NRI Property Rights in India — Purchase, Sale, Inheritance, Repatriation and FEMA Compliance (2026)

Property regulation distinguishes between residents and non-residents differently under FEMA vs Income Tax. Both definitions matter for property transactions.

FEMA definition (Section 2(v) FEMA 1999 + RBI Master Direction):

• 'Person resident in India' — a person who has resided in India for more than 182 days in the immediately preceding financial year, AND is in India for any purpose other than temporary employment / education / business abroad.
• 'Person resident outside India' (i.e. an NRI for FEMA purposes) — broadly, an Indian citizen or PIO who does NOT meet the above test.

Income Tax definition (Section 6 IT Act 1961):

• 'Resident' — present in India for 182 days OR more in the relevant financial year; OR 60 days in current + 365 days in 4 preceding years.
• 'Resident but not ordinarily resident' (RNOR) — meets the resident test above but has been non-resident in 9 of the preceding 10 years, or has been in India for fewer than 730 days in the preceding 7 years.
• 'Non-resident' (NR) — fails the resident tests.

The two definitions can give different results — a person can be FEMA-resident but Income-Tax-non-resident, or vice versa. This is the source of much practical confusion.

OCI / PIO:

• Overseas Citizen of India (OCI) — under the Citizenship Act 1955, an OCI is a foreign citizen of Indian origin granted OCI status. OCI cardholders are generally treated similarly to NRIs for property rules.
• Person of Indian Origin (PIO) — older category; the PIO card scheme has been merged with OCI since 2015.

Foreign citizens of non-Indian origin are treated more restrictively — they need RBI permission for any property acquisition.

Permitted purchases (FEMA + RBI Master Direction):

• Residential property — any number of residential properties anywhere in India (no limit on number).
• Commercial property — any number, anywhere in India.
• Payment must be from:
• NRE (Non-Resident External) account.
• NRO (Non-Resident Ordinary) account.
• FCNR (Foreign Currency Non-Resident) account.
• Inward remittance through normal banking channels.
• Or from sale proceeds of another property held in India.

Not permitted to purchase (FEMA):

• Agricultural land.
• Plantation property.
• Farmhouse.

The ban on agricultural land is the most-litigated. RBI has reiterated multiple times that an NRI / OCI cannot purchase agricultural land even with prior approval (Master Direction 2018, reaffirmed in 2023 update). Practical workaround: some NRIs purchase via Indian-resident family members; this is technically not transfer to NRI and is treated as resident's purchase. But if the actual beneficial ownership rests with the NRI, FEMA enforcement can follow.

Inheritance (Section 6(4) FEMA):

• NRI / OCI can inherit any immovable property in India — including agricultural land, plantations, farmhouses — by inheritance / succession / will from a resident or another NRI.
• This carve-out is widely used. An NRI cannot purchase agricultural land but can inherit it.
• Hold period: no restriction.
• Sale of inherited agricultural land: under FEMA, an NRI can sell agricultural land only to a resident Indian citizen. Cannot sell to another NRI / OCI / foreign national.

Sale of property by NRI / OCI:

• Any property (purchased + inherited) — can be sold to:
• Resident Indian citizen.
• Another NRI / OCI (for non-agricultural property).
• Agricultural property — only to resident Indian citizens.
• The sale must comply with state stamp duty + registration requirements normally.

When an NRI sells property in India, the buyer is statutorily obliged to deduct Tax at Source (TDS) before making payment. The rate depends on whether the gain is long-term or short-term.

For long-term capital gains (property held >24 months as of FY 2024-25):

• TDS rate: 20% on the entire sale consideration (not just the gain), plus applicable surcharge + cess. Effective rate: ~22-25% depending on consideration level.
• The IT Act provides for lower TDS if the seller obtains a certificate from the Assessing Officer (Section 197) showing the actual tax liability is lower (because of indexation benefit on long-term gains).
• Practical: many NRI sellers apply for Section 197 lower-TDS certificate before the sale closes. The Assessing Officer estimates the actual capital gain after indexation and issues a certificate at the appropriate rate — often 1-5% rather than 20%.

For short-term capital gains (property held ≤24 months):

• TDS rate: 30% on the entire sale consideration plus surcharge + cess. Effective: ~35-37%.
• Higher because short-term gains are taxed at slab rates which for NRIs can be high.

For resident-buyer sales by resident-seller — the rate is 1% TDS under Section 194-IA (for sales > ₹50 lakhs). NRI-seller transactions are NOT under Section 194-IA — they fall under Sections 194LB / 195 with higher rates.

TAN requirement for buyer — the buyer of NRI property must obtain a TAN (Tax Deduction Account Number) to deduct TDS at NRI rates. Many resident buyers are caught off-guard by this requirement. The buyer is criminally liable under Section 271C / 276B for failure.

Refund mechanism:

• TDS deducted at 20% is much higher than the actual tax on the indexed long-term gain.
• NRI seller files Income Tax Return in India claiming the actual liability.
• Excess TDS is refunded by the IT Department — typically 9-15 months.
• Working capital tie-up is the main cost.

Section 197 Lower-TDS Certificate Procedure:

1. NRI seller (or buyer on their behalf) applies to the Assessing Officer in Form 13.
2. Application is filed online at incometaxindia.gov.in.
3. The AO calculates likely tax (with indexation, exemption claims like Section 54 / 54F if applicable) and issues a certificate fixing TDS at the lower rate.
4. Processing time: 30-60 days. Plan the sale closing accordingly.

Sale proceeds from property in India by an NRI / OCI can be repatriated, subject to limits.

Repatriation framework (FEMA + RBI Master Direction):

Purchased property (out of foreign remittance / NRE / FCNR):

• Sale proceeds can be repatriated up to the original investment cost as documented in the inward remittance or NRE/FCNR debit.
• Capital gains can also be repatriated if taxes are paid.
• No annual limit, but proceeds of only two residential properties can be repatriated in a lifetime per individual (this was relaxed in some 2023 RBI directions, check current applicability).

Purchased property (out of NRO / Indian-source funds):

• Repatriation up to USD 1 million per financial year under the LRS (Liberalised Remittance Scheme equivalent for NRO funds).
• Need a Chartered Accountant's certificate (Form 15CA + 15CB) certifying that taxes have been paid.

Inherited property:

• Sale proceeds repatriable up to USD 1 million per financial year.
• Same Form 15CA / 15CB requirement.
• For estates with significant value, multi-year repatriation strategy is common.

Form 15CA / 15CB:

• Form 15CB is issued by an Indian Chartered Accountant — certifies the nature of payment and tax compliance.
• Form 15CA is filed by the remitter (typically the bank acting for the NRI) with the IT Department.
• Pre-requisite for foreign remittance of any amount above small thresholds.

Practical timeline for repatriation:

• Sale closing + TDS deducted: Day 1.
• IT return filing for the relevant year: by 31 July of the assessment year (or extended date).
• Refund of excess TDS: 9-15 months from return filing.
• 15CB / 15CA certificate: 2-4 weeks once tax position is settled.
• Bank remittance: 2-7 days post-certificate.

Total: typically 12-18 months for full proceeds (including excess TDS refund) to reach foreign account.