Non-Resident Indians can purchase residential and commercial properties in India under Foreign Exchange Management Act (FEMA) and Reserve Bank of India (RBI) regulations. According to reports from Mint, NRIs are prohibited from acquiring agricultural land, plantation property, and farmhouses, though these properties can be acquired through inheritance or gift. The acquisition process involves payment through permitted banking channels using funds from inward remittances or NRE, NRO, or FCNR(B) accounts, with payments made through traveller's cheques or foreign currency notes not permitted under FEMA rules. Recent guidance emphasizes that NRIs can purchase residential and commercial properties freely, but agricultural land, farmhouses, and plantation properties require RBI special permission.
Before committing to any real estate deal, NRIs must run comprehensive due diligence checks covering 10 critical verification points. According to The Asset Syndicate, investors must verify that the seller has clear, marketable title with title documents going back at least 30 years - confirming no disputes, encumbrances, litigation, or pending dues. Essential documents include property tax receipts (latest), No-Objection Certificate (NOC) from the society or builder, and RERA registration for under-construction projects. For Dubai investments, verify the project is registered with RERA Dubai (part of DLD) to ensure statutory protections including delivery timelines, escrow mandates, and grievance redressal. A Specific, Registered Power of Attorney (POA) is mandatory in most states, executed in the NRI's country of residence, attested by the Indian Consulate/Embassy, and registered in India before use.
NRIs and Persons of Indian Origin can repatriate sale proceeds only if the property was originally acquired in compliance with foreign exchange laws. As reported by Mint, the repatriation amount cannot exceed the original purchase price, with NRE account funds capped at the foreign currency equivalent of the purchase amount. For residential properties, repatriation is restricted to a maximum of two properties per NRI, with authorized dealers permitting up to $1 million per financial year from NRO account balances for properties purchased using rupee funds. Agricultural land, plantation property, and farmhouses can only be transferred to Indian citizens permanently residing in the country. Recent guidance confirms that repatriation of principal is allowed for up to 2 residential properties (for NRE/foreign currency investments), while rental income from NRO account investments can be repatriated up to $1 million per financial year.
When NRIs sell property in India, capital gains are taxed under the 'capital gains' head, with taxation varying based on the property's purchase date. According to Mint, properties purchased before 23 July 2024 are taxed at 20% with indexation benefit, while properties purchased on or after this date are taxed at 12.5% without indexation benefit. TDS is deducted at 20% plus surcharge and cess on long-term capital gains and 30% on short-term capital gains, significantly higher than the 1% TDS applicable to resident sellers under Section 194-IA. As per recent reports, an NRI selling a ₹50 lakh flat can lose up to ₹15 lakh to TDS upfront - more than three years of average Indian salary. For Dubai investments, Dubai/UAE residents currently pay no personal income tax, though global compliance is evolving and verification with a tax advisor is recommended.
When buying from NRIs, buyers must verify the seller's residential status before the transaction, as they are legally responsible for deducting correct TDS or face penalties. According to recent reports, applying for a lower TDS certificate (Form 13) from the Income Tax department before the sale closes can significantly reduce upfront deductions on actual gains. All NRI property transactions must be routed through NRE or NRO accounts only, with chartered accountants filing Form 15CA/15CB before any repatriation to avoid FEMA violations. NRIs can claim TDS refund after filing an Indian ITR if actual capital gains tax is lower than the TDS already deducted, with many missing out on lakhs unclaimed every year. For Dubai investments, Dubai offers zero capital gains tax and zero rental income tax, with strong rental yields of 6-9% and USD-linked currency stability. However, real estate transactions create tax obligations in India AND potentially in the NRI's country of residence, with DTAA agreements between India and your resident country providing relief but requiring proactive claims.
