Non-resident Indians (NRIs) and foreign citizens of Indian origin can purchase residential property in India using funds from their NRE accounts without obtaining specific RBI permission, according to the Master Circular issued by the Reserve Bank of India. As reported by FEMA provisions, prior permission is required for investment transactions in India, including immovable property acquisition, unless the RBI has granted general permission exemptions. The circular specifically states that NRI and PIO can buy any immovable property in India except agricultural land, plantation property or a farmhouse without requiring specific RBI approval. OCI cardholders can also purchase residential and commercial property in India, though they are prohibited from purchasing agricultural land, plantation property, or farmhouses.
When the purchase price exceeds ₹50 lakh, NRIs and PIOs must deduct tax at source at 1% of their respective share in the purchase cost, as reported by the RBI circular. Under Section 195 of the Income Tax Act, buyers purchasing property from NRIs must deduct 20% TDS on long-term capital gains (property held more than two years) or 30% on short-term capital gains. After paying TDS, net proceeds are credited to the NRI's NRO account. Repatriation of up to USD 1 million per financial year is permitted from NRO accounts after Form 15CA declaration and CA certificate filing with the authorized dealer bank. For OCI holders, repatriation of proceeds from agricultural land sales is prohibited.
The Double Taxation Avoidance Agreement (DTAA) allows NRIs to pay tax only in one country or at reduced rates, preventing double taxation on income earned in India and their country of residence. India has signed DTAA treaties with more than 100 countries including the US, UK, UAE, Canada, and Australia, making cross-border taxation less burdensome. Under DTAA, when NRIs earn income in India, TDS applicable would be according to the rates set in the Double Tax Avoidance Agreement with that country. For example, if an NRI earns ₹5 lakh annually from NRE fixed deposits in India and lives in the US, they can claim foreign tax credit in the US for taxes already paid in India. Tax relief can be claimed through deduction, exemption, or tax credit methods depending on the specific treaty provisions.
According to the RBI guidelines, no formalities are required to be complied with under FEMA law for acquiring a residential house in India for NRIs and PIOs. Property transactions are governed by the Transfer of Property Act, 1882 and the Registration Act, 1908. For movable assets like NRE/NRO bank accounts and shares, a Succession Certificate from the District Court is required through a registered Power of Attorney without the NRI traveling. For immovable property, mutation of revenue records (thandaper) in the heir's name is the process, with probate from the High Court required where a registered will exists. All communication is handled remotely through email, telephone, and video call, with offices responding within one working day.
