A complete guide to FEMA compliance, TDS obligations, Form 15CA/15CB requirements, and repatriation of sale proceeds for NRIs and OCI cardholders selling property in Kerala.
Quick Summary
When an NRI or OCI cardholder sells property in India, two compliance frameworks apply simultaneously: Income Tax Act (TDS on capital gains, income tax return) and FEMA 1999 (repatriation of proceeds). The buyer must deduct TDS — 12.5% for long-term capital gains (property held more than 24 months) or 30% for short-term (24 months or less) — plus surcharge and cess. Repatriation of sale proceeds from the NRO account abroad is permitted up to USD 1 million per financial year, subject to Form 15CA/15CB certification by a Chartered Accountant confirming tax compliance.
Property sale proceeds must first be credited to the NRO account — not NRE. Repatriation requires a Form 15CB from a CA and Form 15CA filed online before the authorised dealer bank will remit funds abroad. An NRI seller should obtain a Lower TDS Certificate (Form 128) — replacing the old Form 13 — before the transaction to avoid excessive TDS deduction on the full consideration rather than on actual gains. From 1 October 2026, the TAN requirement for buyers is removed under Budget 2026-27 — buyers will use PAN instead, simplifying compliance and reducing transaction delays.
Key references: RBI — FEMA Regulations · Income Tax India · FEMA, 1999 · Kerala Registration Dept · Last reviewed: June 2026
The Foreign Exchange Management Act, 1999 (FEMA) governs all cross-border transactions involving Indian residents and non-residents, including the acquisition, holding, and disposal of immovable property in India by NRIs and OCI cardholders. The key regulations for NRI property transactions are the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018 and the Foreign Exchange Management (Remittance of Assets) Regulations, 2016.
FEMA's practical significance for NRIs selling Kerala property is in two areas: (1) what types of property an NRI can sell and to whom, and (2) how the sale proceeds can be remitted abroad. Most NRI property sales in Kerala involve residential or commercial property — both of which can be freely sold to any person resident in India or to another NRI/OCI cardholder. Agricultural land, plantation property, and farmhouses have restrictions — they can only be sold to a resident Indian citizen (not to another NRI or OCI).
Under Section 195 of the Income Tax Act, 1961, when a buyer in India purchases immovable property from an NRI, the buyer is responsible for deducting TDS at source before making payment. This is a critical compliance point — failure by the buyer to deduct and deposit TDS makes the buyer liable for the tax plus interest and penalty.
Important practical note: While TDS is legally computed on the capital gains amount, in practice most buyers deduct TDS on the full sale consideration — not just the gains — because the buyer does not independently verify the cost of acquisition. The NRI seller can then claim a refund of excess TDS by filing an income tax return in India. To avoid this, the NRI should obtain a Lower TDS Certificate (see below) before the transaction is completed, which specifies the correct rate on the actual gains.
The buyer must deposit the TDS and issue Form 16B to the NRI seller.
Currently, a resident buyer purchasing property from an NRI is required to obtain a Tax Deduction and Collection Account Number (TAN) before depositing TDS — unlike resident-to-resident property transactions where TAN is not required.
Union Budget 2026-27 change: The TAN requirement for resident buyers is being removed. From 1 October 2026, buyers will deposit TDS using their PAN instead of TAN, and TDS will be deposited using the new Form 141 (replacing the ITNS 281 challan for NRI property TDS). The TDS rates themselves are unchanged. Until 30 September 2026, TAN remains mandatory for buyers in NRI property transactions.
An NRI selling a residential property in India can claim exemption from long-term capital gains tax under Section 54 by reinvesting the gains in another residential property in India within specified timelines. Under Section 54EC, gains can be invested in specified bonds (NHAI, RECL) within 6 months of sale for exemption up to Rs. 50 lakhs. These exemptions reduce the actual tax liability — and consequently, the NRI can apply for a lower TDS certificate from the Income Tax Officer to avoid excessive upfront deduction.
If the NRI's actual tax liability is lower than the standard TDS rate — for example, because of Section 54 reinvestment or because indexed cost deductions substantially reduce the gains — the NRI can apply to the Jurisdictional Assessing Officer for a Lower or Nil TDS Certificate. Under the Income Tax Act, 2025 (which has renumbered and consolidated provisions of the 1961 Act), this application is made using Form 128, which replaces the earlier Form 13. The application is filed electronically through the TRACES portal. The certificate specifies a reduced TDS rate applicable to the transaction. The buyer deducts at the lower certified rate, avoiding a large upfront deduction followed by a prolonged refund process. Applications typically take 4 to 6 weeks and should be filed well in advance of the sale transaction.
Before an authorised dealer bank in India will remit NRI property sale proceeds abroad, two documents are mandatory:
Form 15CB is a certificate issued by a practising Chartered Accountant (CA) certifying that the tax on the remittance has been paid or provided for in accordance with the provisions of the Income Tax Act and applicable DTAA (Double Taxation Avoidance Agreement). The CA verifies the TDS deducted, the nature of the income, and the applicable tax rate. Form 15CB must be obtained before Form 15CA is filed.
Form 15CA is an online declaration filed by the remitter (or the NRI's authorised representative holding a valid Power of Attorney) on the Income Tax e-filing portal before the remittance is made. It incorporates the details from Form 15CB. The acknowledgement of Form 15CA is submitted to the authorised dealer bank along with the bank's remittance request.
For remittances above Rs. 5 lakh: both Form 15CB and Form 15CA are required. For remittances below Rs. 5 lakh: only Part D of Form 15CA (a simplified declaration) is required — no Form 15CB. Property sale proceeds in Kerala are almost invariably above Rs. 5 lakh, making the CA certificate the standard requirement.
A fundamental FEMA requirement is that sale proceeds of Indian immovable property must be credited to the NRI's NRO (Non-Resident Ordinary) account — not directly to an NRE (Non-Resident External) account or to an overseas account. From the NRO account, repatriation abroad is permitted as follows:
NRE accounts, by contrast, hold funds that are freely repatriable — but they are designed for funds brought into India from abroad. Indian property sale proceeds originate in India and must route through NRO. Funds can be transferred from NRO to NRE within the USD 1 million annual limit after Form 15CA/15CB compliance, but this is a separate step.
India has Double Taxation Avoidance Agreements (DTAAs) with most countries where large NRI communities reside — including the USA, UK, UAE, Canada, Australia, Singapore, and Malaysia. DTAAs determine in which country the capital gains tax on property sold in India is payable, and whether the NRI can claim credit in their country of residence for taxes paid in India.
Under the India-UAE DTAA, capital gains from the sale of immovable property situated in India are taxable only in India. UAE residents pay no capital gains tax in the UAE on Indian property sales — the entire tax obligation is in India. Since the UAE levies no income tax, there is no double taxation issue for UAE-based NRIs.
Under the India-USA DTAA, gains from immovable property in India are taxable in India. The USA also taxes its citizens on worldwide income including Indian property gains. However, the US allows a foreign tax credit for taxes paid in India, avoiding double taxation. US-citizen NRIs should ensure their India tax filings are in order to support the foreign tax credit claim in their US returns.
Similar to the US position — gains are taxable in India. The UK allows credit for Indian tax paid. UK-resident NRIs should coordinate their Indian tax position with their UK self-assessment return.
For NRIs from other countries, the applicable DTAA should be checked specifically — the treatment of immovable property gains varies between treaties.
The following checklist covers all steps from sale agreement to repatriation:
Under FEMA, an NRI or OCI cardholder can repatriate sale proceeds of immovable property up to USD 1 million per financial year from their NRO account. This covers all NRO account remittances in the year. Form 15CA/15CB compliance is required before the bank processes the remittance.
The buyer must deduct TDS at 12.5% for long-term capital gains (property held more than 24 months) or 30% for short-term capital gains (24 months or less), plus surcharge and cess. TDS is deducted on the capital gains amount, not the full sale price. The buyer deposits TDS and issues Form 16B to the NRI seller.
Form 15CB is a certificate from a Chartered Accountant confirming tax compliance on the remittance. Form 15CA is an online declaration filed on the Income Tax portal before remittance. Both are required for remittances above Rs. 5 lakh. Without these, the authorised dealer bank will not process the overseas remittance.
No. Property sale proceeds must first be credited to the NRO account. Repatriation from NRO to abroad is permitted up to USD 1 million per year with Form 15CA/15CB compliance. Funds can be transferred from NRO to NRE after tax compliance, but the initial receipt must be in the NRO account.
Yes — through two routes. First, if Section 54 reinvestment in another residential property is planned, the effective capital gains liability reduces significantly. Second, the NRI can apply to the Jurisdictional Assessing Officer under Section 197 for a lower TDS certificate before the sale is completed. The buyer then deducts at the lower certified rate rather than the standard rate.
The office advises NRIs and OCI cardholders on FEMA compliance, TDS, Form 15CA/15CB, and property sale transactions in Kerala. All matters managed remotely with Power of Attorney.
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