Can an NRI or OCI buy property in India? The FEMA rules on what you can purchase and how you must pay

An NRI in Dubai wiring money to book a Pune flat, or an OCI cardholder in New Jersey eyeing a Bengaluru office floor, both run into the same first question: is this even allowed, and if so, how must the rupees move? The governing law is the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, framed under the Foreign Exchange Management Act, 1999. The Reserve Bank of India's Frequently Asked Questions on acquisition of immovable property, last anchored to these 2019 rules, confirm that Non-Resident Indians and Overseas Citizens of India may buy residential and commercial property in India without seeking any prior RBI approval. This guide walks through what you can purchase, how you must pay, and the Indian and foreign tax consequences that follow the title deed.

The distinction that trips up most buyers is the asset class. Under Schedule III of the 2019 Rules, an NRI or OCI may acquire any immovable property in India other than agricultural land, a farmhouse, or plantation property. Those three categories cannot be purchased at all, regardless of the sums involved; they can only be received by inheritance from a resident, or by gift from a resident relative as defined in Section 2(77) of the Companies Act, 2013. There is no ceiling on the number of residential or commercial units an eligible buyer may hold, a point the RBI FAQ makes explicit.

FEMA / DTAA Position

The purchase of immovable property is a capital account transaction under Section 6 of FEMA, 1999, and is therefore permitted only to the extent the Rules specifically allow it. For NRIs and OCIs, the 2019 Non-debt Instruments Rules provide that general permission, so no Form or RBI reference number is needed before you sign. Confirm your own status first: residential status under Section 6 of the Income-tax Act, 1961 decides your tax exposure, while your NRI/OCI classification under FEMA decides your right to buy. The two tests are separate, and you can read the FEMA basics in our FEMA glossary entry and the tax-side test in the residential-status glossary.

Payment discipline is where FEMA is strict. The consideration must be paid out of funds received in India through normal banking channels, or from the balances held in your Non-Resident External (NRE), Non-Resident Ordinary (NRO), or Foreign Currency Non-Resident (FCNR) account. The RBI FAQ is categorical that payment cannot be made by traveller's cheque or by foreign currency notes carried into India, and it cannot be tendered outside India. A single cheque from your NRE account, or an inward remittance routed through your bank, is the compliant path; understand the account types in our NRE-account glossary and NRO-account glossary.

Double Taxation Avoidance Agreements do not govern whether you may buy; they govern how the gain is later taxed. Nearly every Indian DTAA follows the OECD-model rule that gains from the alienation of immovable property are taxable in the country where the property is situated. So India retains the primary right to tax the eventual sale, and the treaty then hands your country of residence the duty to relieve the double tax. India does not treat such capital gains as exempt for any partner country; under the India-United States treaty, for instance, Article 24 preserves a foreign tax credit in the country of residence rather than an exemption at source.

Tax Treatment in India

Buying triggers stamp duty and registration charges, which vary by state, typically between 4% and 7% of the higher of consideration or circle rate, plus 1% registration under the Registration Act, 1908 in most states. Nothing about NRI status changes these state levies. If you buy from a resident seller, you as the buyer deduct 1% TDS under Section 194-IA of the Income-tax Act, 1961 on any consideration of Rs 50 lakh or more. If you buy from another NRI, Section 194-IA does not apply; instead the tougher Section 195 withholding attaches, and you can read the mechanics in our TDS glossary entry.

The larger tax event arrives when you eventually sell. Immovable property held for more than 24 months is a long-term capital asset; gains are taxed under Section 112 at 12.5% without indexation for transfers on or after 23 July 2024, per the Finance (No. 2) Act, 2024. For assets acquired before 23 July 2024, resident individuals and Hindu Undivided Families may instead opt for the older 20% rate with indexation, whichever is lower. Property sold within 24 months produces a short-term gain taxed at your applicable slab rate.

On top of the base rate sit surcharge and the 4% health and education cess. Surcharge runs at 10% for total income above Rs 50 lakh, 15% above Rs 1 crore, and 25% above Rs 2 crore, but for long-term capital gains the surcharge is capped at 15% by the Finance Act, 2022. Crucially, when an NRI sells, the resident buyer must withhold TDS under Section 195 on the sale consideration at 12.5% for a long-term gain (plus surcharge and cess), not merely on the profit, unless the seller obtains a lower-deduction certificate under Section 197. Model your own liability with the NRI capital gains and tax calculator.

If you let the property, the rent is Indian-source income taxable under "Income from House Property". You deduct municipal taxes actually paid, then a flat 30% standard deduction under Section 24(a), and interest on any home loan under Section 24(b). A tenant paying rent to an NRI landlord must deduct TDS under Section 195 at 30% plus surcharge and cess, and file Form 15CA before remitting; estimate the net position with our rental-income tax calculator.

Tax Treatment Abroad

Because the property sits in India, India taxes the gain first, and your country of residence then decides how to relieve the overlap. Under Article 24 of the India-US DTAA (in force since 12 September 1991), a US-resident seller claims a foreign tax credit for the Indian tax paid, subject to US limitation rules; the treaty gives relief by credit, not by exemption. The same credit mechanism appears in the UK, UAE, Canada, Singapore and Australia treaties, though each has its own limitation formula.

The practical friction is timing and evidence. US taxpayers report the Indian gain on their Form 1040 and claim the credit on IRS Form 1116, matching it to the Indian tax year that runs 1 April to 31 March, which never aligns cleanly with the US calendar year. To claim treaty relief in India you need a Tax Residency Certificate from your home jurisdiction plus Form 10F, mandated under Rule 21AB of the Income-tax Rules. See how the credit unwinds in our foreign tax credit calculator, and note that the treaty rate never lets India tax the immovable-property gain below its domestic 12.5% floor.

Repatriation Mechanics

Getting sale proceeds back out of India is governed by the source of the original purchase money. Where the property was bought with foreign exchange remitted through banking channels or from an NRE/FCNR account, the RBI permits repatriation of the sale proceeds of up to two residential properties, capped at the amount of foreign exchange originally brought in for the acquisition. Any gain beyond that, and proceeds of any further property, must route through the NRO account.

The NRO route carries the well-known cap: an NRI may remit up to USD 1 million per financial year (1 April to 31 March) out of NRO balances, including sale proceeds of immovable property, after paying applicable Indian taxes. This USD 1 million ceiling is the single most important number for anyone unwinding an Indian property portfolio; we cover it in depth in the linked NRO repatriation piece below and in the repatriation calculator.

Every repatriation above the small-value threshold needs Form 15CA (self-declaration) and Form 15CB (a chartered accountant's certificate) under Section 195, confirming that the correct TDS was deducted before the money left. The remitting bank will not process the SWIFT transfer without them; read the compliance detail in our Form 15CA/15CB glossary entry. Funds parked meanwhile can sit in an FCNR deposit to hedge rupee risk until you remit.

FAQ

Can an NRI buy agricultural land in India?

No. Under Schedule III of the FEMA Non-debt Instruments Rules, 2019, an NRI or OCI cannot purchase agricultural land, a farmhouse, or plantation property. These can only be acquired by inheritance from a person resident in India, or received as a gift from a resident relative. The RBI grants no general permission for their purchase, and a specific application would be required for any exception.

Do I need RBI approval before buying a flat in India?

No prior approval is required. The 2019 Non-debt Instruments Rules give NRIs and OCIs general permission to acquire residential and commercial immovable property, so no Form or RBI reference number is needed at the time of purchase. You must only ensure the payment flows through banking channels or an NRE/NRO/FCNR account, never in foreign currency notes or traveller's cheques.

Can I pay the builder in US dollars from abroad?

No. The RBI FAQ requires the consideration to be received in India through normal banking channels, or paid from your NRE, NRO or FCNR balances held in India. Payment outside India, or by foreign currency notes and traveller's cheques, is not permitted. An inward remittance converted to rupees in your Indian account is the compliant route.

How much tax will I pay when I sell?

A property held for more than 24 months is long-term, taxed under Section 112 of the Income-tax Act, 1961 at 12.5% without indexation for transfers on or after 23 July 2024, plus surcharge (capped at 15% on long-term gains) and 4% cess. If you sell within 24 months, the gain is short-term and taxed at your slab rate up to 30%. India does not treat this gain as treaty-exempt for any country.

How much can I repatriate after selling?

If you bought with foreign exchange or NRE/FCNR funds, you may repatriate the sale proceeds of up to two residential properties, limited to the forex originally invested. Everything else routes through the NRO account, subject to the USD 1 million per financial year ceiling, and requires Form 15CA and Form 15CB before the bank releases the transfer.

Is there a limit on how many properties I can own?

No. The RBI FAQ confirms there is no restriction on the number of residential or commercial properties an NRI or OCI may purchase in India. The only bar is on agricultural land, farmhouses and plantation property, which cannot be bought at all.

Does buying from another NRI change my TDS obligation?

Yes. When you buy from a resident seller you deduct 1% under Section 194-IA on consideration of Rs 50 lakh or more. When you buy from an NRI seller, Section 194-IA does not apply; you must deduct under Section 195 at the capital-gains rate applicable to the seller (12.5% for a long-term gain plus surcharge and cess), unless the seller produces a lower-deduction certificate under Section 197.