The Indian real estate market has long been a magnet for Non-Resident Indians (NRIs) seeking investment opportunities or a home in their native country. In 2021, NRI investments in Indian real estate reached approximately $13.1 billion, underscoring the community's significant contribution to the sector's growth. The industry's market size is projected to soar from $200 billion in 2021 to $1 trillion by 2030, reflecting its significant expansion.

For NRIs contemplating buying or selling property in India, navigating the legal frameworks, tax implications, and procedural intricacies is crucial. This guide aims to provide a comprehensive overview of the essential aspects of NRI property transactions, equipping you with the knowledge to make informed decisions in the dynamic Indian real estate industry.

Types of Properties NRIs Can Buy in India

As an NRI, you have multiple options for investing in Indian real estate. However, some restrictions apply based on the type of property. Here’s what you need to know:

1. Residential Property: Houses, Apartments, Villas

• NRIs can freely buy and own residential properties in India.

• This includes flats, apartments, villas, and standalone houses in any part of the country.

• There are no restrictions on the number of properties an NRI can purchase.

2. Commercial Property: Office Spaces, Retail Outlets

• NRIs can invest in office spaces, shops, retail outlets, and other commercial real estate.

• These properties can be rented out, leased, or sold without additional permission.

• Investing in commercial real estate can generate higher rental returns compared to residential properties.

3. Agricultural Land: Restrictions and Criteria

• NRIs cannot purchase agricultural land, farmhouses, or plantation properties.

• These can only be acquired through inheritance or as a gift from a resident Indian.

• Special permission from the Reserve Bank of India (RBI) is required for any exceptions.

Once you’ve decided on the type of property you want to buy, the next step is ensuring you have the necessary documentation. From identity proof to financial arrangements, having everything ready can make the process seamless.

Requirements and Documentation for Buying Property

If you’re an NRI planning to buy property in India, having the right documents and financial setup is essential. Here’s what you need:

1. Required Documents

• PAN Card – Mandatory for property transactions and tax filings.

• Passport – Serves as primary identity proof.

• Valid Visa & OCI Card (if applicable) – Confirms your NRI status for legal purposes.

2. Power of Attorney for Seamless Transactions

• If you can’t be physically present in India, granting Power of Attorney (PoA) to a trusted person allows them to sign documents and complete legal formalities on your behalf.

• PoA should be registered and notarized as per Indian legal requirements.

• Helps with registration, bank loans, and property management remotely.

3. NRE and NRO Accounts for Financial Management

• NRE Account – Used to repatriate funds from India to your resident country without tax deductions.

• NRO Account – Used to manage income earned in India, such as rent, which is subject to tax.

• All property transactions, including payments and repatriations, must be routed through Indian banking channels.

These documents and accounts ensure a smooth and hassle-free property-purchase process.

Purchasing property comes with financial commitments beyond just the sale price. Understanding the tax obligations including stamp duty, registration charges, and capital gains tax, can help you plan your investment effectively.

Tax Implications for NRIs Buying Property

When purchasing property in India, NRIs must account for various taxes that impact the overall cost and future returns. Here's what you need to know:

1. Stamp Duty & Registration Fees

• Stamp duty is a state-specific charge, typically ranging from 5% to 7% of the property value.

• Registration fees are generally 1% of the property value but may vary by state.

• These charges must be paid upfront at the time of property registration.

2. Capital Gains Tax 

If you sell the property later, capital gains tax applies:

• Long-term capital gains (LTCG): 20% tax if the property is held for more than two years.

• Short-term capital gains (STCG): Taxed at slab rates if sold within two years.

• You can reduce LTCG tax liability by reinvesting in another residential property or specific bonds under Section 54 or 54EC.

3. Tax Deducted at Source (TDS) Rates

• When an NRI buys a property, 1% TDS applies if the value exceeds ₹50 lakh.

• When an NRI sells a property, the buyer must deduct:

  • 20% TDS for LTCG (plus surcharge and cess).

  • 30% TDS for STCG if sold within two years.

• NRIs can apply for a lower TDS certificate from the Income Tax Department to reduce upfront tax deductions.

Now that you know the tax implications, let’s break down the property-buying process into simple steps. Whether you’re buying remotely or in person, following these guidelines ensures a smooth transaction.

Step-by-Step Guide to Buying Property

Buying property in India as an NRI involves several steps, from understanding eligibility to finalizing the sale agreement. Here’s a simplified breakdown:

Step 1: Determine Eligibility and Property Type

• Under RBI guidelines, ensure you qualify as an NRI or OCI (Overseas Citizen of India).

• Choose between residential or commercial properties—agricultural land purchase is restricted.

• Research property laws, market trends, and stamp duty rates in your preferred location.

Step 2: Financing and Document Preparation

• Open an NRE/NRO account to manage transactions.

• If taking a loan, apply through an Indian bank offering NRI home loans (loan tenure and interest rates vary).

• Gather essential documents like PAN Card, Passport, Visa, and OCI Card (if applicable).

• Assign Power of Attorney (PoA) to a trusted representative in India if handling the transaction remotely.

Step 3: Verification and Signing Sale Agreement

• Verify title deeds, past ownership records, and encumbrance certificates to ensure a clear title.

• Conduct legal due diligence with a real estate lawyer to avoid disputes.

• Pay the booking amount and sign the sale agreement, ensuring compliance with RERA regulations in applicable states.

Buying property in India as an NRI? BCD India provides end-to-end assistance to make your purchase smooth and hassle-free. 

If you’re an NRI looking to sell property in India, knowing the legal requirements, tax obligations, and repatriation rules is crucial. Here’s what you should keep in mind before listing your property for sale.

Also Read: Real Estate Regulatory Authorities Development in India

NRI Selling Property in India

Selling property in India as an NRI involves specific conditions, tax considerations, and repatriation rules. Here’s what you need to know:

1. Conditions for Sale and Eligible Buyers

• NRIs can sell residential and commercial properties to Indian residents, other NRIs, or OCI cardholders.

• Agricultural land, farmhouses, and plantations can only be sold to Indian residents, not to other NRIs or OCIs.

• Ensure the property has clear title ownership and is free from legal disputes before listing it for sale.

2. Repatriation of Sale Proceeds

• Funds from the sale must be credited to an NRO (Non-Resident Ordinary) account.

• NRIs can repatriate up to $1 million per financial year from NRO accounts, subject to tax compliance.

• For repatriation beyond this limit, RBI permission is required.

• Documentary proof like sale deed, tax clearance certificate, and bank statements is necessary for repatriation approval.

3. Tax Implications on Sale

NRIs selling property in India are subject to capital gains tax, with the rate depending on the holding period. Tax deductions and exemptions may apply under specific conditions.

• Capital Gains Tax:

  • Long-term (held for more than 2 years): 20% tax (plus surcharge and cess).

  • Short-term (held for less than 2 years): Taxed at applicable income tax slab rates.

• TDS (Tax Deducted at Source): The buyer must deduct:

  • 20% TDS for LTCG.

  • 30% TDS for STCG.

• NRIs can claim capital gains tax exemptions under Section 54 (buying another residential property) or 54EC (investing in capital gains bonds).

After selling your property, transferring the sale proceeds to your resident country involves compliance with FEMA and RBI regulations. Understanding the rules and procedures will help you avoid delays or legal complications.

Transfer of Funds for NRIs

When buying or selling property in India, NRIs must follow Foreign Exchange Management Act (FEMA) regulations for transferring funds internationally. Here’s how it works:

1. Conditions Under FEMA for Buying and Selling

• NRIs can freely repatriate funds used for property purchases if the purchase was made using foreign exchange via NRE or FCNR accounts.

• Repatriation is subject to restrictions if the property was bought using rupee funds from an NRO account.

• Sale proceeds of residential and commercial properties can be repatriated, but agricultural land, farmhouses, or plantations require special RBI approval.

2. Limitations and Procedures for Fund Transfer

• Required documents for repatriation:

  • Form 15CA & 15CB (tax clearance forms)

  • Sale deed & bank statements

  • Tax payment proof (if applicable)

• The remittance must be done through an authorized Indian bank, following RBI guidelines.

3. Compliance with Foreign Exchange Laws

• Transactions must comply with RBI and FEMA rules to avoid penalties.

• Funds must be routed through NRE/NRO/FCNR accounts, with proper documentation for tax clearance.

• For more significant repatriation amounts, special RBI approval is needed.

Understanding these rules ensures a smooth and legally compliant transfer of funds. 

Conclusion

Navigating the Indian real estate market as an NRI requires a clear understanding of the buying and selling process, tax implications, and repatriation rules. With the right financial planning and legal compliance, you can maximize returns and avoid unnecessary hurdles. Whether you're investing in a new property or selling an existing one, staying informed is key to making smart, profitable decisions. 

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