NRIs — Buying & Selling Property in India

If you live outside India and own — or want to own — property back home, three worries tend to sit on your chest at once. Can I even buy here from abroad, or are there rules I'll trip over? When I sell, will they withhold a small fortune before I see a rupee? And how on earth do I get my own money out of the country without breaking a law I've never read? This lesson takes those fears one at a time and shows you they each have a clear, boring, do-able answer.

None of this is because the system distrusts you. It's because money crossing a border touches two rulebooks at once — India's foreign-exchange law and its income-tax law — and both were written assuming the person on the other side has already left. Once you can name the pieces, the fear shrinks to a checklist.

Meet Reena Thomas. She's 35, an Indian citizen living and working in Dubai, and she's selling the flat she bought in Kochi back in 2013 for ₹42,00,000 (forty-two lakh — a lakh is one hundred thousand). A buyer has agreed to ₹1,15,00,000 (one crore fifteen lakh — a crore is one hundred lakh, ten million). On paper she's made a good gain. In practice she's terrified that most of it will vanish into taxes and paperwork before it ever reaches Dubai. We'll follow her whole sale, rupee by rupee.

Her cousin Nikhil, 40, also in Dubai, is coming at it from the other direction — he wants to buy back home and has his eye on a cheap-looking 'farmhouse plot.' He'll show us the buying side, and one hard 'no.'

One promise up front: by the end, Reena will know that the ₹17,19,250 her buyer is about to withhold can legally drop to ₹10,43,900 — the difference, ₹6,75,350, staying in her hands instead of the tax department's for a year. That single move is the heart of this lesson.

Everything that follows hangs on one label, so let's pin it down before we use it. An NRI — Non-Resident Indian — is an Indian citizen who lives outside India. For income tax, the rough test is time: spend fewer than 182 days in India in the year (with some finer conditions) and you're a non-resident for that year. For foreign-exchange law (FEMA), the test leans on why you're abroad — employment, business, or an intention to stay indefinitely. Reena, working full-time in Dubai for years, is comfortably an NRI on both tests.

Two neighbouring labels you'll hear: an OCI (Overseas Citizen of India) is a foreign passport-holder of Indian origin carrying an OCI card; a PIO (Person of Indian Origin) is the older version of that idea, now folded into OCI. The good news is that for buying and selling property, an OCI is treated the same as an NRI — same permissions, same restrictions. So whenever this lesson says 'NRI,' read it as 'NRI or OCI.'

A subtle trap: your status is judged year by year, and it can flip. Someone who moves abroad mid-life, or returns to India, can be a resident one year and an NRI the next. For a property sale, what matters is your status in the year you sell. Reena has been abroad for years, so there's no ambiguity — but if you're newly moved or about to return, confirm which side of the line you're on before you sign anything, because it changes the whole withholding story that's coming.

Check yourself before moving on: could you say, in one sentence, why a resident and an NRI selling the same flat are treated differently? If yes — that the border pulls in FEMA and a heavier tax-withholding rule — you're ready for what an NRI can actually buy.

FEMA — the Foreign Exchange Management Act, 1999 — is the rulebook for money and assets crossing India's border, run by the Reserve Bank of India (RBI). For property it's surprisingly generous, with three sharp exceptions. An NRI may buy residential property (flats, houses) and commercial property (offices, shops, warehouses) freely — any number of them, with no RBI permission needed. What an NRI may not buy, ever, is agricultural land, a farmhouse, or a plantation.

The map above is the whole rule in one picture: the teal column is a green light, the red column is a wall. Notice there's no cap on the green side — an NRI can own ten flats if they like. And notice the red side is absolute: it isn't 'with permission' or 'with extra tax,' it's simply not allowed to be bought. The reason is policy, not spite — farmland is kept for cultivators and local agrarian interests, so the door is shut to buyers who live abroad.

This is where cousin Nikhil comes in. He'd found a 'farmhouse plot' near the backwaters at a tempting price and assumed his OCI card made him as good as a local buyer. It doesn't. A farmhouse sits on agricultural land, and agricultural land is on the wall. If he buys it anyway, the Enforcement Directorate can act under FEMA — penalties up to three times the amount involved, and the property can even be confiscated. The cheap plot is cheap for a reason.

Two more quiet facts worth carrying: you don't need any special approval to buy the allowed kinds — no RBI letter, no waiting — and there's no limit on how many residential or commercial properties you hold. The restriction is about the TYPE of land, never the number. Nikhil, redirected to an ordinary apartment in the city, can buy it this afternoon.

Quick check: if a relative offers to gift you the family orchard, can you accept it as an NRI? No — agricultural land can come to an NRI only by inheritance, never by purchase or gift. Hold that distinction; it catches a lot of people.

Say Nikhil buys that city apartment. How does an NRI actually pay for Indian property? Through the banking system only — never with foreign-currency notes handed over in cash, never through an informal channel. The money moves from one of three special accounts every NRI can hold, and it's worth learning the three because they come back when we bring Reena's sale money home.

• NRE (Non-Resident External) account — a rupee account funded from your foreign earnings. Its signature feature: money in it is freely repatriable, meaning you can send it back abroad with no cap. Think of it as 'money I brought in from outside.'
• NRO (Non-Resident Ordinary) account — a rupee account for money that arises inside India: rent, dividends, and — crucially — the proceeds when you sell Indian property. Repatriation out of it is capped (we'll meet the USD 1 million/year ceiling later). Think of it as 'money that came to me in India.'
• FCNR (Foreign Currency Non-Resident) account — a fixed deposit held in an actual foreign currency (dollars, pounds), so it sidesteps rupee exchange-rate wobble for the term of the deposit. Also freely repatriable.

Why does an NRI-buyer care which account pays? Because it quietly sets up the exit. Money that came in through an NRE/FCNR account to buy a home can, broadly, go back out the same way when that home is sold. Money routed through NRO — the usual home for a sale — meets the yearly cap. Paying cleanly through the right account today is what keeps repatriation simple years later.

And here's a hinge that surprises people. If Nikhil buys not from a builder or a resident but from ANOTHER NRI, then Nikhil — the buyer — must withhold tax under Section 195 on that purchase and hand it to the government. The duty to deduct sits with whoever is paying an NRI. That's the same rule that's about to land on Reena's buyer, so let's turn to it now.

Check: which account would a flat's SALE proceeds usually land in — NRE or NRO? NRO, because the money arose inside India — and that's the account with the repatriation cap. Keep that pairing in mind.

Here's the fear made real. When Reena sells, her buyer is legally required to hold back a slice of the price and pay it straight to the tax department before Reena gets the rest. That mechanism is TDS — tax deducted at source — and for a payment to a non-resident it runs on Section 195 of the Income-Tax Act. You may have met Section 195 in passing in Lesson 26; this is where it bites.

The shock isn't that tax exists — Reena expects to pay tax on her gain. The shock is the BASE. Section 195 is calculated on the entire gross sale value — the whole ₹1,15,00,000 — not on her actual profit. The buyer isn't in a position to know Reena's real gain (he doesn't know what she paid in 2013, what exemptions she'll claim, her other income), so the law makes him withhold against the big number and lets Reena reconcile later. It's cash-flow brutal even when the final tax is fair.

So what's the rate? For a long-term sale — property held more than 24 months, which Reena's 2013 flat easily is — the base is 12.5% (the long-term capital-gains rate since 23 July 2024, with no indexation). On top sits a surcharge that steps up with the size of the deal, then a 4% health-and-education cess on the whole thing. The surcharge is capped at 15% for capital gains, which keeps the very largest sales from climbing further. Put together, the effective rate on the gross price lands in a narrow band:

Reena's ₹1,15,00,000 sits in the third row, so her buyer withholds at 14.95% — of the whole price.

₹17,19,250. That's the number that frightens her — over seventeen lakh gone before the sale even feels done. But hold that fear against what she actually OWES, because the two are very different. Her real gain is the price minus what she paid: ₹1,15,00,000 − ₹42,00,000 = ₹73,00,000. (NRIs don't get the resident's optional 20%-with-indexation route — that choice is residents-only — so the gain is simply price minus cost, taxed at 12.5%. The full capital-gains computation is Lesson 35's job.) The tax on THAT gain is far smaller:

Look at the gap. The buyer must hold back ₹17,19,250, but Reena's true tax is ₹10,43,900. The difference — ₹6,75,350 — isn't a tax she owes. It's her own money, withheld against a number that was never her profit, sitting with the government until she files a return and asks for it back. That's the cash-flow shock in one line: not 'I paid too much tax,' but 'I can't touch ₹6,75,350 of my own money for a year.'

So the ₹17,19,250 is real — but it is not fixed. The right-hand column of that table is the rest of this lesson. Check yourself first: in one sentence, why does the buyer withhold on ₹1,15,00,000 rather than on ₹73,00,000? Because Section 195 works on the gross price — the buyer can't compute your real gain, so the law over-collects and lets you reconcile. Now let's meet the buyer's paperwork, then the certificate that closes the gap.

The obligation to deduct and deposit that tax is the BUYER'S, not Reena's — and it comes with its own small bureaucracy that a first-time buyer often doesn't expect. Three pieces: the buyer needs a TAN, files a quarterly return reporting the deduction, and hands Reena a certificate she can later set against her tax.

A TAN — Tax Deduction and Collection Account Number — is a separate identifier from a PAN, and here it's the tell that this is an NRI sale. For a resident's 1% deduction, the buyer uses only a PAN and a simple challan (Lesson 26). But to deduct under Section 195 the buyer must obtain a TAN. If your buyer doesn't have one and isn't getting one, that's a red flag that he thinks he's doing a resident deal — and he's about to under-deduct.

You'll meet both forms in the specimen just ahead — Reena's Form 13 on top, the buyer's Form 144 below it. Look at the Form 144 half: its taught boxes read like a checklist of everything this lesson has said. The DEDUCTOR is the buyer, identified by a TAN (not just a PAN); the DEDUCTEE is Reena, flagged 'Non-Resident,' which is exactly what pulls the sale into Section 195; and the payment block names Section 195, the ₹1,15,00,000 paid, and the tax withheld. Each field IS a fact, DOES a job for this sale, and MATTERS because if any is wrong the deduction is wrong.

• Buyer's TAN — IS the buyer's deduction identifier; DOES mark this as a proper 195 deduction; MATTERS because without it the buyer literally cannot deposit NRI TDS.
• Deductee status 'Non-Resident' — IS Reena's tax status; DOES trigger Section 195 instead of the resident's 194-IA; MATTERS because it's the single fact that sets the whole heavier regime in motion.
• Section 195, amount paid ₹1,15,00,000, TDS deducted — IS the money trail; DOES record what was withheld and against what; MATTERS because this is what Reena later claims credit for on her return.
• Certificate to the seller (Form 131, earlier Form 16A) — IS the buyer's receipt to Reena; DOES prove tax was actually deposited in her name; MATTERS because without it she can't reclaim a rupee of any over-withholding.

The buyer deposits the tax, files Form 144 for the quarter, and issues Reena the Form 131 certificate. Reena then claims that deposited amount against her own tax when she files her Indian return — so the money the buyer withheld is credited to her, never double-counted. (Exact filing deadlines shift with the rules; confirm the current dates when you file.) What the buyer's machinery can't do by itself is fix the over-collection. For that, Reena has to act first — which is the certificate this next section is all about.

Check: what one word in the deductee box changes everything about how this sale is taxed? 'Non-Resident.' Flip that to 'Resident' and you'd be back in Lesson 26's gentle 1% world. That's how much the label carries.

Here is the relief the whole lesson has been pointing at. Reena does not have to let ₹17,19,250 be withheld and then beg for ₹6,75,350 back a year later. She can go to the tax department BEFORE the sale, show them her real numbers, and get a certificate that tells the buyer to withhold only her actual tax. That is Section 197, and the application is Form 13.

The logic is simple and fair. Section 195 over-collects because the buyer can't see the real gain. Section 197 lets the person who CAN prove the real gain — Reena — take that proof to the Assessing Officer (the tax officer for her case) in advance. She files Form 13 on the income-tax e-filing portal, attaches the purchase deed, the sale agreement, and a computation of the gain, and asks for a lower rate. The officer checks it and, if satisfied, issues a certificate naming a lower rate for the buyer to use.

The upper half of that specimen is Reena's Form 13, and its heart is the highlighted computation box — the same arithmetic we did a moment ago, now doing a job. Read it as IS / DOES / MATTERS: it states the sale value (₹1,15,00,000) and the 2013 cost (₹42,00,000), so it DOES establish the gain of ₹73,00,000; it states the estimated tax on that gain (₹10,43,900) beside the ₹17,19,250 that plain Section 195 would grab; and it MATTERS because line (f) — the lower rate requested, about 9.08% of the sale value — is exactly what the officer certifies. Feed that certificate to the buyer, and the withholding on the lower half's Form 144 falls from 14.95% to 9.08%.

Two honest caveats. First, the certificate reduces the WITHHOLDING to match the tax — it does not reduce the tax itself; Reena still owes ₹10,43,900, she just isn't over-charged along the way. Second, if she's also claiming a capital-gains exemption — reinvesting in another house under Section 54 or in bonds under Section 54EC (Lesson 36) — she puts that in the Form 13 too, and the certified rate can fall further, even to nil, because her real tax is lower still. The certificate is only ever as good as the numbers she proves.

Check yourself: who applies for the Section 197 certificate — the buyer or the seller? The seller (Reena) — she's the one who can prove the real gain. And what does it change: the tax, or the amount withheld? The amount withheld. Get those two right and you've understood the most important paragraph in the lesson.

Reena's tax is handled; now the third fear — getting the money to Dubai. This is repatriation: moving your sale proceeds out of India to your account abroad. It's completely legal and routine, but it runs on a specific road, and taking a shortcut off that road is where NRIs get hurt (the Scam Watch, further down).

The proceeds from selling Indian property land in Reena's NRO account — the 'money that arose in India' account we met when funding the buy. From there, the repatriation limit is USD 1 million per financial year (April to March), after taxes are paid. That's the ceiling for everything going out of NRO in a year, across all sources. Money sitting in an NRE account, by contrast, is freely repatriable with no cap — but property proceeds almost always start life in NRO.

Does the cap bite for Reena? Not remotely. With the Section 197 certificate, ₹10,43,900 is withheld and ₹1,04,56,100 reaches her NRO account. At an illustrative exchange rate of about ₹95.8 to the US dollar (mid-2026 — the rate moves daily), that's roughly USD 109,000. The ceiling is USD 1,000,000. She could repatriate her entire sale nine times over within a single year's limit. For most residential sales, the USD 1 million cap is a ceiling you'll never touch.

One nuance for the keen: if a property had been bought years ago with foreign money routed through an NRE/FCNR account, the original foreign-currency portion can generally go back out that same NRE road (for up to two residential properties), sidestepping the NRO cap for that slice. Reena's flat was an ordinary Indian purchase, so she's on the standard NRO-and-USD-1-million road — which, as we saw, is miles wider than she needs.

Check: from which account do property-sale proceeds usually repatriate, and what's the yearly ceiling? From NRO, up to USD 1 million per financial year, cleared with Form 15CA and a CA's Form 15CB. If someone offers you a way around that, read the Scam Watch below before you say yes.

There's a practical problem hiding under this whole sale: registration, bank formalities, and the odd signature all happen in India, in person — and Reena is in Dubai. She can't fly to Kochi for every step. The answer is a power of attorney (POA): a document that authorises a trusted person in India to act for her. But a POA is also, in the wrong hands, the most dangerous piece of paper an NRI can sign, so it has to be done a particular way.

A POA made abroad isn't automatically valid for an Indian property transaction. It has to be dressed correctly for India in three steps:

1. Execute it abroad, then authenticate it. Because the UAE is a member of the Hague Apostille Convention, Reena can get an apostille — a standard international certification stamp — which India recognises. From a non-Hague country, you'd instead get the document attested by the Indian Embassy or Consulate. (Some cautious sub-registrars in India like to see the consular attestation too, so doing both is the safest route.)
2. Adjudicate and stamp it in India — within 3 months. Once the apostilled POA reaches India, the person acting for you must take it to the sub-registrar, have the correct stamp duty assessed ('adjudicated'), and pay it, within three months of the document arriving. Miss the window and it can be treated as improperly stamped.
3. Register it if it authorises a sale. A POA that grants the power to sell immovable property must be registered under the Registration Act, 1908, at the local sub-registrar's office — not merely signed and stamped.

So how does Reena stay safe? By making the POA narrow and specific, not broad and open-ended. Name the exact property, the exact power ('to execute and register the sale deed of Flat X'), the exact person, and — ideally — an expiry. A tight POA to a sibling she trusts is a tool. A vague, lifetime, 'do-anything-with-any-property' POA is the blank cheque that the Scam Watch's fraud is built on. Same document, opposite risk, decided entirely by how she scopes it.

Check yourself: does a POA make your cousin the owner of your flat? No — it only lets him act for you; ownership still moves only by a registered sale deed. And what makes a foreign POA usable in India? Apostille or consular attestation, then adjudication and stamping within three months, and registration if it authorises a sale.

Reena lives in Dubai, where there's no personal income tax, and someone has told her a DTAA means she won't pay tax on the flat at all. It's a comforting idea and it's wrong — so let's separate what a DTAA actually does from what it's often sold as.

A DTAA — Double Taxation Avoidance Agreement — is a treaty between two countries that stops the same income being fully taxed twice. India and the UAE have one. Its purpose is relief from DOUBLE taxation, not relief from tax as such. And for immovable property it's blunt: under Article 13 of the India–UAE treaty, gains from selling property situated in India are taxable in India. The country where the land sits gets to tax the gain. The DTAA does not hand Reena an exemption on her Kochi flat.

So where is a DTAA genuinely useful to an NRI? On OTHER income and on withholding rates — interest, dividends, and the like — where the treaty can lower the rate or grant a credit, and where double taxation is a live risk. To claim any treaty benefit you generally need a Tax Residency Certificate (TRC) from your country of residence — for Reena, a TRC from the UAE — proving you're a tax resident there. It's worth having in the file. Just don't expect it to rescue the property gain; the Section 197 certificate from earlier, not the DTAA, is what actually reduces the cash withheld on Reena's sale.

Check: can the India–UAE DTAA make Reena's tax on the Kochi flat disappear because Dubai has no income tax? No — Article 13 keeps the property gain taxable in India; the DTAA only prevents the same gain being taxed twice.

Every scam that targets NRIs runs on the same fuel: you're far away and can't stand in the room. Four in particular cluster around the exact steps we've just learned — the agent, the buyer's TDS, the POA, and repatriation. Here's how each one looks from the inside, and how to report it without wasting a day on self-blame.

The through-line: the misused POA is the worst because it's self-inflicted trust turned into a weapon — a broad power you granted, used to sell or mortgage your own flat. Scope the POA tight, as we just saw, and it can't be turned against you. And notice how the 'handle-everything' agent and the non-deducting buyer both fail at the Section 195 machinery we walked through — which is exactly why you now know enough to catch them: no TAN, no Form 144, a vague fee, or a '1% is fine.' The tells are things you can see.

The hawala offer deserves its own line: someone promising to move your money abroad faster and at a better rate, outside the banking system, is offering you a FEMA violation with no bank and no RBI to appeal to if it evaporates. The USD 1 million NRO road we walked earlier is slower and duller — and it's the one where your money is actually protected.

Maybe you're reading this after the fact. The full ₹17-lakh-style TDS was already withheld and no one mentioned a certificate. Or a relative did something with a POA you now regret giving. Or your remittance is stuck and a stranger is offering a 'faster' way. First, set the self-blame down. These rules are genuinely opaque, they changed recently, and you were abroad relying on people who should have known better. Being caught out here is ordinary, not stupid.

• Too much TDS was withheld → you have NOT lost that money. File your Indian income-tax return for the year, show the real gain, and claim the excess as a refund. It's slower than a Section 197 certificate would have been, but the ₹6,75,350-type overage comes back. Next sale, apply for the certificate first.
• A POA was misused → revoke it in writing immediately and put the revocation on record with the sub-registrar; then report the misuse to the police / Economic Offences Wing and, if a sale or mortgage was registered off it, contest that transfer — a GPA sale doesn't convey clean title, which is your opening.
• Repatriation stalled → work the banking channel, not around it. Push through your bank's NRI grievance cell, get the 15CA/15CB sorted with a CA, and escalate to the RBI if the bank sits on it. A legitimate remittance under the cap will clear; an off-channel shortcut is how you'd actually lose it.
• Then report it for the next person → an acknowledged complaint (grievance number, FIR, RBI reference) is what turns your bad week into a paper trail that protects the next NRI in your position.

The theme across all four: almost nothing here is truly final. Over-withholding is refundable, a misused POA is revocable and contestable, and a stalled-but-legal remittance is unstickable. What's hard to undo is a shortcut taken in a panic — so slow down and use the channels.

You don't have to hold all of this in your head from Dubai. There's a ladder — start at the top, climb only as far as you need.

The questions NRIs actually ask, in plain answers — paraphrased from the recurring ones, not any single person's.

• Can I buy agricultural land as an NRI? — No. FEMA lets you buy residential and commercial property freely, but never agricultural land, a farmhouse, or a plantation. You can only come to own those by inheritance, never by purchase or gift.
• Why is SO much tax deducted when I sell? — Because Section 195 withholds on your whole sale price, not on your profit — roughly 13% to 14.95% of the gross for a long-term sale. It over-collects because the buyer can't compute your real gain.
• What's a 'lower-TDS certificate'? — A Section 197 certificate (applied for in Form 13, before the sale). It tells the buyer to withhold only your real tax on the gain instead of the flat rate on the whole price. For Reena that's ₹10,43,900 instead of ₹17,19,250.
• How do I actually take the money abroad? — From your NRO account, up to USD 1 million per financial year, using Form 15CA (your declaration) and Form 15CB (a CA's certificate). Money in an NRE account has no cap.
• My buyer says he'll just deduct 1%, like a normal sale — is that right? — No. That 1% (Section 194-IA) is for RESIDENT sellers. An NRI sale is Section 195 on the gross, and the buyer needs a TAN. If he's planning on 1%, he's about to under-deduct and create a problem for both of you.
• Do I have to be in India to sell? — No. A properly made power of attorney lets a trusted person act for you — but scope it narrowly (this property, this power), get it apostilled or consular-attested, and have it adjudicated, stamped within three months, and registered.
• I pay no tax in Dubai — doesn't the DTAA make my Indian tax disappear? — No. Article 13 of the India–UAE DTAA keeps property gains taxable in India. The treaty prevents the SAME gain being taxed twice; it doesn't erase India's tax.
• Can I still use the capital-gains exemptions? — Yes. NRIs can claim Sections 54/54F/54EC (Lesson 36) — reinvest in a house or in specified bonds. Put the exemption into your Form 13 and the certified withholding rate can fall further, even to nil.
• A relative offered to sell it on a general POA — simpler, no? — Risky. A broad, open-ended POA is exactly the instrument NRI-property fraud runs on. Keep it narrow, time-bound, and registered; name the property and the single power.
• The buyer already withheld too much — is it gone? — No. File your Indian return, show the real gain, and claim the excess as a refund. It's slow, especially from abroad — which is why the Section 197 certificate, obtained first, is worth the effort.

Put the whole sale in your hands. The calculator below is pre-filled with Reena's numbers — a ₹1,15,00,000 sale and a ₹42,00,000 cost. Watch the buyer withhold ₹17,19,250 on the whole price while her real tax is only ₹10,43,900, and watch a Section 197 certificate free the ₹6,75,350 difference. Then clear it and put in your own sale to see your own three numbers: what's withheld, what you owe, and what comes home.

The lesson in the widget: the gap between the red number (TDS on the gross) and the teal one (your real tax) is the cash a Section 197 certificate keeps in your hands rather than the government's. Push the sale value up past ₹1 crore and the effective rate ticks to 14.95%; drop it below ₹50 lakh and it falls to 13%. And unless your sale is enormous, the repatriable figure stays comfortably inside the USD 1 million ceiling. If you can predict which way each number moves before you type, you've got this lesson.