Buying and Selling Property in India by Non-Residents — Rules, Taxes & Process

Property continues to be one of the most popular investments for non-residents with ties to India. Whether you are planning to buy your first home, build a portfolio, or sell an existing property and remit the proceeds, the rules are set by the Foreign Exchange Management Act (FEMA) and administered by the Reserve Bank of India (RBI). This guide walks through what non-residents are allowed to do, how transactions must be structured, and the tax implications on both sides.

Who Is a "Non-Resident" for Property Rules?

For property transactions, three categories of people are treated similarly under FEMA:

• NRI (Non-Resident Indian) — an Indian citizen residing outside India
• OCI (Overseas Citizen of India) — a foreign citizen with an OCI card
• PIO (Person of Indian Origin) — now largely merged with the OCI category

Foreign nationals who are not of Indian origin cannot freely buy property in India and generally need prior RBI approval, except when they become residents of India under FEMA by staying more than 182 days in a financial year for a bona fide purpose.

Part 1 — Buying Property in India

What You Can Buy

NRIs and OCIs can freely purchase:

• Residential property (apartments, houses, villas)
• Commercial property (offices, shops, warehouses)
• Any number of residential or commercial units — there is no cap

What You Cannot Buy

Without specific RBI approval, non-residents are not permitted to purchase:

• Agricultural land
• Plantation property
• Farmhouses

These categories can still be inherited or gifted from a resident Indian, but cannot be bought outright.

How the Purchase Must Be Funded

All payments must flow through legal banking channels. Permitted sources are:

• NRE account (Non-Resident External)
• NRO account (Non-Resident Ordinary)
• FCNR account (Foreign Currency Non-Resident)
• Inward remittance from abroad through normal banking channels

Cash, traveller's cheques, or foreign currency notes are not acceptable modes of payment for property. Keep a clear paper trail — the source of funds becomes critical again when you eventually sell and want to repatriate the proceeds.

Home Loans for Non-Residents

Most Indian banks and housing finance companies lend to NRIs and OCIs:

• Loan-to-value: typically up to 80–85% of property value
• Tenure: up to 20–30 years, subject to age at maturity
• EMIs must be serviced through NRE, NRO, or FCNR accounts, or by inward remittance
• A resident Indian co-applicant is often required
• Interest rates and processing fees are broadly similar to resident loans

Step-by-Step Buying Process

1. Shortlist and inspect the property — either in person or via a trusted representative
2. Legal due diligence — engage an independent lawyer (not the builder's) to verify title, encumbrances, RERA registration, and local approvals
3. Obtain a PAN card — mandatory for the registration and for filing taxes
4. Execute the agreement to sell and pay the agreed token/advance
5. Arrange financing, if a loan is needed
6. Pay stamp duty and registration charges — these vary by state, typically 5–10% combined
7. Register the sale deed at the Sub-Registrar's office
8. Apply for mutation of the property in the local municipal records

Taxes Payable When Buying

• Stamp duty and registration charges — same as for resident buyers, set by the state
• GST — applicable on under-construction property; not applicable on ready-to-move-in resale property
• TDS at 1% — deducted by the buyer if the property value exceeds Rs. 50 lakh and the seller is a resident. If the seller is an NRI, much higher TDS rates apply (see Part 2)

Power of Attorney

Most non-residents are not physically present in India for every stage of the transaction. A Special Power of Attorney granted to a trusted family member or friend allows them to sign documents, register the sale deed, and handle the mutation on your behalf. The POA should be executed at an Indian embassy/consulate abroad, or — if executed in India — registered locally. Keep the scope narrow and specific.

Part 2 — Selling Property in India

Who You Can Sell To

• Residential and commercial property can be sold to any resident Indian, NRI, or OCI
• Agricultural land, plantations, or farmhouses (typically acquired by inheritance) can only be sold to a resident Indian

TDS When an NRI Sells

This is where the tax mechanics change sharply. When the seller is a non-resident, the buyer is legally obliged to deduct TDS on the entire sale consideration — not just on the gain:

• Long-term capital gains (property held over 24 months): 12.5% TDS (rate rationalised from 20% with effect from 23 July 2024; note that indexation benefit has been removed for most long-term property sales from that date, with a grandfathering option for property acquired before that date)
• Short-term capital gains (held 24 months or less): TDS at the applicable slab rate, effectively 30% plus surcharge and cess
• Plus surcharge (10%–37% depending on sale consideration) and 4% health & education cess

Because TDS is on the gross sale price, it is usually far higher than the actual tax liability on the gain — which is why most NRI sellers apply for a lower-deduction certificate.

Lower TDS Certificate (Form 13)

To prevent excess deduction, apply to your jurisdictional Assessing Officer for a certificate under Section 197:

1. File Form 13 online via the TRACES portal
2. Submit supporting documents: purchase deed, indexed cost computation, improvement costs, draft sale agreement
3. The AO reviews and issues a certificate specifying a lower TDS rate
4. Hand the certificate to the buyer before they make payment

Apply 4–6 weeks in advance — delays are common. Without this certificate, expect the buyer to deduct at the full rate and recover the excess only through your income tax return.

Calculating Capital Gains

For property acquired on or after 23 July 2024, or where you choose the new regime:

LTCG = Sale Price − Cost of Acquisition − Improvement Costs − Transfer Expenses
Tax  = 12.5% of LTCG (plus surcharge and cess)

For property acquired before 23 July 2024, a resident-style comparison may apply and you may be able to use either:

• The new 12.5% without indexation, or
• The old 20% with indexation — whichever is lower (check with a CA; NRIs historically did not get full indexation benefit in all cases)

Exemptions to Reduce Capital Gains Tax

Even after the 2024 changes, exemptions remain available:

• Section 54 — reinvest the long-term gain in another residential property in India, within 1 year before or 2 years after the sale (3 years for construction). Note the overall cap of Rs. 10 crore introduced in the Finance Act 2023.
• Section 54EC — invest up to Rs. 50 lakh in specified bonds (NHAI, REC, PFC, IRFC) within 6 months of sale, with a 5-year lock-in
• Section 54F — exemption when selling any long-term asset (not just property) and reinvesting in one residential house

Step-by-Step Selling Process

1. Ensure your PAN card is active and linked to Aadhaar (where applicable)
2. Get the property valued and arrange documentation — original sale deed, tax receipts, society NOC, encumbrance certificate
3. Apply for a Lower TDS Certificate if the expected gain is much lower than the sale price
4. Execute the sale deed and register it at the Sub-Registrar's office
5. The buyer deducts TDS and deposits it with the government; you receive Form 16A
6. File your Indian income tax return for the year of sale, claiming any exemptions and the TDS already paid
7. Apply to your bank to repatriate the proceeds

Repatriating the Sale Proceeds

The RBI allows repatriation in two scenarios:

Property originally bought with foreign-sourced funds: You can repatriate up to the original foreign exchange investment immediately on sale, capped at the sale proceeds of a maximum of two residential properties. The balance goes to your NRO account.

Property bought from rupee resources, inherited, or the balance after the above: Move the proceeds to your NRO account, and then use the standard NRO remittance facility of USD 1 million per financial year (across all NRO balances combined).

For any repatriation your bank will need:

• Form 15CB — certificate from a Chartered Accountant confirming that taxes have been paid
• Form 15CA — filed online by you before remittance
• Form A2 and the bank's foreign exchange application
• Copy of the sale deed and, where applicable, the will/legal heir certificate for inherited property

See the detailed guide on transferring sale proceeds abroad for the exact paperwork.

Common Pitfalls to Avoid

• Accepting cash for any part of the sale — it breaks the audit trail needed to repatriate later
• Using a generic POA when a narrowly-scoped one would do — broad POAs have been misused in the past
• Skipping the Lower TDS Certificate — you tie up lakhs of rupees that take years to refund
• Ignoring state-specific rules — e.g., some states restrict even residential plot sizes for NRIs, or require additional NOCs
• Not filing an Indian ITR in the year of sale — without a filed return, you cannot claim the TDS already deducted or the capital gains exemption
• Assuming old indexation rules still apply — the July 2024 changes meaningfully alter the calculation for most NRI sellers

Documents Checklist

For buying:

• Passport, visa, and OCI card (if applicable)
• PAN card
• Overseas address proof
• NRE/NRO/FCNR account statements and proof of remittance
• Power of Attorney (if not transacting in person)

For selling:

• Original sale/purchase deed of the property
• Property tax receipts and latest utility bills
• Encumbrance certificate
• Approved building plan and occupancy certificate (for apartments)
• Society/association NOC
• PAN card and Lower TDS Certificate (if obtained)
• For inherited property: will, probate, or legal heir/succession certificate and death certificate

Final Word

Buying and selling property in India as a non-resident is well-defined but paperwork-heavy. The rules are designed to be followed — shortcuts like hawala or cash almost always catch up with you at repatriation. Engage a qualified Chartered Accountant early, use an independent lawyer (not one nominated by the builder or buyer), and plan each transaction with the ultimate repatriation in mind from day one.