OCI cardholder property rules under FEMA(NDI) Rules 2019: What you can and cannot buy

Holding an Overseas Citizen of India (OCI) card does not make you an Indian citizen, and it does not, on its own, decide how you may buy property in India. Two separate legal systems apply at once: your citizenship status under the OCI scheme administered by the Ministry of Home Affairs, and your residential status under the Foreign Exchange Management Act, 1999. The buying rules sit inside the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, notified on 17 October 2019 and administered jointly by the Reserve Bank of India and the Ministry of Finance. Get the distinction wrong and a registered sale deed can still be challenged, so the starting point for every OCI buyer is the FEMA framework rather than the brochure.

FEMA / DTAA Position

Under the FEMA(NDI) Rules, 2019, an OCI cardholder may acquire immovable property in India by purchase, with three clear exceptions: agricultural land, plantation property, and farmhouses. These three categories cannot be bought, irrespective of how the funds are arranged or how long you have held the OCI card since the scheme's expansion in 2005. The bar is on purchase only, which is a point most buyers miss.

The Rules treat acquisition by inheritance and by gift differently from purchase. An OCI may inherit any immovable property, including agricultural land, a plantation, or a farmhouse, from a person resident in India or from another non-resident who had acquired it in line with the foreign-exchange law in force at the time. A gift of property is similarly permitted where it comes from a person resident in India, an NRI, or an OCI, and again the agricultural-land restriction that applies to purchase does not block a genuine inheritance or a permitted gift.

Section 6 of FEMA, 1999 sets the general principle that capital-account transactions need either a specific permission or a general permission from the RBI, and the NDI Rules supply that general permission for the property classes described above. There is no ceiling on the number of residential or commercial units an OCI may buy, and no RBI approval is required for a compliant purchase as on 31 May 2026. The OCI's residential status under FEMA, not the colour of the passport, governs the account through which money moves.

Documentation matters as much as eligibility. A purchase must be supported by a registered sale deed stamped under the relevant state stamp-duty law, and the consideration must be routed through banking channels so the trail is auditable; cash purchases above Rs 20,000 fall foul of Section 269SS of the Income-tax Act, 1961. Where the OCI buys jointly, every co-owner must independently qualify under the FEMA(NDI) Rules, 2019, because a single resident-status defect can taint the whole acquisition.

A frequent confusion is the role of a Double Taxation Avoidance Agreement at the buying stage. A DTAA does not authorise or restrict the purchase itself; it only allocates taxing rights once income or a capital gain arises from the property. The India-USA treaty, in force from 12 September 1991, is a useful illustration: India retains the right to tax gains on Indian immovable property, and the treaty then governs how the United States gives relief, a point we return to under foreign-tax credit below.

Tax Treatment in India

Once the property is bought, Indian income tax follows ordinary rules with NRI-specific deduction mechanics layered on top. Rental income from an Indian property is taxable in India under the head "Income from house property", with the standard 30% deduction under Section 24(a) of the Income-tax Act, 1961 and a deduction for municipal taxes actually paid. You can model the net liability with our NRI rental income tax calculator before you file.

The bigger tax event is the eventual sale. Immovable property held for more than 24 months is a long-term capital asset, and the gain is taxed at 12.5% without indexation under the regime that took effect from 23 July 2024. Where the property was acquired before 23 July 2024, a grandfathering option lets a resident or non-resident elect the older 20% rate with indexation, choosing whichever produces the lower tax. Property sold within 24 months produces a short-term gain taxed at the seller's applicable slab rate.

An NRI seller is not left without shelter from the gain. Section 54 exempts a long-term gain on a residential house where the seller reinvests in one other residential house in India within the statutory window of one year before or two years after the sale, or constructs within three years. Section 54EC allows investment of up to Rs 50 lakh of the gain in NHAI or REC bonds within six months of transfer, with a five-year lock-in. Both reliefs are available to non-residents on the same terms as residents, and an OCI selling a single high-value flat can combine them to compress the taxable gain materially.

When an OCI or NRI sells, the buyer must deduct tax at source under Section 195, not the 1% Section 194-IA route that applies to resident sellers. The deduction is on the capital gain at the LTCG rate, plus the applicable surcharge and 4% health and education cess. Surcharge slabs run at 10% for income above Rs 50 lakh, 15% above Rs 1 crore, 25% above Rs 2 crore, and a maximum of 25% in the new regime; critically, surcharge on long-term capital gains is restricted to 15% under the Finance Act proviso, so a high-value sale does not attract the top slab on the gain itself.

Because Section 195 deduction is computed on the gross consideration unless the seller obtains relief, an NRI should apply for a lower or nil-deduction certificate under Section 197 so that TDS tracks the actual gain rather than the full sale value. The mechanics of Section 195 against Section 194-IA, and the Section 197 certificate, are set out in our companion analysis linked at the end of this piece.

Tax Treatment Abroad

The same gain that India taxes will usually be reportable in the OCI's country of residence, and this is where the treaty does real work. Under Article 24 of the India-USA DTAA, the United States, as the country of residence, gives a foreign-tax credit for the Indian tax paid on the Indian-source gain, which prevents the same income being taxed twice at full rates. Note that the treaty does not make the Indian gain exempt; India keeps its taxing right, and the residence country grants relief against its own liability.

To claim the credit in India where relief flows the other way, or to substantiate foreign tax paid, an Indian resident files Form 67 before the return due date, a compliance step we cover in our India-USA DTAA article. For an OCI who is a US tax resident, the credit is claimed on the US return under the Internal Revenue Code's foreign-tax-credit provisions, and the Indian challan plus Form 16A issued by the buyer serve as evidence of the Section 195 deduction.

Rates differ by income type even within one treaty. The India-USA DTAA caps tax on portfolio dividends at 15% and on interest at 15%, while capital gains on immovable property remain taxable in India at the domestic 12.5% long-term rate rather than a reduced treaty rate. An OCI resident in a no-tax jurisdiction such as the UAE may pay no second layer of tax abroad, but the Indian liability at 12.5% plus surcharge and 4% cess still stands and is unaffected by the absence of foreign tax.

Repatriation Mechanics

Moving sale proceeds out of India is governed by the source of the original purchase money and the type of bank account used. Funds for the purchase may come only from foreign inward remittance through normal banking channels, or from the balances of an NRE, NRO, or FCNR(B) account. An OCI cannot fund the purchase by borrowing from a resident against the property, and cannot lend to a resident on that security.

Where a residential property was bought with foreign inward remittance or out of NRE/FCNR funds, the sale proceeds of up to two such residential units may be repatriated in full after applicable Indian taxes, with no annual ceiling on those two units. Beyond that, and for all other property and for rental income, repatriation runs through the NRO route, which carries a cap of USD 1 million per financial year (1 April to 31 March) covering the aggregate of capital and current account remittances.

Operationally, repatriation from the NRO account requires Form 15CA and a chartered accountant's certificate in Form 15CB confirming that the applicable tax has been deducted or paid, as the authorised dealer bank will not remit without them. The repatriation calculator helps you sequence remittances against the USD 1 million limit, and the NRI tax calculator estimates the residual liability before you initiate the transfer. Residents, separately, remit under the Liberalised Remittance Scheme limit of USD 250,000 per financial year, which does not apply to an OCI repatriating Indian property proceeds.

FAQ

Can an OCI cardholder buy agricultural land in India?

No. Under the FEMA(NDI) Rules, 2019, an OCI cannot purchase agricultural land, plantation property, or a farmhouse. These can only be acquired by inheritance, or by a permitted gift from a resident, NRI, or OCI. There is no RBI approval route to purchase agricultural land as on 31 May 2026.

Does an OCI need RBI permission to buy a flat in Mumbai?

No specific approval is needed. The general permission in the FEMA(NDI) Rules, 2019 covers the purchase of residential and commercial property by an OCI, with no limit on the number of units, provided the money comes through inward remittance or NRE/NRO/FCNR balances.

What tax does an OCI pay when selling Indian property?

Long-term gains on property held over 24 months are taxed at 12.5% without indexation for acquisitions on or after 23 July 2024, or at 20% with indexation for property bought before that date if that is lower. Surcharge on the long-term gain is capped at 15%, plus 4% cess, and the buyer deducts TDS under Section 195.

Is the Indian capital gain exempt under a DTAA?

No. India retains the right to tax gains on Indian immovable property at the domestic 12.5% long-term rate. A treaty such as the India-USA DTAA, in force since 12 September 1991, gives relief through a foreign-tax credit under Article 24 in the country of residence, not an exemption in India.

How much can an OCI repatriate after selling property?

Proceeds of up to two residential units funded by NRE/FCNR money or inward remittance can be repatriated in full after tax. All other repatriation, including rental income and a third property, goes through the NRO route subject to a USD 1 million per financial year ceiling.

Can an OCI gift Indian property to a resident relative?

Yes. An OCI may gift residential or commercial property to a person resident in India, and the agricultural-land restriction that applies to purchase does not block a genuine gift. The transaction must still be reported and stamped under the relevant state stamp-duty law.

Does OCI status change my FEMA residential status?

No. OCI is a citizenship-linked immigration status from the Ministry of Home Affairs, while FEMA residency depends on your physical stay and intent under Section 2(v) of FEMA, 1999. The two are decided independently, and your FEMA status governs which bank accounts and repatriation routes you may use.