NRI Property Ownership in India: FEMA Rules for NRIs and OCI Holders

NRI property ownership in India is governed by FEMA, not by income tax. The Reserve Bank of India (RBI) sets who may buy which kind of property, how it must be paid for and how sale proceeds may be sent abroad. In plain terms, a non-resident Indian or an Overseas Citizen of India (OCI) may buy and sell flats, houses and commercial property in Pune, Hyderabad, Bengaluru or Mumbai without RBI approval, but may not buy agricultural land, plantation property or a farm house. This page explains the rules, the payment channels, the repatriation conditions and the Indian and U.S. tax consequences.

What does NRI property ownership in India allow?

RBI's master direction and FAQ summarise the Non-debt Instruments Rules, 2019 as follows.

A "relative" is defined in section 2(77) of the Companies Act, 2013. A spouse who is a foreign national and neither an NRI nor an OCI may acquire one non-agricultural property jointly with the NRI or OCI spouse. Citizens of certain countries (Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong and North Korea) need RBI permission, but RBI states that the prohibition does not apply to an OCI. Whether a plot counts as agricultural land is decided from the land records and local law, so have a lawyer confirm before you pay.

An NRI or OCI who held property when resident, or who inherited it from a resident, keeps it under section 6(5) of FEMA after becoming non-resident. Our page on OCI, PIO and tax questions covers how OCI status fits in.

How must you pay?

Payment must be received in India through banking channels by way of inward remittance from abroad, or by debit to your NRE, FCNR(B) or NRO account. RBI does not allow travellers' cheques, foreign currency notes or other modes. The sale and registration are subject to all Indian taxes and duties. Stamp duty and registration charges are state matters and differ in Maharashtra, Telangana, Karnataka, Gujarat and Tamil Nadu; check the state registration site. Details of the three accounts are in NRE, NRO and FCNR accounts.

Can you take a housing loan?

An authorised dealer bank can lend to an NRI or OCI for housing under RBI's borrowing and lending rules. RBI treats repayments out of remittances received from abroad through banking channels, or debits to NRE or FCNR(B) accounts, as equivalent to foreign exchange received. That matters on sale, because repatriation depends on how the purchase was funded.

How are sale proceeds repatriated?

RBI sets two layers.

1. Property bought with foreign exchange. An authorised dealer may allow repatriation of sale proceeds of non-agricultural property if the property was acquired in accordance with the law at the time, the price was paid in foreign exchange through banking channels or from FCNR(B) or NRE funds (housing loan repayments from those sources count), and, for residential property, not more than two such properties are involved.
2. Everything else. NRIs and PIOs may remit up to USD 1 million per financial year from NRO balances, sale proceeds of assets and assets acquired by inheritance, together. More needs RBI approval. A person who acquired property under section 6(5) cannot repatriate sale proceeds without prior RBI permission, but if resident outside India may use the USD 1 million facility.

Sale proceeds of agricultural land, plantation property and a farm house cannot be repatriated under the first layer. The practical paperwork, including Form 15CA and 15CB, applies in both layers.

What taxes apply in India?

• Rent. Rent is house property income: the owner deducts municipal taxes paid, then a 30% standard deduction, and may deduct interest on borrowed capital. The tenant must deduct tax at rates in force on rent paid to a non-resident. See NRI income taxable in India.
• Sale. Gains are taxed under the capital gains rules in capital gains for NRIs. If the price is below the stamp duty value, the stamp duty value can be used, with a 110% tolerance (section 78 of the 2025 Act).
• TDS. The buyer deducts tax at rates in force on the payment; a lower deduction certificate can reduce it, as explained in TDS on property sale by an NRI.
• Gifts and inheritance. No tax on receipt from a relative or under a will; later sale is taxed. See gifts and inheritance in India.

Documents to keep

• Sale agreement, registered deed, mutation and property tax receipts
• Bank statements showing how the purchase was funded (inward remittance or NRE/FCNR/NRO debit)
• Housing loan sanction letter and repayment statements, if any
• Passport, OCI card, PAN and a registered power of attorney if a relative acts for you
• For inherited property: death certificate, will or succession papers and legal heir documents

Worked examples

Purchase and sale. Deepa lives in Aurora and buys a Bengaluru flat for ₹1.2 crore from NRE funds. Years later she sells it. Because the purchase was paid from NRE funds, an authorised dealer may allow repatriation of the sale proceeds, as one of not more than two residential properties, subject to tax payment and paperwork. The buyer deducts TDS unless she has a lower deduction certificate.

Inherited land. Hardik, an OCI cardholder in Chicago, inherits 2 acres of agricultural land near Ahmedabad from his father, a resident. FEMA allows him to inherit it, and he can sell it only to a resident. He cannot buy more agricultural land. The sale proceeds are credited to NRO and can be sent abroad only within the USD 1 million facility with RBI's conditions.

Mistakes to avoid

• Buying farmland, a farm house or plantation property because an agent calls it "farm plots". Confirm the classification before payment.
• Paying part of the price in cash or from a resident relative's account.
• Using a power of attorney too widely; limit its scope and register it correctly.
• Assuming sale proceeds are automatically repatriable. They depend on how the purchase was funded and on RBI limits.
• Overlooking state stamp duty differences.

U.S. side

Rent from Indian property is reported on the U.S. return, with depreciation and the foreign tax credit for Indian tax paid; gains are computed in dollars using exchange rates on the purchase and sale dates. Directly owned real estate is generally not itself an FBAR or Form 8938 asset, but the NRO or NRE accounts that collect the rent are, and ownership through a company or trust can change the answer. Estate planning matters because Indian real estate is part of a U.S. person's worldwide estate. See real estate investor tax, FBAR, U.S. taxpayers with India income and assets and US-India estate and succession planning.

How we can help

For Fox Valley owners of Indian property, our CPA firm handles the U.S. return, basis in dollars and foreign tax credit on Indian property, and the account reports, and coordinates with your Indian CA and property lawyer. We do not give legal advice on Indian title or FEMA, file Indian returns or deal with the Indian tax office. See individual tax returns for newcomers and NRIs. Further reading is on the India hub.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.