New guidance highlights eligibility, FEMA compliance and tax obligations for overseas Indian homebuyers
Non-Resident Indians (NRIs) planning to purchase property in India are being advised to understand the legal, financial and tax implications before making investment decisions, as demand for residential real estate among overseas buyers continues to grow.
Under the Foreign Exchange Management Act (FEMA), NRIs and Overseas Citizens of India (OCIs) are permitted to buy residential and commercial properties in India without requiring prior approval from the Reserve Bank of India. However, they are not allowed to purchase agricultural land, plantation property or farmhouses, except in specific cases such as inheritance. Property payments must be made through approved banking channels, including NRE, NRO or FCNR accounts, in line with FEMA regulations.
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Banks and housing finance companies continue to offer home loans to eligible NRIs, subject to income verification, documentation and credit assessment
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Many overseas buyers also appoint a trusted representative through a Power of Attorney to complete documentation and registration when they are unable to travel to India
Taxation remains a key consideration. Rental income earned from Indian property is taxable in India, while profits from a future sale may attract capital gains tax depending on the holding period. Buyers and sellers must also comply with tax deduction at source (TDS) provisions and filing requirements. Experts recommend seeking professional tax advice, particularly where Double Taxation Avoidance Agreements may apply.
The guidance also notes that NRIs are currently not eligible for benefits under the Pradhan Mantri Awas Yojana (PMAY). Investors are encouraged to carry out due diligence on property titles, approvals, developer credentials and local market conditions before completing a purchase.
Recent Union Budget proposals are also expected to simplify compliance in certain NRI property transactions by allowing resident buyers to use their Permanent Account Number (PAN), instead of obtaining a separate TAN, for TDS reporting from October 2026, subject to the proposed provisions taking effect.
