The NRI money guide: paying for property in India

Most of the friction in an NRI property purchase is not about the property. It is about the money: which account it comes from, what FEMA lets you do with it, how a loan is structured, what gets deducted at purchase, and how much you can take back out later. Get the money architecture right at the start and the rest of the deal is ordinary.

General information, not tax or investment advice. Rates and limits change; confirm the current position with a chartered accountant before you act.

NRE, NRO, FCNR: which account pays

As an NRI you cannot use a resident savings account. You operate some combination of three:

The practical rule: fund from NRE or by inward remittance wherever you can. That is what preserves your right to repatriate the same amount if you sell. Money paid from NRO out of locally held funds falls under the annual USD 1 million ceiling instead.

What FEMA allows, in one paragraph

An NRI or OCI may buy any number of residential or commercial properties in India without RBI approval, may not buy agricultural land, plantations, or farmhouses, must pay only through banking channels from India or by inward remittance, and may repatriate the sale proceeds of up to two residential properties subject to the conditions in the repatriation section. Rental income, after tax, is repatriable through the NRO route. That is the whole framework; everything else is detail underneath it.

Home loans for NRIs

Banks and housing finance companies lend to NRIs and OCIs. The shape of an NRI loan differs from a resident’s in a few predictable ways:

• Loan-to-value is usually capped around 75 to 80 percent of the property value, sometimes lower.
• Tenure is often shorter — many lenders cap NRI loans well below the 30 years a resident might get, and tie it to your age and visa type.
• Repayment must come from an NRE, NRO, or FCNR account, or by inward remittance. You cannot service the loan from abroad directly.
• A resident co-applicant or PoA holder is commonly required, and documentation is heavier: passport and visa, overseas employment contract, salary credits, overseas and Indian bank statements, and a credit report from your country of residence.

Interest rates are broadly in line with resident rates. Where NelaZo works with a loan partner, the introduction is optional and the referral fee, if any, is disclosed — it is never automatic.

The tax deducted when you buy

Tax gets withheld at the point of purchase, and who the seller is decides how much.

• Buying from a resident seller, price 50 lakh or more: you deduct 1 percent of the consideration under Section 194-IA and deposit it with Form 26QB. No TAN needed.
• Buying from an NRI seller: tax is deducted under Section 195 at the seller’s capital-gains rate — for a long-term gain, 12.5 percent plus surcharge and cess on transfers from 23 July 2024 — and it applies to the entire sale value, not just the gain, unless the seller hands you a lower-deduction certificate. You must obtain a TAN, deposit the tax, and file Form 27Q.

If you get the NRI-seller case wrong — deduct 1 percent when you should have deducted more — the shortfall, interest, and penalty are recovered from you, the buyer. This is one of the clearest places an advisor and a CA earn their fee. The selling-side mechanics are covered in selling property in India as an NRI.

The costs beyond the price

Budget the transaction cost as a separate line from the sticker price. It is paid up front and it is real money.

Getting money back out of India

Two routes, depending on where the money came from:

• The amount you originally brought in through NRE or FCNR or inward remittance, for up to two residential properties, can be repatriated on sale without hitting the annual cap — you need to show the original inward remittance.
• Everything else — gains above what you put in, rental income, proceeds funded from Indian money — goes through the NRO account, capped at USD 1 million per financial year, and requires a chartered accountant’s certificate on Form 15CB and a Form 15CA filing before the bank will remit.