Property in India for NRIs and OCIs: What FEMA Allows You to Buy, Sell and Repatriate

For a non-resident Indian (NRI) or an Overseas Citizen of India (OCI), buying a flat in Mumbai or selling an inherited house in Pune is not a simple property transaction. It sits at the intersection of the Foreign Exchange Management Act, 1999 (FEMA), the Income-tax Act, 1961, and the tax code of the country you now live in. Get the sequence wrong and sale proceeds can sit stuck in a Non-Resident Ordinary (NRO) account, blocked from repatriation for months.

This guide sets out exactly what the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (notified 17 October 2019) permit, how the Reserve Bank of India's Master Direction No. 12/2015-16 governs acquisition and transfer, and how the Double Taxation Avoidance Agreement (DTAA) decides who taxes your capital gain. Every figure below is drawn from the statute, the RBI Master Direction, or a treaty rate — nothing is estimated.

FEMA / DTAA Position

The governing instrument is the Reserve Bank of India's FED Master Direction No. 12/2015-16, "Acquisition and Transfer of Immovable Property under FEMA 1999", first issued on 1 January 2016 and last updated on 1 September 2022. Since 17 October 2019, the operative rules are the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, which supersede the earlier FEMA 21(R) regime for immovable property.

Under these rules, an NRI or an OCI may acquire any immovable property in India other than three prohibited categories: agricultural land, plantation property, and a farmhouse. This restriction is absolute — it applies whether the property is bought, gifted, or otherwise transferred, and no general permission exists to circumvent it. A resident Indian citizen faces no such bar, which is why residential status under Section 6 of FEMA 1999 is the first fact to establish before any deal.

Section 6 of FEMA 1999 makes clear that capital account transactions require RBI permission unless specifically permitted. For residential and commercial property, the permission is general — no case-by-case RBI approval is needed for an NRI or OCI purchase. But for the three prohibited categories, even a specific application is unlikely to succeed, because the Non-debt Instruments Rules do not carve out any route for non-residents to hold farm land.

An NRI or OCI can also acquire property by inheritance from a person resident in India, or from another non-resident who had acquired it in compliance with the foreign-exchange law in force at the time. Inheritance is not treated as a fresh acquisition subject to the three-category bar in the same way — an NRI can inherit agricultural land, though repatriating its sale proceeds later remains tightly controlled under the USD 1 million per financial year window described further below.

The DTAA does not change what you may buy; it changes who may tax the gain when you sell. A critical warning applies here: for no country does the DTAA treat capital gains on Indian immovable property as "exempt". Under Article 13 of most Indian treaties, gains from the alienation of immovable property situated in India are taxable in India. India retains its taxing right at the domestic long-term rate of 12.5% (post-Budget 2024), and your country of residence then grants relief through the foreign-tax-credit mechanism.

The uniform 12.5% column is not a coincidence: immovable property is one asset class where the source country (India) keeps primary taxing rights across every major treaty. Use the DTAA benefit calculator to model the residence-country credit against this Indian liability.

Tax Treatment in India

Once you sell, the Income-tax Act, 1961 takes over. The holding period decides the character of the gain: immovable property held for more than 24 months yields a long-term capital gain (LTCG); 24 months or less yields a short-term capital gain (STCG) taxed at your slab rate.

Budget 2024, effective 23 July 2024, rewrote the LTCG arithmetic for property. There are now two tracks, and the choice matters:

For property bought before 23 July 2024, resident individuals and HUFs may pick the lower of 20% with indexation or 12.5% without. The Finance (No. 2) Act, 2024 confined that election largely to residents; NRIs selling long-held property should confirm their eligibility with a chartered accountant, because the flat 12.5% often applies.

On top of the base tax sits a surcharge and a 4% health and education cess. Surcharge is levied on the tax, not the gain: 10% where total income exceeds Rs 50 lakh, 15% above Rs 1 crore, and 25% above Rs 2 crore. Critically, for capital gains the surcharge is capped at 15% even for very high incomes, and the maximum surcharge in the new regime is capped at 25% (not 37%). This cap materially lowers the effective rate on large property gains.

The mechanism that most often trips up NRI sellers is TDS under Section 195. When a buyer purchases property from an NRI, the buyer must deduct tax at source on the capital-gains-bearing consideration — for a long-term sale, at 12.5% plus the applicable surcharge and 4% cess, not merely the 1% that applies to resident-to-resident deals under Section 194-IA. Section 195 is unforgiving: it can attach to the entire sale value unless the seller obtains a lower-deduction certificate.

That relief route is Section 197. By filing Form 13 with the Assessing Officer, an NRI can obtain a certificate directing the buyer to deduct TDS only on the actual gain rather than the gross sale price. Our detailed walk-through — "Selling Property as an NRI: How Section 195 TDS Works and the Section 197 Lower-Deduction Route" — shows the paperwork step by step. Model the net gain first with the NRI tax calculator.

Reinvestment relief survives for NRIs. Under Section 54, LTCG on a residential house is exempt if reinvested in another residential house in India — the new purchase must be made within one year before or two years after the sale, or construction completed within three years. Section 54EC allows up to Rs 50 lakh to be parked in specified NHAI or REC bonds within six months of transfer, with a five-year lock-in, deferring the tax entirely.

Tax Treatment Abroad

Selling Indian property does not end your obligations at the Indian border. Because you are tax-resident abroad, your home country will generally tax the same gain on a worldwide-income basis — and then relieve the double tax through a credit for the Indian tax paid.

The table below sets out the residence-country credit mechanism named in each treaty. The Indian 12.5% is creditable, but only up to the home-country tax on that same gain; if the foreign rate is lower, the excess Indian tax is not refunded by the foreign treasury.

For a UAE-resident NRI, the absence of UAE personal income tax means the Indian 12.5% long-term rate is, in practice, the final tax on the property gain — there is no second layer to credit against. For a US-resident NRI, the position is the reverse: the US Internal Revenue Code taxes the worldwide gain, and the Indian tax is claimed as a foreign tax credit on IRS Form 1116, subject to the US limitation. The foreign tax credit calculator helps size the creditable amount.

One recurring error is treating the Tax Residency Certificate as optional. To claim any DTAA benefit — including the reduced treaty rates on rental income or the credit position above — the NRI must furnish a valid TRC from the residence country plus Form 10F, under Section 90(4) of the Income-tax Act. For the UAE specifically, the treaty note requires proof of a UAE establishment for the TRC to hold.

Repatriation Mechanics

Owning the money in India is not the same as moving it abroad. Repatriation runs on the account architecture set out in RBI's Master Direction on Deposits and the Non-debt Instruments Rules, and the NRE / NRO distinction is the whole game.

Funds in a Non-Resident External (NRE) account are fully and freely repatriable — both principal and interest — because the money represents foreign earnings brought into India. A Non-Resident Ordinary (NRO) account holds Indian-source income (rent, dividends, sale proceeds of assets bought while resident) and is repatriation-restricted. A Foreign Currency Non-Resident (FCNR) deposit holds foreign currency and is fully repatriable. Our companion explainer, "NRE vs NRO vs FCNR(B): How FEMA Rules Govern NRI Bank Accounts", sets out the full comparison.

For property specifically, the Non-debt Instruments Rules, 2019 grant a narrow but valuable right: an NRI or OCI who bought a residential property using foreign inward remittance or NRE funds may repatriate the sale proceeds of up to two residential properties, provided the repatriated amount does not exceed the original foreign-currency consideration paid. The gain portion, and proceeds beyond that two-property window, fall under the general USD 1 million per financial year ceiling.

The USD 1 million per financial year limit is the workhorse for most NRIs — especially where property was inherited or bought while the seller was still a resident. It runs from 1 April to 31 March and resets each year. Note this is distinct from the Liberalised Remittance Scheme (LRS): as our piece "LRS at USD 250,000: Why It Is for Residents, Not NRIs" explains, the LRS USD 250,000 window is a resident's facility and does not apply to NRI repatriation at all.

Every outward remittance from an NRO account requires two forms filed with the Income-tax Department: Form 15CA (a declaration by the remitter) and Form 15CB (a certificate from a chartered accountant confirming that the applicable tax has been deducted). Without both, the authorised dealer bank will not process the transfer. Rental proceeds follow the same track — estimate the post-tax figure with the rental income tax calculator before initiating a repatriation request.

FAQ

Can an NRI buy agricultural land in India?

No. Under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 and RBI Master Direction No. 12/2015-16, an NRI or OCI cannot purchase agricultural land, plantation property, or a farmhouse. This is one of only three property categories that are absolutely off-limits. Such land can only be inherited from a resident, not bought.

What TDS rate applies when a buyer purchases property from an NRI seller?

For a long-term sale (property held over 24 months), the buyer must deduct TDS under Section 195 at 12.5% plus the applicable surcharge and 4% cess, effective 23 July 2024 — not the 1% under Section 194-IA that applies to resident sellers. If the NRI obtains a Section 197 lower-deduction certificate via Form 13, TDS applies only to the actual gain rather than the gross sale value.

Is the capital gain on Indian property exempt under the DTAA if I live in the US or UK?

No. Under Article 13 of India's treaties, gains on immovable property situated in India are taxable in India, and India retains its taxing right at 12.5% for the long term. Your residence country (the US or the UK) then grants a foreign tax credit for the Indian tax paid — the gain is never treaty-exempt in India.

How much can I repatriate after selling property in India?

If you bought a residential property with NRE funds or foreign inward remittance, you may repatriate the sale proceeds of up to two such properties, capped at the original foreign consideration. All other cases — inherited property, or property bought while resident — fall under the USD 1 million per financial year limit from your NRO account, which resets on 1 April each year.

Do I still get the Section 54 reinvestment exemption as an NRI?

Yes. Section 54 of the Income-tax Act, 1961 exempts LTCG on a residential house if you reinvest in another residential house in India — bought within one year before or two years after the sale, or constructed within three years. Section 54EC additionally allows up to Rs 50 lakh in NHAI/REC bonds within six months, with a five-year lock-in.

What forms are needed to remit sale proceeds abroad?

Every outward remittance from an NRO account needs Form 15CA (the remitter's declaration) and Form 15CB (a chartered accountant's certificate confirming tax compliance), filed with the Income-tax Department under Rule 37BB. To claim any DTAA benefit you additionally need a Tax Residency Certificate and Form 10F under Section 90(4).

This article is for general information and reflects the position as at 7 August 2026 under FEMA 1999, RBI Master Direction No. 12/2015-16, and the Income-tax Act, 1961. It is not tax or legal advice; consult a qualified chartered accountant before acting. Verify current rules at rbi.org.in and incometax.gov.in.