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NRI Services

NRI Property Investment Advisory

NRI Property

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Regulatory Framework

NRI and OCI acquisition of immovable property in India is governed by the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 ("NDI Rules"), issued under FEMA, 1999.

NRIs and OCIs may freely acquire any immovable property in India OTHER THAN agricultural land, plantation property, or a farmhouse — these three categories remain prohibited to non-resident acquisition under the NDI Rules, with the only routes to holding them being inheritance, or retention of property lawfully purchased while the individual was resident in India and subsequently became an NRI. A case-specific exception exists for RBI approval under Section 6(5) of FEMA, but such approvals are granted rarely and only on individual merits.

Sale of permitted (non-agricultural) property and repatriation of the proceeds out of India is capped at USD 1,000,000 per financial year from the NRO account — inclusive of all other eligible remittances by that individual in the same year — under Regulation 4 of the Foreign Exchange Management (Remittance of Assets) Regulations, 2016, and requires Form 15CA/15CB certification along with settlement of applicable capital gains tax before remittance. Where the original property purchase was funded through inward remittance or an NRE/FCNR(B) account, repatriation of that original principal amount is permitted through normal banking channels without the USD 1 million cap, subject to conditions.

We treat the agricultural-land prohibition and the USD 1 million repatriation ceiling as the two facts every NRI property client needs confirmed before a transaction is structured, since both carry direct enforceability consequences if missed.

Overview

NRI property investment advisory covers the acquisition, the financing and the management of property in India by non-residents under the Foreign Exchange Management Act 1999 and the Income-tax Act 1961 — the acquisition rights under the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2018, the remittance of the funds and the home loan financing, the taxation of the rental income and the capital gains under the Act, and the repatriation of the sale proceeds. The property is the largest single investment most NRIs make in India, and its structure decides the tax and the regulatory position of the whole investment.

The property investment is where the NRI's capital, the FEMA rules and the Indian tax meet. The acquisition must follow the 2018 Regulations, the funds must move through the proper channels, the rental income is taxed in India under the Act with the TDS, the capital gains on the sale are taxed with the NRI's specific provisions, and the repatriation of the proceeds follows the limits. Each layer is a decision the structure should have planned.

The cost of an unplanned property investment is the tax and the regulatory leak: the rental taxed without the deductions planned, the capital gains without the reinvestment exemptions of Sections 54 and 54EC, the repatriation blocked or the TDS not claimed — each a cost that the planning would have avoided.

This service is for NRIs investing in Indian property. We structure the acquisition under the 2018 Regulations, plan the financing and the remittances, manage the rental income and the TDS under the Act, plan the capital gains and the reinvestment exemptions of Sections 54 and 54EC, and handle the sale and the repatriation — so the property investment carries the structure and the tax plan it needs.

How It Works

  1. 1

    Investment & Rights Review

    We review the acquisition rights and the investment plan.

    Harun Raaj & Associates does this3-5 days
  2. 2

    Financing & Remittance Plan

    We structure the financing and the remittances under FEMA.

    Harun Raaj & Associates does this1-2 weeks
  3. 3

    Rental & TDS Management

    We manage the rental income and the TDS under the Act.

    Harun Raaj & Associates does thisAnnual
  4. 4

    Capital Gains Planning

    We plan the gains and the Sections 54 and 54EC exemptions.

    Harun Raaj & Associates does thisAs required
  5. 5

    Sale & Repatriation

    We handle the sale and the repatriation of the proceeds.

    Harun Raaj & Associates does thisAs required

Frequently Asked Questions

From an income tax standpoint, what is more tax-efficient for an NRI investor — purchasing property through a company or in their own name?
For an NRI purchasing Indian property personally, long-term capital gains (held over 24 months) are taxed at 12.5% under Section 112 of the Income Tax Act 1961 (without indexation, from AY 2025-26) and rental income is taxed under Section 22 with a 30% standard deduction and interest deduction under Section 24. If the property is purchased through an Indian company, the company is taxed on rental income at 25% (for companies with turnover below ₹400 crore) under Section 115BA of the Income Tax Act 1961, and capital gains are taxed at 25% for the company — which is higher than the individual LTCG rate of 12.5%. Additionally, distributing profits from the company to the NRI shareholder attracts TDS on dividends under Section 194 at 20% (or DTAA rate with Form 10F and TRC submitted). For a buy-hold-rent strategy, personal ownership is generally more tax-efficient; a company structure is justified only when the NRI plans multiple properties, requires limited liability, or intends to claim business-level deductions not available to individuals.
Can an NRI take a home loan in India to purchase property, and how are the loan repayments treated under FEMA?
Yes — under Rule 28(3) of the Foreign Exchange Management (Non-Debt Instruments) Rules 2019, an NRI may borrow in Indian rupees from an authorised dealer bank in India to purchase residential or commercial property in India, subject to LTV norms prescribed by the National Housing Bank (for HFCs) or RBI (for banks) — currently up to 90% LTV for loans up to ₹30 lakh, 80% for ₹30–75 lakh, and 75% for above ₹75 lakh per RBI guidelines. The loan must be repaid either by inward remittance from abroad or from funds held in the NRE or NRO account of the borrower — direct repayment in cash or through a third party's account is not permitted. Home loan interest paid to an Indian bank by an NRI is deductible under Section 24(b) of the Income Tax Act 1961 up to ₹2 lakh per year for self-occupied property and without limit for let-out property, subject to the TDS deduction and return-filing requirements. The NRI must disclose the loan and property in their Schedule AL (Assets and Liabilities) in the ITR if their income exceeds ₹50 lakh.
What FEMA rules govern the repatriation of rental income from investment property by an NRI?
Rental income earned by an NRI from Indian property is a 'current account transaction' under FEMA 1999 and can be repatriated to the NRI's overseas bank account after payment of applicable taxes in India, without any limit and without RBI approval, under Schedule 3 of the Foreign Exchange Management (Current Account Transactions) Rules 2000. The rental must first be credited to the NRI's NRO account (not directly to an NRE account, as NRO is the designated account for India-sourced income per FEMA Notification No. FEMA 5(R)/2016-RB). From the NRO account, current income — including rent — may be repatriated through the authorised dealer by submitting Form 15CA (Part B or Part C depending on amount) and, if the remittance exceeds ₹5 lakh, Form 15CB issued by a CA under Rule 37BB of the Income Tax Rules 1962. The bank will also require a self-certification that taxes have been deducted or paid, in line with RBI/FEMA requirements.
What are the stamp duty and registration obligations for an NRI purchasing property in India, and are there any FEMA implications?
Stamp duty and registration of property documents are governed by state-specific Stamp Duty Acts (e.g., Maharashtra Stamp Act 1958, Karnataka Stamp Act 1957) and the Registration Act 1908 — stamp duty rates range from 3% to 7% of the sale consideration or circle rate value (whichever is higher), varying by state, gender of buyer, and property type. For NRI buyers, the same stamp duty rates apply as for resident buyers — there is no additional duty for non-residents. However, if the NRI is unable to be physically present in India for document registration, they may execute a General Power of Attorney (GPA) in favour of a resident Indian, which must be notarised in the NRI's country of residence and apostilled, then adjudicated at the Indian consulate or apostille authority, before it is registered in India. FEMA does not impose any additional registration or filing requirement specifically for the property purchase deed beyond ensuring that the payment was made through permitted banking channels. The difference between the circle rate and actual sale price, if the circle rate is higher, is taxable in the buyer's hands under Section 56(2)(x) of the Income Tax Act 1961 for all buyers including NRIs.
If an NRI gifts a property to a resident Indian relative, what are the FEMA and income tax consequences?
An NRI may gift immovable property held in India to a resident Indian who is a 'relative' under Section 2(77) of the Companies Act 2013 (spouse, parents, siblings, children, and certain others) without any FEMA restriction or RBI approval, under Rule 28(5) of the Foreign Exchange Management (Non-Debt Instruments) Rules 2019. From the NRI's perspective, the gift of property is not a transfer for consideration and does not give rise to capital gains tax under Section 47(iii) of the Income Tax Act 1961, which exempts transfers by gift. The recipient resident Indian, however, must evaluate Section 56(2)(x) of the Income Tax Act 1961 — gifts of immovable property from relatives are exempt from this provision, so no income tax arises in the hands of a relative-recipient. If the donee later sells the property, the cost of acquisition for capital gains purposes is the original cost in the hands of the NRI donor, as provided by Section 49(1) of the Income Tax Act 1961, and the holding period includes the donor's holding period for determining long-term or short-term status.

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