NRIs selling real estate in India: Understand the repatriation rules (2024)

As a Non-Resident Indian (NRI)/Overseas Citizen of India (OCI), you may sell any immovable property in India, including residential or commercial, to a person resident in India or another NRI/PIO/OCI. However, you must comply with the relevant Foreign Exchange Management Act (FEMA), 1999 regulations while repatriating the sale proceeds from India. Repatriation limits depend on your residential status, the method of acquiring the property and the source of funds. This guide outlines the permissible sale scenarios and the associated repatriation limits.

Repatriation of sale proceeds

If you intend to remit the sale proceeds of your Indian property, the rules for repatriation of funds will depend on factors including:

• Whether the property was purchased, gifted or inherited
• Source of funds used for acquiring the property
• Your residential status at the time of the property’s sale and purchase

Further, in all the mentioned scenarios, the repatriated amount will be net of any Taxes Deducted at Source (TDS) by the buyer. Before remitting the sale proceeds, you must comply with Form 15CA filing requirements. To learn more about the taxation rules for the sale of immovable property, please click here.

Sale of property by NRIs: Permissible scenarios

1. Selling property bought as a Resident Indian (RI)

• If you bought a property before you became an NRI, you can repatriate sales proceeds under the overall limit of USD 1 million per financial year (April–March). If you want to remit more than USD 1 million in a financial year, you should seek approval from the Reserve Bank of India (RBI) by applying through your authorised dealer (bank)

For instance, Sara, an NRI living in Canada, bought a house in Delhi, India, when she was an RI. Later, she sold the property for USD 2 million net of taxes. She can repatriate sale proceeds up to a limit of USD 1 million per financial year for all funds held in her Non-Resident Ordinary (NRO) account. This means that to repatriate USD 2 million, she will have to transfer funds from her NRO account over the course of at least two financial years. If she wishes to transfer the entire USD 2 million in the same financial year, she can do so by getting approval from the RBI.

2. Selling property bought as an NRI

For properties bought and sold after becoming an NRI, the repatriation limits depend on the source of funds used to purchase the property. If you have:

• Purchased the property with foreign currency or using your Non-Resident External (NRE)/Foreign Currency Non-Resident (FCNR (B)) accountsyou can repatriate the entire sale proceeds of the immovable property. It is important to note that repatriation of sale proceeds for residential property (other than agricultural land) is restricted to a maximum of two such properties in your lifetime. If you want to remit proceeds by selling more than 2 properties, you should seek the RBI’s approvalby applying through your authorised dealer (bank)
• Purchased the property using your NRO account or from Indian income, you can repatriate up to USD 1 million per financial year. This is applicable regardless of the number of properties sold. If you want to remit more than USD 1 million in a financial year, you should seek the RBI’s approval by applying through your authorised dealer (bank)

To understand this better, let's take the example of Pranav, an NRI, who bought five apartments in Mumbai, India, using the funds held in his NRE account. He subsequently decided to sell all the apartments. Since Pranav used non-resident funds held in his NRE account to purchase the property, he can freely repatriate the sale proceeds from two of the five properties sold. He cannot directly repatriate the sale proceeds from the remaining three properties. He will need RBI’s approval to do so.

Pranav’s brother, Vaibhav, another NRI, worked in India for several years before moving abroad. He used the Indian income deposited into his NRO account to purchase three properties in India. Vaibhav has now sold all three properties for USD 4 million net of taxes. Since he used his NRO account to purchase the properties, he can only repatriate up to USD 1 million each financial year. He can repatriate the balance amount from his NRO account over the next few financial years.

3. Property received as a gift or inheritance

As an NRI, you may inherit any immovable property and you can repatriate the sale proceeds upto USD 1 million per financial year. Further, as an NRI, you cannot receive agricultural land, plantation property or a farmhouse as a gift.

Let's look at the example of Shlok, an NRI residing in the United Kingdom (UK), who inherits a house in India from his father Akash, an RI. If Shlok decides to sell the house, he can repatriate the sale proceeds up to USD 1 million per financial year, even if Akash had previously used non-resident funds to purchase the house. However, in case he wants to remit more than USD 1 million in a financial year, he must seek the RBI’s approval by applying through his authorised dealer (bank).

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