NRI Property in Bangalore: FEMA Rules on Buying, Selling and Repatriation
Non-resident Indians and Overseas Citizens of India buy homes in Bangalore under a separate set of rules from resident buyers. The Foreign Exchange Management Act (FEMA) decides what they may buy and how they must pay, while the income tax law decides how a later sale is taxed. This guide covers the buying rules, the funding route, the tax on a sale and how much of the money can go back abroad.
What an NRI or OCI May Buy
Under the FEMA (Non-debt Instruments) Rules, 2019, an NRI or OCI cardholder may buy residential and commercial property in India without any approval from the Reserve Bank of India. There is no limit on the number of flats, houses or offices. The one firm exclusion is agricultural land, plantation property and farm houses.
The exclusion turns on the land's legal status, not on how it looks. A plot sold as a "farm land" project, or a site on revenue land that has not been converted for residential use, is off limits. Before paying for any plot on the edges of Bangalore, the land conversion order and the layout approval should be checked.
Gifts and inheritance
An NRI or OCI may also receive residential or commercial property as a gift from a relative, whether the relative lives in India or abroad. Any property, including agricultural land, may be inherited from a person who held it lawfully. Agricultural land received that way can be kept or sold, but a new purchase of such land stays barred.
How the Purchase Must Be Paid For
The price must reach the seller through normal banking channels. The permitted routes are these:
- Money remitted to India from abroad through a bank.
- Funds held in an NRE (Non-Resident External) account.
- Funds held in an FCNR (Foreign Currency Non-Resident) deposit.
- Funds held in an NRO (Non-Resident Ordinary) account.
Payment by traveller's cheques or foreign currency notes is not allowed. The route matters later, because money brought in through remittances or NRE and FCNR accounts can be sent back abroad on a sale. NRO funds, which usually come from income earned in India, fall under a tighter limit.
Home loans for NRI buyers
Banks and housing finance companies lend to NRIs for buying a home in India. The loan is repaid through remittances from abroad, from NRE or NRO accounts, or from rent earned on the property. Repayments made in foreign exchange or from NRE and FCNR accounts count as foreign exchange paid for the property. The EMI calculator helps size the monthly outgo before applying.
Paperwork for a Buyer Living Abroad
An NRI needs a PAN to buy, sell or earn rent from property in India. Many buyers cannot attend every step in person, so they appoint a relative or adviser in Bangalore through a power of attorney. The document should name the property and the acts it covers, such as signing the sale deed and registering it.
A power of attorney signed abroad is usually attested at an Indian embassy or consulate, or apostilled where the country allows. It must then be stamped in Karnataka once it reaches India, before it is used at the sub-registrar office. A narrowly drawn document, in the name of someone trusted, is safer than a broad general authority.
Selling: Tax and TDS
When an NRI sells, the gain is taxed in India. A property held for more than 24 months gives a long-term gain, taxed at 12.5% plus surcharge and cess, without indexation. A property held for 24 months or less gives a short-term gain, taxed at the seller's slab rates.
The buyer must deduct tax at source before paying an NRI seller. This rule, earlier in Section 195 of the Income-tax Act, 1961, is now part of Section 393 of the Income-tax Act, 2025, in force since 1 April 2026. The deduction runs at the capital gains rates above, not the 1% that applies when the seller is a resident.
Because buyers often deduct on the full price, an NRI seller with a small gain can apply to the tax department for a lower deduction certificate before the sale. From 1 October 2026, a resident individual or HUF buying from an NRI may deposit this TDS using a PAN, without a separate TAN. The exemptions for reinvesting a long-term gain in another house are open to NRIs as well.
Repatriation: Taking the Money Abroad
Repatriation is where the original funding route pays off. Under the Reserve Bank's rules on immovable property, an NRI or OCI may send abroad the sale proceeds of a property bought lawfully, up to the amount originally paid in foreign exchange. For residential property, this route covers no more than two properties.
Any amount above that limit, and the proceeds of property bought from NRO funds, are first credited to the NRO account. From there an NRI may remit up to USD 1 million in each financial year, from April to March. That ceiling covers all NRO remittances in the year, including the sale proceeds of inherited property.
Forms for the remittance
The bank sends money abroad only after the seller files the required tax forms online. From 1 April 2026, Form 15CA and Form 15CB were replaced by Form 145 and Form 146 under the new income tax rules. Form 146 is the chartered accountant's certificate that tax has been paid on the amount being remitted.
Checklist Before an NRI Purchase
A few checks at the start save delays at the time of sale. These are the main ones:
- Confirm the property is residential or commercial, not agricultural land or a farm house.
- Pay through remittances or NRE and FCNR funds where possible, and keep every bank record.
- Check the title, approvals and RERA registration of the project or resale home.
- Draw up a specific power of attorney if the purchase will be handled in Bangalore by someone else.
- Keep the purchase deed, payment proofs and loan statements for the eventual repatriation.
- Plan the TDS and capital gains position well before any sale.
NRI buyers looking at new or ready homes across Bangalore can find more on how we work with overseas clients on our NRI page. The rules above set the frame, but a chartered accountant should review the tax position of each sale.
