FEMA Rules for NRI Property: Purchase, Sale & Repatriation Guide

What are the FEMA rules for NRI property purchase?

Under FEMA (Foreign Exchange Management Act, 1999), NRIs can purchase residential and commercial property in India without requiring RBI permission. Agricultural land, plantation property, and farmhouses are restricted — NRIs cannot purchase these directly. All payments must be made through NRE, NRO, or FCNR bank accounts — no foreign currency or traveller’s cheques accepted.

These regulations are governed by FEMA Notification No. 21/2000-RB (Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018), as amended.

What property can NRIs buy?

Property Type	NRI Can Buy?	Notes
Residential property	Yes	No RBI permission needed
Commercial property	Yes	No RBI permission needed
Agricultural land	No	Cannot purchase directly
Farmhouse	No	Cannot purchase directly
Plantation property	No	Cannot purchase directly
Land (non-agricultural)	Yes	Residential/commercial plots allowed

Exception for agricultural land: NRIs can acquire agricultural land, farmhouse, or plantation property through inheritance or gift from a person resident in India. They can also inherit from another NRI. But they cannot purchase it through a sale transaction.

Joint ownership: NRIs can jointly purchase property with another NRI or PIO (Person of Indian Origin). Joint purchase with a resident Indian who is a close relative is also permitted.

Payment rules

All payments for property purchase must be made through Indian banking channels:

Payment Source	Allowed?
NRE account	Yes
NRO account	Yes
FCNR account	Yes
Foreign currency	No
Traveller’s cheques	No
Payment from abroad directly to seller	No

Important: The payment trail must be documented. Banks will require proof of the source of funds for property transactions. Keep all remittance receipts and bank statements.

TDS when NRIs sell property

NRI property sellers face significantly higher TDS (Tax Deducted at Source) compared to resident sellers:

Gain Type	Holding Period	TDS Rate (NRI)	TDS Rate (Resident)
Long-term capital gain	2+ years	12.5% of gain	1% of sale value
Short-term capital gain	Less than 2 years	30% of gain	1% of sale value

Note: The actual tax rate is on the capital gain (sale price minus indexed cost of acquisition), but TDS is often deducted on the entire sale consideration by buyers unfamiliar with the rules. This leads to excess TDS.

Lower TDS Certificate (Section 197)

NRIs can apply for a Lower TDS Certificate under Section 197 of the Income Tax Act. If your actual tax liability is lower than the default TDS rate, the Assessing Officer can issue a certificate allowing the buyer to deduct TDS at a lower rate. This avoids blocking your funds until you file for a refund.

Repatriation of sale proceeds

From NRE-funded purchases

If the property was purchased using NRE/FCNR funds, repatriation of sale proceeds is permitted:

• Up to 2 residential properties
• Repatriation amount cannot exceed the original foreign exchange brought in
• No cap on number of commercial properties

From NRO-funded or inherited property

• Cap: USD 1 million per financial year from NRO account
• Requires: Form 15CA (online) + Form 15CB (CA certificate)
• Covers: Up to 2 residential properties
• Documentation: Original purchase documents, TDS certificates, bank records

Form 15CA and 15CB

For any foreign remittance exceeding INR 5 lakh, you need:

• Form 15CA: Filed online by the remitter on the income tax portal
• Form 15CB: Certificate from a Chartered Accountant confirming tax compliance and treaty benefits (if applicable)

Banks will not process NRO repatriation without these forms.

Gift and inheritance of property

Gift

• NRI can receive a gift of any immovable property (including agricultural land) from a person resident in India who is a close relative under FEMA
• NRI can gift immovable property (residential/commercial only) to a person resident in India or another NRI/PIO
• Gift deed must be registered
• Gift tax implications apply per Income Tax Act (gifts above INR 50,000 from non-relatives are taxable)

Inheritance

• NRI can inherit any immovable property in India, including agricultural land
• No FEMA restrictions on inherited property
• Succession certificate or probate required for transfer of title
• Repatriation of sale proceeds of inherited property follows NRO rules (USD 1M/FY cap)

FEMA penalties for violations

Under Section 13 of FEMA, penalties for contravention:

• Penalty: Up to 3 times the amount involved in the violation, or up to INR 2 lakh where the amount is not quantifiable
• Continuing violation: INR 5,000 per day of continuing contravention
• Adjudication: By FEMA Adjudicating Authorities
• Appeal: To Appellate Tribunal, then High Court

Common violations:

• Purchasing agricultural land as an NRI
• Making payment in foreign currency for property
• Not redesignating bank accounts after changing residency status
• Exceeding repatriation limits without proper documentation

Checklist for NRI property buyers

Step	Action	Status
1	Confirm property type is allowed (residential/commercial)	☐
2	Arrange payment from NRE/NRO/FCNR account	☐
3	Verify title and legal due diligence	☐
4	Register property (stamp duty + registration fee)	☐
5	Ensure PAN card is available (mandatory for property transactions)	☐
6	Set up PoA if not present in India for registration	☐
7	Keep all payment receipts and bank records	☐
8	Report in annual income tax return	☐

How ZenoWealth helps

Our NRI services team handles end-to-end FEMA compliance for property transactions — from purchase eligibility verification and payment routing to TDS management, Lower TDS Certificate applications, and repatriation with Form 15CA/15CB. We also provide property due diligence through our ZenoRealty network.

Request a consultation to discuss your NRI property transaction.