NRI Property Purchase and Sale in India: TDS, FEMA and Repatriation Guide 2026

Buying or selling property in India while living abroad involves more than selecting a home and agreeing on a price. A Non-Resident Indian must consider foreign-exchange rules, title verification, taxation, TDS, banking channels and repatriation of sale proceeds.

The Income-tax Act, 2025 applies from April 1, 2026, while FEMA-related requirements continue to govern how non-residents acquire property and move money across borders. Because tax and state property rules can change, every transaction should be checked against the law applicable on its actual date.

What Property Can an NRI Purchase?

Under the general foreign-exchange framework, an NRI may purchase residential or commercial property in India without obtaining case-by-case approval from the Reserve Bank of India.

Agricultural land, plantation property and farmhouses are treated differently. An NRI generally cannot purchase these categories under the automatic route. Such property may be acquired through inheritance in eligible circumstances, but acquisition and transfer conditions require careful verification.

These restrictions depend on the legal classification of the land, not simply how it is advertised. A property described as a weekend home could still be recorded as agricultural land. The revenue records and permitted land use should therefore be examined before any payment is made.

The RBI’s official guidance explains the broad rules for NRI acquisition and transfer of immovable property.

Use Permitted Banking Channels

An NRI may generally fund an eligible purchase through inward remittance using normal banking channels or through permitted balances in NRE, NRO or FCNR(B) accounts, subject to applicable rules.

Payment should not be made through foreign-currency notes, traveller’s cheques or an undocumented private arrangement. A complete banking trail is important for tax records, future sale and repatriation.

The buyer should preserve remittance statements, bank advices, loan documents, the registered deed and evidence showing the source of funds. Reconstructing these records several years later can be difficult.

Verify the Property Before Buying

Legal due diligence should be completed before paying a substantial advance. Important checks may include:

• Ownership and chain of title
• Encumbrances, mortgages or pending disputes
• Approved building and layout plans
• Land-use classification
• Property-tax and utility dues
• Occupancy or completion certificates
• Society or association records
• RERA registration, where applicable

RERA registration does not replace independent title verification. A qualified property lawyer should examine the documents and local registration requirements.

The sale agreement should clearly record the payment schedule, possession date, responsibility for taxes and charges, refund conditions and consequences of default.

Understand TDS When an NRI Sells Property

TDS is one of the most commonly misunderstood parts of an NRI property sale. A payment to a non-resident seller is generally governed by the non-resident withholding provisions rather than the standard resident-property TDS process.

The buyer may need to obtain a Tax Deduction and Collection Account Number, deduct tax at the applicable rate, deposit it with the government and complete the prescribed return and certificate requirements.

For eligible long-term capital gains, the statutory base rate may be 12.5%, with surcharge and Health and Education Cess potentially increasing the effective rate. The official Income Tax Department TDS table provides current rates.

However, the buyer should not independently calculate the seller’s gain and deduct tax only on that amount. In the absence of an appropriate certificate or determination, withholding may be applied to the payment or gross sale consideration under the applicable mechanism.

Where the expected tax on the actual gain is lower, the seller may explore applying to the Income Tax Department for a lower or nil-deduction certificate. This process should be started well before the payment date.

The seller can claim eligible credit and seek a refund through the income-tax return if excess tax has been withheld, subject to assessment and compliance.

Holding Period and Capital Gains

The holding period affects whether a property gain is classified as short-term or long-term. The tax calculation may also depend on acquisition cost, improvement expenses, transfer costs, inheritance history and exemptions claimed.

For inherited property, earlier ownership records and the previous owner’s acquisition documents can become important. A valuation may be required where reliable historical cost information is unavailable.

Tax-saving provisions may be available in certain circumstances, but their conditions, timelines and investment limits must be examined individually. A tax exemption should never be assumed merely because another property is being purchased.

Repatriating the Sale Proceeds

Selling a property in India does not mean that the entire amount can automatically be transferred abroad immediately.

Repatriation depends on how the property was acquired, how the purchase was funded and whether Indian taxes have been paid. RBI guidance permits eligible remittance from NRO balances and qualifying asset-sale proceeds up to USD 1 million per financial year, together with other eligible assets, subject to conditions and the authorised dealer bank’s documentation requirements.

Different provisions may apply where residential property was originally purchased using foreign exchange remitted through banking channels. Repatriation under that route is generally linked to the foreign-exchange amount originally used and is subject to prescribed conditions, including restrictions concerning the number of residential properties.

Banks may request the sale deed, original purchase records, proof of taxes, remittance evidence and prescribed tax forms or professional certificates. The relevant RBI remittance guidance should be checked before structuring the transaction.

Using a Power of Attorney

An NRI who cannot travel to India may give a limited Power of Attorney to a trusted representative. The document should specify the exact actions permitted, such as dealing with authorities, completing registration or receiving documents.

A PoA executed outside India may require notarisation, apostille or consular authentication, followed by stamping or adjudication in the relevant Indian state. A generic internet template may not satisfy the local registrar or protect the owner adequately.

A Power of Attorney authorises another person to act; it does not by itself transfer property ownership.

Keep the Transaction Verifiable

Both buyer and seller should maintain copies of PAN records, passports, deeds, bank statements, tax receipts, TDS documents, society papers and correspondence. Payments and material terms should appear in the registered documentation.

The safest approach is to plan the legal, banking and tax structure before signing the agreement. Correcting a defective transaction after registration can be much more difficult.

Disclaimer: This article provides general educational information and is not legal, tax or foreign-exchange advice. FEMA, income-tax, stamp-duty and registration requirements depend on individual facts and may change. Consult a qualified property lawyer, Chartered Accountant and authorised dealer bank before completing an NRI property transaction.