The NRI guide to owning property in India

An NRI or OCI may buy any number of residential and commercial properties in India without RBI permission, but not farmland, plantation property or a farmhouse. Payment must come through banking channels. The remittance trail you create on the way in is what later lets you take sale proceeds back out.

What an NRI may buy, and what is closed

The rule is simpler than most agents make it sound. If you hold an Indian passport and live abroad, or you hold an OCI card, you may buy residential and commercial property in India on the same footing as a resident. No RBI permission is needed for an ordinary flat, villa, housing plot, shop or office. You may own one or twenty.

Three categories are closed: agricultural land, plantation property and a farmhouse. This is where deals go wrong, because the restriction follows the character of the land rather than what the seller calls it. A plot sold as a "farm plot", "managed farmland" or a weekend estate is very often still agricultural land in the revenue records, and an NRI buying it is buying a transaction that can be questioned later. The conversion to non-agricultural use must have happened before you buy, and must appear in the records, not in a brochure. If a seller says conversion is "in process", you are being asked to carry a risk you cannot control from abroad.

The same three categories can be inherited. If you inherit farmland from a resident relative, you may hold it. What you may not do is add to it by purchase. Many NRIs hold inherited agricultural land and assume they can buy the adjoining field to square off the holding; they cannot. Citizens of a small set of neighbouring countries face separate restrictions regardless of residency status, and anyone in that position should take specific legal advice.

How the money must move in

FEMA cares less about what you buy than about how you pay. Consideration must move through normal banking channels. In practice that means one of four routes: a direct inward remittance from abroad, or a payment out of your NRE account, your NRO account, or an FCNR(B) deposit. What is not permitted is cash in foreign currency, traveller's cheques, or an arrangement where a relative in India pays and you settle with them overseas.

That last one is the single most expensive shortcut in NRI property. If your brother pays the builder from his resident account and you transfer him an equivalent sum in dirhams, the property has not been funded through banking channels from your own non-resident account. Years later, when you want to remit the proceeds, the bank will ask how the purchase was funded and you will have no document connecting your money to it. The money does not become un-remittable, but it stops being simple.

Choose the source account deliberately, because it governs the exit. Money from an NRE account or a fresh inward remittance is freely repatriable. Money from an NRO account is rupee money of Indian origin, and sending it out runs through the annual limit. Paying from the NRO account because it had a convenient balance is a decision with a consequence a decade out.

NRI home loans

Indian banks and housing finance companies lend to NRIs for residential property, and the product is close to the resident version with three differences. Repayment must come from an NRE or NRO account or by direct inward remittance, not from an overseas account paying the lender abroad. Tenures are usually shorter, because lenders assume a shorter earning runway in the foreign job. And documentation is heavier: a valid employment contract or appointment letter, overseas salary slips and bank statements, a copy of the visa or residence permit, passport pages, and a continuous address record abroad.

Because you cannot sit across the desk, most lenders ask for a power of attorney in favour of someone in India for loan formalities, and some insist on a resident co-applicant. Read what the POA authorises before signing — some drafts bundle the power to mortgage, to receive disbursement and to accept possession into one open-ended document.

Interest on a home loan is deductible against rental income under the house property rules, and the structure is the same for residents and non-residents. The monetary limits differ between a let-out and a self-occupied property and are revised from time to time, so confirm the limit for your assessment year. Our mortgage calculator shows the EMI and interest split; the deduction limit is a question for your CA.

Power of attorney: the document to get right

You will need somebody in India able to sign on your behalf. There are two kinds, and the difference is not a technicality.

A special power of attorney names the specific property and lists the specific acts — register this sale deed for this flat, accept possession, sign the loan documents for this loan. It expires in substance once those acts are done. A general power of attorney gives broad authority over your affairs or your property generally, including, if drafted loosely, the power to sell or mortgage.

For almost every NRI purchase, a special POA is the right instrument. A general POA handed to a relative is the mechanism behind a large share of Indian property fraud: the holder sells or mortgages the property, the registration goes through because the document on its face permits it, and the owner discovers the problem years later. If you must give a general POA, limit it by time, exclude the power to sell and mortgage expressly, and register the revocation when it is no longer needed.

Executing one from abroad

Two routes exist. You can execute the POA before the Indian embassy or consulate in your country of residence, where a consular officer attests your signature. Or, if your country is party to the Hague Apostille Convention, you can have the document notarised locally and then apostilled by the competent authority there. Either way the document then travels to India, where it must be stamped under the stamp law of the state in which the property lies, and adjudicated or registered where that state requires it. The stamp duty and whether registration is compulsory are state matters, so ask the sub-registrar's office in the relevant district rather than assuming the practice you heard about from a friend in another state.

Three practical points. Attach a photograph and sign across it where the consulate asks. Describe the property by survey number or municipal number, not by the builder's project name. And send the original by courier — many sub-registrars will not act on a scan.

Due diligence when you cannot walk the site

Distance removes the checks a local buyer makes without thinking. Appoint your own advocate for title — not the builder's panel lawyer, not the agent's friend — and ask for a written opinion covering the chain of title, the encumbrance position, approvals and whether the land was ever agricultural. For a project, confirm the state RERA registration yourself rather than accepting a number printed on a hoarding; our RERA check tool and the RERA guide explain what the filings reveal. The documents checklist is the list to hand your advocate.

Send someone to the site who has no stake in the sale. An independent inspection costs very little against the value of the transaction and catches what photographs hide: approach road, drainage, water source, distance to the nearest actual school rather than the nearest planned one. Resist booking from a virtual walkthrough during a two-week holiday. The pressure to close before the flight home is the condition under which most NRI buying mistakes are made.

Managing a property remotely

An empty flat in India is not a passive asset. It accumulates society dues, property tax, electricity minimum charges, and — if genuinely unattended — a risk of unauthorised occupation that is slow and expensive to reverse. Decide at the outset whether the property is to be let, kept for family use, or held empty, and put the corresponding arrangements in place.

You need a local representative, and the authority you give must be written and bounded. A manager should be able to collect rent into your NRO account, pay society dues and utilities, and arrange repairs up to a stated rupee limit without asking — nothing more. Rent should reach your account directly, not the manager's. Keep the authority to sign or end a tenancy with yourself.

Visit, or have someone you trust visit, once a year, between tenancies when the flat is empty and its condition is visible. Our guide to apartment society living covers the association side.

Tax on rental income

Rent from Indian property is Indian-source income and is taxable in India whether or not you are resident, and whether or not the money ever leaves your NRO account. The computation follows the house property rules: start with the annual value, subtract municipal taxes actually paid, take the statutory standard deduction on the balance, and subtract interest on money borrowed for the property. The standard deduction is a fixed percentage of the net annual value and is meant to cover repairs and collection, so you cannot claim actual repair spending on top of it. The percentage and the interest limits are set by statute and change; confirm the figures for your assessment year rather than working from a number on a website.

When a tenant pays rent to a non-resident landlord, the tenant is required to deduct tax before paying, at the rate applicable to payments to non-residents, and to deposit it against your PAN. The practical consequence is that tenants sometimes resist renting from an NRI because the obligation is theirs. Say so upfront, give them your PAN, and point them to their own CA; the deduction is credited to you and is recoverable through your return if it exceeds your liability. If the deducted tax is routinely more than your actual liability, you can apply for a lower deduction certificate from the assessing officer.

Filing an Indian return is worthwhile even when you expect no tax to pay: it is how deducted tax is refunded and how you build the record of declared income that supports a later remittance. Our rental ROI calculator works on net rent after costs.

Selling: the buyer's deduction and your gain

A sale by an NRI works differently from a resident sale in one structural respect. The buyer must deduct tax at source under section 195 on the consideration paid to a non-resident seller, and because section 195 deduction requires a TAN, the buyer has to obtain one. Resident buyers frequently do not know this and discover it at the worst moment. Raise it early, in writing, before the agreement to sell is drafted, and allow time for the TAN.

A buyer with no way to compute your gain will usually deduct on the gross consideration to be safe. The remedy is to apply to the assessing officer for a certificate determining the amount on which tax should be deducted, which the buyer can then rely on. Doing this before the sale is the difference between receiving most of your money at registration and waiting a year for a refund.

On the gain itself: holding period determines whether the gain is short or long term, long-term gains on immovable property are computed under a specific method and taxed at a specific rate, and exemptions exist where the proceeds are reinvested in Indian residential property or in notified bonds within prescribed windows. Both the rates and the method of computing long-term gains on property have been amended in recent years and the treatment can depend on when the property was acquired, so this is exactly the place not to rely on a general guide. Get the figures for your assessment year from a chartered accountant. Our capital gains calculator and net proceeds calculator let you model the shape of the outcome once you have the correct rate.

Taking the money out

Two separate rules govern the exit, and they are often confused.

The first is the two-property rule for residential sale proceeds. Proceeds from the sale of up to two residential properties may be repatriated, provided the property was acquired in accordance with FEMA and the purchase consideration was paid from foreign exchange received through banking channels or from an NRE or FCNR(B) account. This is where the remittance file earns its keep. Commercial property is not subject to the two-property cap in the same way, but the funding and compliance conditions still apply.

The second is the NRO route. Balances in an NRO account — rent collected, sale proceeds that do not qualify under the first rule, inherited money, rupee savings — may be remitted abroad subject to an overall limit of USD 1 million per financial year, against documentation. The paperwork is Form 15CA, filed by you, and Form 15CB, a certificate from a chartered accountant confirming the nature of the remittance and that tax has been paid or is not payable. Banks also ask for the sale deed, proof of the source of funds, evidence of tax payment and the acquisition documents.

Double taxation relief, in principle

India taxes income arising in India. Your country of residence may tax your worldwide income, including that Indian rent and that Indian capital gain. The double taxation avoidance agreement between India and that country is what stops the same income being taxed twice in full. The mechanism is usually credit: you pay the Indian tax, and your country of residence allows a credit for it against the tax it charges on the same income, capped at its own tax on that income. Some treaties use exemption for some categories instead.

Three things follow. Immovable property income is almost always taxable first where the property is — India — so filing in India is not optional. To claim treaty benefits you generally need a tax residency certificate from your country of residence. And the credit is capped at the other country's own tax on that income, so if India taxes it more heavily you may not recover the whole difference. Treaty terms differ country by country; read the treaty that applies to you rather than generalising from a UAE example to a UK situation.

The mistakes that cost most

Losing the remittance trail. The commonest and most expensive. A purchase funded through a relative's resident account, or paid partly in cash, or documented with bank advices that were thrown away after a laptop change, becomes a property you own but cannot cleanly monetise abroad. Nothing else on this list compares.

A loose general power of attorney. Given to a relative in a hurry, never revoked, and occasionally used. Keep it special, keep it time-bound, revoke it in writing and register the revocation.

• Buying farmland dressed as a plot. Check the revenue classification and the conversion order before any money moves.
• Buying on a visit. Two weeks of leave, a site tour with a sales team, a cheque before the flight. Separate the decision from the trip.
• Not telling the buyer about section 195. Deals collapse at registration because the buyer has no TAN. Flag it when you list.
• Leaving the flat unattended and unlet. Dues accumulate and an unoccupied flat attracts problems a civil court resolves slowly.
• Not filing an Indian return. Deducted tax is simply gone, and the record that supports your remittance does not exist.
• Treating one state's rules as national. Stamp duty, POA registration and tenancy law are state subjects. Hyderabad practice is not Mumbai practice.

If you are at the start of this, read the buying process guide for the sequence a purchase actually follows, where to buy for how to think about location, and investment returns for what Indian residential property has and has not delivered. Builder track record matters more than brochure quality — our builder reviews and project database are the starting point for that.