How NRIs Can Buy and Sell Property in India – TDS, Tax & Legal Rules

Why Property is a Key Asset for NRIs

Property in India means more than numbers on your investment portfolio. You get emotional connections plus financial opportunities that make real estate uniquely valuable.

Emotional and financial value of Indian property

Buying property in India helps you stay connected to your roots. Owning a home in your homeland gives you a physical anchor to your cultural identity and heritage.

This emotional connection drives most property decisions. It matters especially if you have strong ties to your native regions.

Here's what makes Indian real estate financially attractive:

• Consistent growth potential in emerging hotspots beyond metros • Cities like Pune, Kochi, Jaipur, and Hyderabad show strong appreciation
• Rental income provides steady passive income to offset mortgage payments
• Currency advantage for NRIs earning in dollars, euros, or dirhams

The weakening rupee increases your purchasing power. You can acquire more square footage for your foreign currency. This makes Indian real estate accessible compared to Western property markets.

Common reasons NRIs invest in real estate

Your motivations go beyond emotional ties and financial returns. Here's what drives most NRI property investments:

Future settlement plans:

Nearly two-thirds of NRIs want to settle in India after retirement. You'll want to secure property years in advance. About 90% of NRIs are ready to invest in senior housing.

Creating a family legacy:

Property lets you pass down material value and cultural connections to future generations. This matters especially if you're raising children abroad who need connections to their heritage.

Portfolio diversification:

Real estate provides stability through its tangible nature and appreciation potential. The Indian market stayed resilient during global economic downturns.

Hometown connections:

More than 75% of NRIs prefer investing in their hometowns over unfamiliar locations. This extends beyond major metros to tier-2 cities like Vadodara, Nashik, and Ghaziabad.

Contingency planning:

Tightening visa regulations in the US, UK, and Australia prompt many NRIs to create backup plans. Property investment serves as security against stringent immigration policies.

The Indian real estate sector has evolved for NRI investors. Developers now design projects specifically for NRI buyers. They use high-quality materials, superior fixtures, and modern amenities that match global standards.

Online platforms offer 3D virtual tours and specialized services. You can make informed decisions despite geographical distances.

Your investment in Indian real estate strengthens cultural bonds while building financial security for the future.

Buying Property in India as an NRI

Property purchase rules for NRIs are straightforward once you understand the eligibility requirements, documentation needs, and financing options.

What properties can you buy as an NRI?

Under FEMA, you're defined as an NRI if you're an Indian citizen living outside India for work, business, or other reasons for an indefinite period. You can freely buy residential and commercial properties without RBI permission.

You can invest in:

• Residential properties (apartments, houses, villas)
• Commercial properties (offices, shops, retail spaces)
• Industrial properties

You cannot buy agricultural land, farmhouses, or plantation properties unless you inherit them or get special RBI approval. This restriction includes farmhouses attached to agricultural land.

Which documents do you need?

You must have a valid Indian passport. Foreign passport holders need a PIO card or OCI card. A PAN card is absolutely essential for all property transactions.

If you're abroad during purchase, get a Power of Attorney (POA). This document lets a trusted person in India handle the transaction for you. Sign the POA before a consular officer or notary in your country, then get it attested.

The purchase process follows these steps: engage a local solicitor and notary, find a realtor, arrange POA if needed, locate property, conduct due diligence, sign sale deed, and register the property.

How do payments and loans work?

Pay for properties in Indian Rupees through normal banking channels or NRE,NRO,FCNR accounts. You cannot use foreign currency notes or traveler's cheques.

Major banks like SBI, HDFC, ICICI, Axis Bank, and Federal Bank offer specialized home loans for NRIs. These banks typically offer loans up to 80% of property value with 20-year tenures. You need stable overseas employment and must be aged 18-55 years.

Loan documentation includes your Indian passport or OCI/PIO card, overseas address proof, salary certificates, tax returns, and bank statements. Repay loans through NRE/NRO accounts using inward remittance.

You get the same tax benefits as resident Indians - deductions up to ₹1.5 lakh on loan principal under Section 80C and up to ₹2 lakh on interest payments for vacant homes.

Consult a real estate advocate before finalizing your purchase to ensure smooth transactions and regulatory compliance.

Selling Property in India as an NRI

Selling property from abroad involves specific procedures and compliance requirements. You need to understand who can buy from you, how to manage the sale remotely, and the legal steps required.

Who can buy from an NRI?

You can sell residential and commercial properties to Indian residents, other NRIs, or Overseas Citizens of India (OCIs) without restrictions. This gives you a wider buyer pool and potentially better prices.

Here's the catch: If you own agricultural land, farmhouses, or plantation properties, you can only sell to Indian residents. This applies even if you inherited these properties.

How do you sell property from thousands of miles away?

Selling property remotely requires systematic planning. Follow these steps:

1. Execute a Power of Attorney (POA) in your current country
2. Get POA notarized and attested by the Indian consulate or embassy
3. Register the POA at Sub-Registrar's office in India within three months
4. Gather required documents:

• Original title deed or sale deed
• PAN card
• Passport and OCI/PIO card (if applicable)
• Encumbrance certificate
• Municipal approvals
• Tax forms (15CA/15CB for repatriation)

1. Draft Agreement to Sell once buyer is confirmed
2. Ensure buyer deducts TDS - 30% for properties held under two years, 12.5% for longer holdings

What you need to know about Power of Attorney

Your POA acts as your legal proxy in India. The document must clearly specify powers for property sale, document signing, and fund collection.

Choose the right POA type:

• Special POA: Limited to specific transactions
• General POA: Broader powers for multiple activities
• Durable POA: Valid for your lifetime unless canceled

POA processes vary by country. Australia requires notarization with two witnesses plus apostille from Department of Foreign Affairs. The US requires apostille from Secretary of State after notarization.

Critical warning: Choose your POA holder carefully. They'll have significant authority over your transaction. Specify exact powers for sale, document signing, fund collection, and dispute handling.

Always register your POA in India for legal protection against fraud.

Understanding TDS on NRI Property Sale

Tax Deducted at Source (TDS) works as advance tax payment when you sell property in India. The tax authorities collect this upfront during the property transfer.

TDS rates and calculation

Your TDS rates as an NRI are much higher than what resident Indians pay. Properties held over 24 months (long-term) face 20% TDS plus surcharge and cess on capital gains. Properties sold within 24 months (short-term) attract 30% TDS plus surcharge and cess.

Buyer's responsibility in TDS deduction

The buyer handles TDS deduction, not you. When someone buys your property, they must:

1. Get a Tax Deduction and Collection Account Number (TAN) before deducting TDS
2. Deduct the correct percentage when paying you
3. Deposit this amount with Income Tax Department within 7 days of month-end
4. File TDS returns using Form 27Q (not Form 26QB used for residents)
5. Give you Form 16A as deduction proof

Tell your buyer about your NRI status upfront. If they don't know, they might apply wrong TDS rates (1% instead of 20% or 30%), creating tax complications.

Avoiding TDS errors

Common TDS mistakes cost both parties:

• Wrong property holding period assessment • Deducting TDS on full sale value instead of capital gains • Using wrong forms (Form 26QB instead of Form 27Q) • Not getting TAN before transaction

When buyers mess up TDS, they pay penalties equal to the missed amount plus interest. Wrong deductions also block your ability to send money to foreign accounts.

Apply for a Lower Tax Deduction Certificate (LDC) through Form 13 before selling. This certificate lets buyers deduct TDS at reduced or nil rates if you show lower tax liability. Include expected capital gains and total India income for the year.

Get Form 16A from the buyer within 15 days of their TDS return filing. Match this with Form 26AS to confirm accurate tax credits.

Reducing TDS Burden Legally

You can cut your TDS burden legally when selling property in India as an NRI. Your tax liability stays the same, but you reduce the upfront cash outflow through proper planning and documentation.

Applying for lower/NIL TDS certificate

Section 197 of the Income Tax Act lets you apply for a Lower Deduction Certificate (LDC) or NIL TDS certificate before your property sale. This certificate allows the buyer to deduct tax based on your actual tax liability rather than the entire sale value.

Here's how to get this certificate:

1. Register on the TRACES portal and submit Form 13 online to the Jurisdictional Assessing Officer (AO)
2. Show your lower tax burden by providing capital gains calculation and estimated total Indian income for the current year
3. Apply 30-40 days before the sale, as processing takes 15-20 working days

You'll need your PAN card, property acquisition proof, sale agreement, buyer's TAN (Tax Deduction Account Number), capital gains computation, and previous tax returns.

Form 13, 15CA, and 15CB explained

Form 13 is your application for lower or nil TDS deduction. Log into the TRACES portal and provide details about your responsible TAN, nature of receipt, and requested TDS rate. You must justify the lower rate by showing actual capital gains after considering acquisition costs.

For getting your sale proceeds back abroad, Forms 15CA and 15CB are mandatory:

• Form 15CA: An undertaking about the TDS details that you generate yourself
• Form 15CB: A certificate that must be signed and stamped by a Chartered Accountant

Submit these forms to your bank when transferring funds outside India, declaring that all applicable taxes have been paid. You can repatriate up to USD 1 million per financial year from property sales.

Real-life example of TDS reduction

Here's an actual case showing the financial impact of getting a Lower TDS Certificate:

An NRI sold a Mumbai property for ₹1.5 crore that was purchased in 2020 for ₹1.2 crore. Without an LDC, TDS would be calculated on the entire sale consideration:

The NRI saved ₹34,73,564 in immediate tax outflow by getting an LDC. The final tax liability stayed the same, but this improved cash flow by preventing excess funds from getting locked with tax authorities.

Even if you miss applying for an LDC, you can still claim a refund for excess TDS when filing your income tax return, though after a longer waiting period.

Capital Gains Tax and Exemptions

You need to understand capital gains tax to maximize returns from your Indian property sale. Your tax depends on how long you owned the property and which exemptions apply.

How does holding period affect your tax?

Your property's holding period determines everything:

Short-Term Capital Gains (STCG): Sell within 24 months and profits get taxed at your income tax slab rates in India. These rates reach up to 30% plus surcharge and cess.

Long-Term Capital Gains (LTCG): Hold for over 24 months and different rules apply. Tax treatment depends on purchase date:

• Properties bought before July 23, 2024: Choose between 20% tax with indexation or 12.5% without indexation—pick whichever saves you more
• Properties bought on or after July 23, 2024: Flat 12.5% tax rate without indexation

Indexation adjusts your purchase cost for inflation, reducing taxable gains.

Which exemptions can reduce your tax?

Three major exemptions can legally cut your capital gains tax:

Section 54: For residential property sales. Invest your capital gains (not full sale proceeds) in another Indian residential property. Timeline: one year before sale, two years after, or complete construction within three years. Exemption capped at ₹10 crore.

Section 54F: For non-residential property sales. Invest entire sale proceeds in Indian residential property. Partial investment gets proportionate exemption. Also capped at ₹10 crore.

Section 54EC: Invest up to ₹50 lakh in specified bonds from NHAI or REC within six months. Bonds have five-year lock-in period.

What to do after selling your property

File your income tax return immediately after selling, even if TDS was deducted. Filing is mandatory for:

• Declaring actual capital gains and claiming exemptions
• Reconciling TDS shown in Form 26AS with actual tax liability
• Claiming refunds when TDS was deducted on full sale value instead of just gains

File returns even if your total income stays below taxable limits—this is the only way to claim TDS refunds. Verify Form 16A from the buyer against your Form 26AS before filing.

Legal and Compliance Aspects for NRIs

Property management from thousands of miles away creates specific challenges. Tenant issues, maintenance problems, and legal compliance requirements demand specialized solutions and proper procedures.

Property management through local agents

You need a trustworthy property management service if you can't regularly visit your properties. These professionals handle property ownership tasks that require physical presence in India.

Property managers offer these services:

• Rent collection and tenant verification
• Repair coordination and regular inspections
• Property tax filing and local regulation compliance
• Record maintenance and document updates
• Property monitoring to prevent unauthorized occupation

Many NRIs hire legal experts who can represent them during disputes. This simplifies asset management and prevents legal complications from neglect.

How do you handle disputes and encroachments?

Property encroachment hits NRIs hard due to physical absence. The Indian legal system provides multiple remedies to protect your property rights.

You can file criminal cases under the Indian Penal Code against trespassers (Section 441) or those creating fraudulent ownership documents.

Civil remedies under the Specific Relief Act, 1963 let you file suits to reclaim possession without proving legal title. RERA protects against fraudulent sales and unauthorized possession.

Your best defense remains prevention:

• Regular property visits (personal or through representatives)
• Boundary walls around empty plots
• CCTV camera installation
• Immediate legal notices or police complaints for potential encroachment

Why proper documentation matters

Documentation forms the foundation of secure property ownership. The Registration Act, 1908 requires mandatory registration for gift deeds and lease agreements exceeding one year.

The Supreme Court mandates that property transfers occur through registered deeds to prevent fraud and establish clear ownership. Registered documents provide authenticity, transparency, and valid court evidence during disputes.

Critical documents for NRI property sales include sale deed, title deed, and encumbrance certificate showing the property is free from legal liabilities. Remote transactions require Power of Attorney properly notarized in your residence country and attested by the Indian Embassy or Consulate.

Thorough documentation provides ownership evidence, prevents disputes, and ensures smooth transactions—crucial when managing real estate from abroad.

Inheritance and Gifting Rules for NRIs

Inheriting or gifting property in India follows different rules for NRIs. Get these regulations right for proper asset planning and tax compliance.

Tax on inherited property

Good news: India does not impose inheritance tax. You pay zero tax on assets acquired through inheritance. This applies to all property types including residential, commercial, and even agricultural land that NRIs typically cannot purchase directly.

Once you inherit property, income from these properties becomes taxable based on how you use them:

• Self-occupied properties: No tax implications
• Rental income: Taxable after standard deductions
• Dividends from inherited shares: Taxed as "income from other sources"
• Interest from fixed deposits: Taxed as "income from other sources"

When you sell inherited property, capital gains calculations use the original purchase price of the previous owner (or fair market value as of April 1, 2001, for older properties). Your holding period includes both your ownership time and that of the previous owner.

Gifting property to family

You can freely gift property to relatives in India without tax implications. Gifts to non-relatives are tax-exempt only if their value doesn't exceed ₹50,000.

You must register a gift deed for documentation. If you later sell gifted property, deposit proceeds in an NRO account with repatriation limited to USD 1 million annually.

What to do next: Consult a tax advisor before gifting high-value properties to understand the complete tax implications for both parties.

Repatriation Rules and DTAA Implications

You've sold your property. Now you need to get your money back home.

The repatriation process follows specific RBI regulations. Most NRIs don't realize the documentation requirements can delay transfers by weeks if done incorrectly.

How to repatriate sale proceeds

All property sale proceeds must first go into your Non-Resident Ordinary (NRO) account. From there, follow these steps:

1. Verify proper TDS deduction before any transfer
2. Submit required forms to your bank
3. Request transfer to your overseas account or NRE account

Here's what many NRIs miss: Properties bought using foreign currency through NRE/FCNR accounts let you repatriate the entire sale proceeds freely. But this privilege applies to only two residential properties in your lifetime.

Properties purchased using NRO accounts face the annual limit.

What are the limits and documentation requirements?

FEMA allows you to repatriate up to USD 1 million per financial year from NRO accounts. Amounts above this need special RBI approval.

Required documents:

• Form 15CA: Online tax payment declaration
• Form 15CB: CA certificate confirming tax compliance
• Sale deed and purchase documents
• Tax clearance certificate
• PAN card and passport copies

Missing any document stops your transfer. Double-check everything before submission.

How do DTAA benefits help US, UK, and UAE residents?

Double Taxation Avoidance Agreements (DTAAs) prevent taxing the same income twice. India has signed DTAAs with over 90 countries, including the US, UK, and UAE.

Your benefits by country:

• US residents: Claim foreign tax credit for Indian taxes paid
• UK residents: Get tax relief on Indian earnings, including dividends
• UAE residents: Enjoy lower TDS rates since UAE has no personal income tax

Get a Tax Residency Certificate (TRC) from your home country to claim these benefits.

Next step: Contact your bank with all documentation ready before initiating any repatriation request.

Conclusion

You now have the complete roadmap for buying and selling property in India as an NRI. Start by understanding your eligibility and required documents before purchasing any property. When selling, apply for a Lower Deduction Certificate through Form 13 at least 30-40 days before your sale to minimize TDS burden. Use Section 54, 54F, or 54EC exemptions to reduce your capital gains tax legally.

For remote transactions, execute a proper Power of Attorney and ensure all documents are notarized and attested correctly. File your income tax returns even if TDS was deducted to claim any excess refunds. Finally, prepare Forms 15CA and 15CB for repatriating your sale proceeds up to USD 1 million annually. Your next step: consult a qualified tax advisor familiar with NRI property transactions and start organizing your documentation today.