The Foreign Exchange Management Act, 1999 (FEMA) and the regulations made thereunder by the Reserve Bank of India govern all NRI property transactions in India — purchase, sale, gift, inheritance and repatriation of sale proceeds. FEMA replaced the Foreign Exchange Regulation Act, 1973 (FERA) with a more liberalised framework that permits most NRI property transactions without prior RBI approval, subject to compliance with specific regulations and reporting requirements. Non-compliance with FEMA does not make a property transaction void, but it exposes the NRI to penalties up to three times the amount involved, and can create complications in repatriating proceeds or in future property transactions.
FEMA Key Points for NRI Property
- NRIs can purchase residential and commercial property — no restriction, no RBI approval needed
- NRIs cannot purchase agricultural land, plantation property or farmhouse — RBI approval required
- OCI holders: same rights as NRIs for residential/commercial; same restrictions on agricultural land
- Repatriation: up to USD 1 million per year from NRO account after paying taxes
- Forms 15CA and 15CB from CA required before bank processes international remittance
- Property acquired through inheritance: repatriation allowed with RBI approval or within USD 1 million limit
- Property gifted by an NRI to a resident Indian: permitted, stamp duty applies in Kerala
What an NRI Can and Cannot Buy in India
Under the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018, an NRI is permitted to purchase residential property (flats, houses, plots in residential zones) and commercial property (office space, shops, commercial buildings) without any restriction and without RBI approval. The purchase consideration must be paid through NRE (Non-Resident External) account, NRO (Non-Resident Ordinary) account, or through inward remittance in foreign currency through authorised banking channels. Payment by traveller's cheques or foreign currency notes is not permitted. An NRI cannot purchase agricultural land, a plantation property, or a farmhouse without prior RBI approval — such approval is granted only in exceptional circumstances such as inheritance.
Sale and Repatriation of Proceeds
An NRI who sells residential or commercial property in India can repatriate the sale proceeds subject to compliance conditions. Repatriation from the NRO account is permitted up to USD 1 million (or equivalent in any freely convertible foreign currency) per financial year, after applicable taxes have been paid. This limit covers all remittances from the NRO account in a financial year. A CA certificate in Form 15CB must be obtained confirming that taxes have been paid and the remittance is within the permitted limit. Form 15CA — an online self-declaration — must be filed with the Income Tax Department before the remittance. The bank will require both forms before processing the international wire transfer. Where the property was purchased from foreign inward remittances credited to an NRE account, the original investment amount may be repatriated beyond the USD 1 million cap, with documentary evidence of the NRE account source.
Inherited and Gifted Property
An NRI who inherits property in India from a resident Indian may sell the property and repatriate the sale proceeds, subject to the USD 1 million annual repatriation limit from the NRO account. Where the inherited property is agricultural land, a plantation property or a farmhouse, the NRI cannot sell it to another NRI or foreign national — only to a resident Indian citizen. Repatriation of proceeds from inherited property beyond the USD 1 million limit requires prior RBI approval through the Authorised Dealer bank. An NRI can gift property to a resident Indian without RBI approval. An NRI can also receive property as a gift from a resident Indian, provided the property is not agricultural land, plantation property or farmhouse. Cross-border gifts — NRI to NRI, or resident Indian to NRI of property abroad — require careful FEMA compliance analysis.
Common FEMA Compliance Errors by NRIs
The most frequently encountered FEMA compliance failures in NRI property transactions include: receiving sale consideration in cash (not through banking channels); accepting sale proceeds directly in a foreign account without routing through an NRO account in India; failing to obtain Form 15CB before remitting proceeds; remitting amounts in excess of the USD 1 million annual limit without RBI approval; purchasing agricultural land or farmhouse without recognising the restriction; and failing to file the annual Foreign Assets and Liabilities return (Form FA) with the Income Tax Department where the NRI holds property in India as a foreign asset. Penalties for FEMA violations are civil in nature — up to three times the amount involved — and cannot be compounded without the RBI's authorisation. Where the violation is intentional or involves large amounts, enforcement proceedings can be initiated by the Enforcement Directorate.
Frequently Asked Questions
NRIs can purchase residential and commercial property without restriction. They cannot purchase agricultural land, plantation property or farmhouses without prior RBI approval (granted only in exceptional circumstances). OCI card holders have the same rights as NRIs for residential and commercial property and the same restrictions on agricultural land.
Repatriation from the NRO account is permitted up to USD 1 million per financial year, after applicable taxes are paid and Forms 15CA and 15CB are filed. Property purchased through NRE account remittances may have the original investment amount repatriated separately beyond this limit with documentation.
Form 15CA is an online declaration filed by the NRI with the Income Tax Department before remittance. Form 15CB is a CA certificate confirming taxes have been paid and the remittance is FEMA-compliant. Both are required before a bank will process international remittance of NRI property sale proceeds above Rs. 5 lakhs.