NRI Property Buying and Selling in India: Tax, FEMA and Compliance Guide (2025)
Everything an NRI needs to know about buying or selling property in India — FEMA rules on types of property, how to fund the purchase, capital gains tax on sale, TDS obligations, and repatriation of proceeds.
What Property Can NRIs Buy in India?
NRIs (Non-Resident Indians) and PIOs (Persons of Indian Origin) can freely purchase and hold: residential properties (flats, houses, villas), and commercial properties (shops, offices). NRIs CANNOT purchase: agricultural land, plantation property, or farmhouse (unless inherited or received as gift from a resident Indian). There is no limit on the number of properties an NRI can own.
How Can NRIs Fund Property Purchase?
NRIs can fund property purchase using: (1) NRE account funds — freely repatriable, (2) NRO account funds — repatriable up to USD 1 million per FY with CA certificate, (3) Foreign currency remittance — inward remittance through banking channels, (4) Home loan from Indian bank — NRIs can take home loans from banks and HFCs in India. All payments must be through banking channels — no cash payments allowed.
TDS on Purchase from NRI Seller (Buyer's Obligation)
When buying property from an NRI seller, the buyer MUST deduct TDS (Section 195 of the 1961 Act; the same obligation continues under the Income-tax Act, 2025 from 1 April 2026): 12.5% + surcharge + 4% cess for long-term capital gains (property held > 24 months, transfers on or after 23 July 2024) or 30% + surcharge + 4% cess for short-term capital gains. In practice this is deducted on the FULL sale value, not just the gain. The NRI seller can apply for a lower or nil deduction certificate — Form 128 from 1 April 2026 (formerly Form 13) — to reduce TDS to the actual tax on the gain. The buyer needs a TAN and reports the deduction in the non-resident TDS return — Form 144 from 1 April 2026 (formerly Form 27Q) — not Form 26QB/141, which covers purchases from residents.
Capital Gains Tax on NRI Property Sale
For transfers on or after 23 July 2024, an NRI pays LTCG on property at 12.5% without indexation. Unlike resident individuals and HUFs, NRIs do NOT get the option of 20% with indexation for property bought before 23 July 2024 — that grandfathering choice was given to residents only. STCG is taxed at slab rates. Section 54 exemption applies — if you reinvest LTCG in another residential property in India within the specified timeframe, the gain is exempt.
Repatriating Property Sale Proceeds
Repatriation limits and requirements: (1) If property was purchased from NRE/FCNR funds — sale proceeds fully repatriable. Repatriate up to original purchase cost + LTCG (after tax). (2) If property was purchased from NRO/local funds or inherited — USD 1 million per FY limit. Requires the remitter's declaration and a CA certificate — Forms 145 and 146 for remittances from 1 April 2026 (formerly Forms 15CA and 15CB). Must be routed through NRO account.
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