Can NRIs and OCIs Buy Property in India? What RBI FEMA Rules Permit and Prohibit

Property remains the single largest asset class Indians abroad want to own back home, and the rules that govern it are set not by any state registrar but by the Reserve Bank of India under the Foreign Exchange Management Act, 1999. The good news for most buyers is settled: a Non-Resident Indian (NRI) or an Overseas Citizen of India (OCI) can buy residential and commercial property in India without any prior approval from the RBI. The RBI's own FAQ on the Acquisition and Transfer of Immovable Property, last hosted at rbi.org.in, states this in plain terms and has done so consistently since the Non-debt Instruments Rules were notified on 17 October 2019.

The limits are equally settled, and they matter. There are three categories of property an NRI or OCI may not purchase outright: agricultural land, a farmhouse, and plantation property. The only route to holding these is inheritance, or a gift from a person resident in India who is a relative as defined under the Companies Act. This one distinction accounts for the majority of transactions that get stuck at the sub-registrar's office. Below we set out the FEMA position, the Indian tax treatment on holding and selling, how the income interacts with tax abroad under the Double Taxation Avoidance Agreement (DTAA), and the repatriation mechanics that decide whether the sale proceeds can ever leave India.

FEMA / DTAA Position

The governing instrument is the Foreign Exchange Management Act, 1999, read with the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Section 6 of FEMA treats the acquisition of immovable property as a capital account transaction, which means it is prohibited unless specifically permitted; the Non-debt Instruments Rules 2019 supply that permission for residential and commercial property. Section 3 of FEMA separately restricts any unauthorised dealing in foreign exchange, which is why the payment channel (covered below) is not a formality but a compliance condition.

What an NRI or OCI may and may not acquire is summarised below, drawn from the RBI FAQ current as of 2026.

There is no ceiling on the number of residential or commercial properties an NRI or OCI may own; the FEMA restriction is on the type of land, not the count. Payment, however, is tightly channelled. Under the RBI FAQ, the consideration must be paid out of funds received in India through normal banking channels or from balances held in an NRE, FCNR(B) or NRO account. Payment by traveller's cheque or by foreign currency notes is not permitted, and no part of the consideration may be paid outside India. For resident Indians, the parallel Liberalised Remittance Scheme caps outward remittance at USD 250,000 per financial year under Section 6 of FEMA; that scheme governs money leaving India and does not apply to an NRI bringing funds in to buy property.

The DTAA does not decide whether you can buy the property; it decides who taxes the income the property later throws off. Under the standard treaty architecture that India follows, income from immovable property and gains on its sale are taxable in the country where the property is situated. For a flat in Mumbai or Bengaluru, that country is India. This is why, for immovable property specifically, the treaty never removes India's right to tax; the relief comes later as a credit in the country of residence, not as an exemption in India.

Tax Treatment in India

Buying property is not itself a taxable event for the NRI purchaser, but two Indian tax charges attach to the asset thereafter: tax on rental income while it is held, and capital gains tax when it is sold. Rental income from Indian property is taxable in India regardless of the owner's residential status, because the income arises in India. It is computed under the head "Income from house property", with the standard 30% statutory deduction on net annual value plus a deduction for home-loan interest. You can model the after-tax position using the NRI rental income tax calculator; tenants paying rent to an NRI landlord are required to deduct tax at source under Section 195 of the Income-tax Act, 1961, at DTAA rates or the Act's rates, whichever is lower.

On sale, the gain is a capital gain. Long-term treatment applies to immovable property held for more than 24 months. The Budget of 23 July 2024 rewrote the long-term rate, and the transition rule matters for anyone who bought before that date.

Resident individuals who bought before 23 July 2024 may choose whichever of the two computations gives the lower tax, but that choice is a resident-only relief; NRIs are taxed at the 12.5% rate without indexation on transfers on or after that date. Short-term gains, where the holding period is 24 months or less, are added to total income and taxed at slab rates. A surcharge applies on the tax where total income crosses the thresholds: 10% between Rs 50 lakh and Rs 1 crore, 15% between Rs 1 crore and Rs 2 crore, and 25% above Rs 2 crore, with a health and education cess of 4% on top. The surcharge on capital gains income is itself capped at 15%, and in the new tax regime the top surcharge is 25%, not the old 37%.

The exemptions survive for NRIs. Section 54 of the Income-tax Act exempts long-term gains on a residential house if the proceeds are reinvested in another residential house in India within the prescribed timelines (one year before or two years after the sale, or three years for construction). Section 54EC allows a separate exemption of up to Rs 50 lakh where the gain is invested in specified bonds within six months. When an NRI sells, the buyer must deduct TDS on the entire sale consideration under Section 195, not merely on the gain, unless the seller obtains a lower-deduction certificate from the Assessing Officer under Section 197; this single point is the most common cash-flow shock in NRI property sales. Use the NRI tax calculator to estimate the liability before the buyer withholds.

Tax Treatment Abroad

Because immovable-property income is taxable in India first, the country of residence generally taxes the same income again and then gives a credit for the Indian tax paid. How that plays out depends on the treaty.

For an NRI resident in the United States, the India-USA DTAA, effective from 12 September 1991, preserves India's right to tax India-source rental income and property gains, and Article 24 of that treaty gives a foreign tax credit in the United States for the Indian tax. The US taxes its residents on worldwide income, so a US-resident NRI reports the Indian rental income and any gain on the US return and claims the credit; the treaty prevents the same rupee of income being taxed twice at full rates but does not make it tax-free in either country. For reference, the same treaty sets a 12.5% cap on long-term capital gains, 25% on portfolio dividends (15% only where the recipient holds at least 10% of the voting stock), and 15% on interest and on fees for technical services.

For an NRI resident in the United Arab Emirates, the India-UAE DTAA, effective from 22 September 1993, works differently at the residence end because the UAE levies no personal income tax. There is therefore no double taxation to relieve on individual rental income or property gains; the Indian tax is the final tax for the individual. To access any treaty rate on other India-source income, the UAE resident must hold a valid Tax Residency Certificate, and the treaty's own note records that establishing UAE residence requires proof of an establishment there. The table below sets out the two treaties side by side.

One warning that applies to every treaty India has signed: capital gains on immovable property are never "exempt" under the DTAA. India retains the taxing right at 12.5% for long-term gains, and any advice that a treaty makes an Indian property sale tax-free in India is wrong. Where a credit is available, claim it through the foreign tax credit calculator and the DTAA relief route, not by understating the Indian liability. See the DTAA glossary entry for how the credit mechanism is structured.

Repatriation Mechanics

Owning the property is one question; getting the money back out of India after selling it is a separate one, and it turns on which account funded the purchase. The three account types behave differently, which is why the RBI's Master Direction on deposits treats them separately.

An NRE (Non-Resident External) account holds income earned abroad, converted to rupees, and both principal and interest are freely repatriable without limit. An FCNR(B) account holds foreign currency directly and is likewise fully repatriable. An NRO account holds India-source income such as rent, dividends and pensions, and repatriation from it is capped at USD 1 million per financial year across all NRO balances, subject to payment of applicable Indian taxes and a chartered accountant's certificate in Forms 15CA and 15CB. Our detailed treatment of that ceiling sits in a separate NRO remittance guide; here it is enough to note the limit applies to the aggregate, not per account.

For sale proceeds of residential property specifically, the RBI FAQ adds a further rule. Repatriation of sale proceeds is restricted to not more than two residential properties, and where the property was bought with foreign exchange remitted through banking channels or out of NRE or FCNR(B) balances, the amount repatriated may not exceed the amount originally paid for the acquisition in that foreign exchange. In practice this means the capital that came in as foreign exchange can go back out on the same footing, but any rupee gain above the original foreign-currency cost, and proceeds of property that was bought with rupee (NRO) funds, must route through the NRO account and count against the USD 1 million annual limit. The repatriation calculator helps map which slice of the proceeds falls in which bucket before you file Form 15CB.

The compliance sequence on a sale is therefore: the buyer deducts TDS under Section 195; the NRI files the Indian return and, if over-withheld, claims the refund or obtains a Section 197 lower-deduction certificate in advance; the net proceeds land in an NRO account; the chartered accountant certifies that taxes are paid in Form 15CB; and only then does the bank process the outward remittance within the USD 1 million or foreign-exchange-in ceiling. Missing any step delays the remittance, not the sale.

FAQ

Can an NRI buy agricultural land in India?

No. The RBI FAQ on immovable property, read with FEMA 1999 and the Non-debt Instruments Rules 2019, prohibits an NRI or OCI from purchasing agricultural land, a farmhouse or plantation property. The only way to hold such land is by inheritance from a person resident in India, or in limited cases by gift from a resident relative. Residential and commercial property carry no such bar.

Does an OCI cardholder have the same property rights as an NRI?

Yes, for immovable property the RBI treats OCI cardholders on the same footing as NRIs. Both may buy residential and commercial property without RBI approval and both are barred from buying agricultural land, farmhouse or plantation property except by inheritance. The residential status test under the Income-tax Act still determines how the resulting income is taxed.

How must an NRI pay for the property?

Payment must come from funds received in India through normal banking channels or from balances in an NRE, FCNR(B) or NRO account. Under the RBI FAQ, payment by traveller's cheque or in foreign currency notes is not allowed, and no part of the price may be paid outside India. The account that funds the purchase also determines how freely the eventual sale proceeds can be repatriated.

What tax applies when an NRI sells Indian property?

Long-term gains on immovable property held over 24 months are taxed at 12.5% without indexation for transfers on or after 23 July 2024, plus applicable surcharge and 4% cess. The buyer must deduct TDS on the full sale consideration under Section 195 of the Income-tax Act, 1961, unless the seller has obtained a lower-deduction certificate under Section 197. Reinvestment reliefs under Sections 54 and 54EC remain available to NRIs.

Is property capital gains exempt under any DTAA?

No. India retains the right to tax capital gains on immovable property situated in India, and the long-term rate is 12.5%. No DTAA makes an Indian property sale tax-free in India; relief comes as a foreign tax credit in the country of residence, such as under Article 24 of the India-USA treaty, not as an Indian exemption.

How much can be repatriated after selling property?

Foreign exchange originally brought in through banking channels or from NRE or FCNR(B) balances to buy up to two residential properties can be repatriated up to that original foreign-currency amount. Any excess, and proceeds of property bought with rupee funds, route through the NRO account and count against the USD 1 million per financial year limit, subject to Forms 15CA and 15CB.

Do I need RBI permission to buy a flat in India as an NRI?

No prior RBI approval is needed for residential or commercial property. The permission is general, granted under the Non-debt Instruments Rules 2019, provided payment follows the banking-channel rule. Approval is only relevant in the excluded categories, agricultural land, farmhouse and plantation property, and even there purchase is not permitted, only inheritance.