NRI Real Estate Ownership and Rental Rules in India

1. Who is considered an NRI?

For property and foreign-exchange purposes, an NRI is generally an Indian citizen who is resident outside India. The RBI defines an NRI as “a person resident outside India who is a citizen of India.”

An Overseas Citizen of India, or OCI, is a person resident outside India who is registered as an OCI cardholder under the Citizenship Act.

FEMA residency is not determined solely by citizenship or by counting days in India. The person’s period of stay, purpose of stay, employment and intention may all be relevant. Income-tax residency is determined under separate tax rules, so a person’s status under FEMA and income-tax law may not always be identical.

2. What property can an NRI or OCI purchase?

Under the RBI framework, an NRI or OCI may generally purchase residential and commercial immovable property in India without obtaining case-by-case RBI approval.

• Houses and villas
• Apartments and condominiums
• Residential plots that are not classified as agricultural land
• Shops and retail units
• Offices
• Warehouses
• Qualifying commercial buildings
• Other non-agricultural residential or commercial property

There is generally no FEMA-imposed numerical limit on the number of qualifying residential or commercial properties an NRI or OCI may purchase. Nevertheless, zoning, land-ceiling, local development and state-specific rules may still apply.

3. Restricted property categories

An NRI or OCI generally cannot purchase the following property merely under the automatic permission available for ordinary residential and commercial property:

• Agricultural land
• Plantation property
• Farmhouses

The legal classification of the land is more important than the way it is advertised. A plot promoted as a “weekend home,” “farm villa” or “eco-estate” may still be classified as agricultural land in official revenue records. Before purchasing land, the buyer should obtain a title and land-use review from a lawyer in the state where the property is located.

The restriction on purchasing agricultural land does not necessarily prevent an NRI or OCI from acquiring such property through a legally valid inheritance. The rules governing a later sale, gift or transfer are more restrictive and should be reviewed separately.

4. Property received through inheritance or gift

An NRI or OCI may generally inherit immovable property in India from a resident of India. Property may also be inherited from a person resident outside India if that person acquired the property in compliance with the foreign-exchange law applicable at the time of acquisition.

An NRI or OCI may generally receive residential or commercial property—but not agricultural land, plantation property or a farmhouse—as a gift from a person resident in India or another NRI/OCI who is a qualifying relative. The definition of “relative” is linked to Section 2(77) of the Companies Act, 2013. Income-tax consequences must also be checked because a gift permitted under FEMA is not automatically exempt from income tax.

An inherited property should be properly transferred in the relevant land, municipal, society and revenue records.

• Death certificate
• Will
• Probate or letters of administration, where applicable
• Legal-heir or succession certificate
• Family settlement
• Relinquishment or release deed
• Mutation application
• Previous title documents
• Property-tax records

5. Joint ownership with a spouse

A foreign-national spouse who is neither an NRI nor an OCI may, subject to conditions, jointly acquire one qualifying property with an NRI or OCI spouse.

• The property cannot be agricultural land, plantation property or a farmhouse
• The marriage must have been registered
• The marriage must have existed continuously for at least two years immediately before the acquisition
• The foreign-national spouse must not otherwise be prohibited from acquiring the property
• Payment must be made through permitted banking channels

Special restrictions can apply to citizens of specified countries. These cases should be cleared with an authorized dealer bank and Indian lawyer before any agreement or payment is made.

6. How an NRI must pay for property

Payment for an eligible property must be made through permitted banking channels. Funds may generally come from:

• An inward remittance to India through banking channels
• An NRE account
• An FCNR(B) account
• An NRO account

Payment cannot be made using foreign currency notes or traveller’s cheques. Cash transactions can create serious tax, documentation and FEMA problems. The purchaser should retain bank remittance confirmations, foreign inward-remittance certificates, account statements, builder or seller receipts, loan documents, sale agreement, registered sale deed and stamp-duty/registration receipts. These records may become important when the owner later sells the property or requests repatriation of the proceeds.

7. Home loans for NRIs

NRIs may be eligible for rupee-denominated housing loans from Indian banks and housing finance institutions, subject to the lender’s policies and RBI requirements. A lender may examine passport and visa, OCI card where applicable, overseas employment or business documents, foreign and Indian income, credit history, NRE/NRO bank statements, property valuation, title documents, approved building plans, RERA registration, down-payment source and repayment capacity.

Loan repayment should be made through permitted sources specified by the lender and the applicable foreign-exchange rules.

8. Due diligence before purchasing

NRI buyers should not rely only on a broker, seller, builder brochure or online listing. A local property lawyer should independently investigate the property.

• Seller’s identity and authority to sell
• Complete chain of title
• Registered sale deeds
• Record of Rights or land-revenue record
• Mutation records
• Encumbrance certificate
• Pending mortgages and charges
• Property-tax payments
• Approved building and layout plans
• Occupancy or completion certificate
• Land-use and zoning classification
• Access rights and easements
• Pending litigation
• Society or association dues
• Builder’s authority over the land
• RERA registration, where applicable
• Restrictions on resale, lease or redevelopment

9. Power of Attorney for an NRI owner

An NRI who cannot travel to India may appoint a trustworthy person through a Power of Attorney, or POA, to perform specifically authorised acts — sign a rental agreement, collect rent, pay taxes and association charges, appear before a sub-registrar, manage repairs, represent the owner before a housing society, sign specified property documents, or complete a sale if the authority is expressly granted.

A POA does not transfer ownership by itself. It should identify the property and authorised acts clearly rather than granting unnecessarily broad powers. A POA signed outside India may need notarisation, authentication by an Indian consulate or apostille, followed by stamping or adjudication in India. Registration requirements and deadlines vary by state and by the authority granted.

10. Can an NRI rent out property in India?

Yes. An NRI can generally rent or lease eligible property in India, subject to the rental, municipal, society and land-use rules applicable to the property.

• Residential versus commercial use
• Local rent-control or tenancy laws
• Society or condominium restrictions
• Police or tenant-verification requirements
• Registration of the lease
• Stamp duty
• Security-deposit limits
• Local licensing requirements
• Short-term-rental restrictions
• Municipal or tourism permissions
• Tax and TDS compliance
• Whether a property manager will act for the owner

A residential property should not be used commercially without confirming zoning, society and municipal requirements. Short-term or vacation rentals may require additional local registrations or approvals.

11. What a strong rental agreement should contain

A written agreement should clearly state:

• Legal names and addresses of the landlord and tenant
• Landlord’s NRI status
• Property address and permitted use
• Lease start and end dates
• Monthly rent
• Rent-payment date and method
• Security deposit
• Maintenance and association charges
• Utility responsibilities
• Repair responsibilities
• Furnishings and inventory
• Renewal and rent-increase terms
• Subletting restrictions
• Inspection and access rules
• Early-termination provisions
• Notice period
• Default consequences
• Dispute-resolution process
• TDS responsibilities
• Move-in and move-out procedures
• Deposit-refund conditions
• Jurisdiction and governing law

The tenant should be told in writing that the landlord is a non-resident because it materially affects the tenant’s tax-withholding obligations.

12. Taxation of NRI rental income

Rent from property situated in India is generally taxable in India, even if the owner lives abroad or receives the money in an NRO account. For a typical let-out property, taxable house-property income is generally calculated by considering gross annual value or rent, permitted municipal taxes, the applicable statutory deduction, eligible interest on borrowed capital, and other adjustments allowed under current law.

The correct return depends on the owner’s other income. An individual NRI with rental or capital-gain income but no business or professional income will commonly use the return designated for that category, historically ITR-2. An NRI with business or professional income may require the business-income return, historically ITR-3. Current-year instructions on the Income Tax e-Filing Portal must always be checked before filing.

An NRI may also have to report the income in the country where the NRI is tax resident. A Double Taxation Avoidance Agreement may allow a foreign-tax credit, subject to documentation and that country’s laws.

13. Tenant’s TDS obligation when paying rent to an NRI

This is one of the most frequently missed NRI rental rules. When rent is paid to a non-resident landlord, the simplified resident-landlord procedure is not the correct procedure. The Income Tax Department expressly states that if the landlord or deductee is a non-resident, the applicable quarterly TDS statement is Form 27Q, rather than the resident-rent challan statement.

• Obtain a Tax Deduction and Collection Account Number (TAN)
• Deduct tax at the rate legally in force
• Add applicable surcharge and cess where required
• Deposit the tax within the prescribed time
• File the applicable quarterly TDS statement (Form 27Q)
• Provide the landlord with the appropriate TDS certificate
• Quote the landlord’s PAN and the payer’s TAN correctly

The exact withholding rate should not be guessed. It can depend on the governing tax law, surcharge, cess, PAN availability, treaty position and any lower-deduction certificate. The tenant and landlord should obtain current professional tax advice before the first rent payment. Failure to deduct, deposit or report TDS can result in interest, late fees, penalties and other consequences for the tenant or payer.

14. Lower or nil withholding certificate

The tax withheld from gross rent may be substantially higher than the NRI owner’s final tax liability after permitted deductions. When justified by estimated total income, the NRI may apply to the Income Tax Department for a lower or nil withholding certificate.

For Tax Year 2026–27 under the Income-tax Act, 2025, the official application is Form No. 128. This replaces the earlier Form 13 procedure for new applications under the new Act. The application is expected to be available through TRACES or the Income Tax e-Filing Portal. The tenant should apply the lower rate only after receiving and verifying a valid certificate covering the tenant, payment and relevant period.

15. Sale of property by an NRI

An NRI or OCI may generally transfer eligible immovable property to a person resident in India. Residential or commercial property may also be transferred to another NRI or OCI subject to the applicable conditions. Agricultural land, plantation property and farmhouses are governed by stricter transfer rules.

When an NRI sells Indian property, the buyer’s withholding obligation is governed by the rules for payment to a non-resident — not the simplified procedure used when buying from a resident seller. Forms 26QB and 26QC are intended for resident deductees. If the seller or landlord is non-resident, Form 27Q applies. The buyer should therefore determine the seller’s residential status before making an advance, instalment or closing payment. Both parties should consult a CA before executing the transaction. The NRI seller may seek a lower withholding certificate where the tax otherwise withheld from gross sale consideration would exceed the expected tax liability.

16. Repatriating rent or sale proceeds

Repatriation means transferring eligible funds from India to an overseas account through an authorised dealer bank. The bank may request passport, PAN, OCI card where applicable, proof of overseas address, sale deed or rental agreement, original purchase documents, evidence showing the source of purchase funds, bank statements, capital-gain calculation, income-tax return, tax-payment evidence, TDS certificates, Chartered Accountant certification, and the applicable remittance declaration.

For remittances made on or after April 1, 2026, the Income Tax Department identifies Form No. 145 as the replacement for former Form 15CA, and Form No. 146 as the replacement for former Form 15CB. Form 145 is the remitter’s foreign-remittance declaration. Form 146 is the Chartered Accountant’s certificate used in applicable cases. The required part and supporting certification depend on whether the remittance is taxable, the amount involved and whether an Assessing Officer’s certificate is available.

RBI rules permit repatriation of qualifying sale proceeds through an authorised dealer bank when the property was acquired lawfully and the applicable source-of-funds and other conditions are satisfied. Different limits or conditions may apply where the property was acquired from rupee funds, while resident in India, by inheritance or from funds held in an NRO account. The owner should obtain instructions from the bank before completing the sale rather than waiting until after the proceeds have been deposited.

17. Practical checklist for NRI owners

Use this three-stage checklist to catch the small mistakes that create big problems.