI)
  • NRE/NRO bank statement (past 6 months)
  • Salary slips + tax returns from country of residence (for home loan)
  • Power of Attorney (if buying remotely; must be Indian consulate-attested)

Annual Indian Tax Filing for NRIs

  • Filing threshold: Rs. 2.5 lakh (below-threshold NRIs can skip; above-threshold MUST file)
  • Due date: July 31 following the financial year
  • Form ITR-2 for NRIs with capital gains + rental income
  • Foreign asset reporting (Schedule FA) — not required for NRIs but consult CA
  • Refund available for excess TDS via return filing

Common NRI Mistakes to Avoid

  1. Buying agricultural land — prohibited without RBI permission
  2. Missing TDS on sale — buyer's liability; NRI seller responsible for follow-up
  3. Skipping Lower TDS Certificate — Section 197 application significantly reduces TDS at sale
  4. NOT filing Indian tax return — refund lost + potential penalty for undisclosed rental income
  5. NOT declaring foreign asset on US Form 8938 / FBAR — US tax residents MUST report Indian bank accounts + real estate
  6. Assuming NRE + NRO are interchangeable — repatriation rules differ ($1M cap on NRO)
  7. Ignoring DTAA — double taxation preventable with proper filing in both countries

US Tax Treatment of Indian Real Estate for NRIs

  • Indian real estate is a US-reportable foreign asset if value exceeds thresholds
  • FBAR (FinCEN 114) required if aggregate foreign account values exceed $10,000 at any time in year
  • Form 8938 (FATCA) required if foreign asset thresholds exceeded ($50K single / $100K joint end-of-year; higher for foreign residents)
  • Rental income is USA-taxable (reportable on Schedule E)
  • Capital gains on sale taxable in USA; foreign tax credit available for India tax paid
  • US estate tax may apply if Indian real estate exceeds thresholds (consult tax attorney)

Frequently Asked Questions

What property can NRIs buy in India?

NRIs can freely buy residential + commercial property in India. NRIs CANNOT buy agricultural land, plantation land, or farmhouse property without specific RBI permission (rare). Inheritance of agricultural land IS permitted.

Advertisement

What is the maximum NRI repatriation limit from India?

NRIs can repatriate up to $1 million per financial year from NRO account (all types of Indian-source funds combined). NRE account repatriation has NO limit. FCNR is fully repatriable. All repatriations require CA-certified Form 15CB + Form 15CA online.

How much TDS is deducted when an NRI sells property in India?

The buyer must deduct 20% TDS on Long-Term Capital Gains (with Lower TDS Certificate under Section 197 from Income Tax Officer) OR 30% on total sale value without certificate. NRI seller can apply for lower TDS before sale to reduce cash-flow impact.

Is rental income from Indian property taxable in India for NRIs?

Yes. Rental income is Indian-source, taxable in India. Tenant deducts 30% TDS on gross rent (paid via Form 27Q). NRI landlord files return + claims deductions (30% standard for repair/maintenance + interest on home loan). DTAA foreign tax credit available in country of residence.

What is a Lower TDS Certificate (Section 197)?

NRIs selling Indian property can apply to the Income Tax Officer under Section 197 for a certificate reducing TDS from default 20-30% to their actual tax rate. Filed BEFORE sale via online portal. Significantly reduces cash-flow lock-in during transaction.

Disclaimer: NRI Globe provides journalism and general information only. This is NOT tax, legal, or financial advice. FEMA + Income Tax + DTAA rules change; consult a Chartered Accountant (CA) in India + a licensed CPA in your country of residence for specific transactions. Verify current rules on rbi.org.in + incometax.gov.in.