🏠 Introduction

India has always been a preferred destination for Non-Resident Indians (NRIs) seeking to invest in real estate. Whether it is buying residential property, maintaining ancestral assets, or planning long-term investments, NRIs must navigate a specific legal framework. The Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA) lay down the rules that govern these investments. Understanding these provisions is crucial to ensure that investments are compliant and secure.

📌 What Properties Can NRIs Buy?

• Allowed: NRIs can purchase residential and commercial properties in India without prior approval from RBI.

• Not Allowed: Purchase of agricultural land, plantation property, or farmhouses is prohibited. Such transfers can only be done through inheritance or special approval.

💰 Mode of Payment

• Payments must be made through banking channels in India.

• Funds can be remitted via inward remittance or using NRE/NRO/FCNR accounts.

• Payments cannot be made in foreign currency or traveler’s cheques directly.

🏦 Repatriation of Sale Proceeds

• If an NRI sells property, the repatriation of sale proceeds is subject to FEMA rules.

• For property purchased using funds from NRE/FCNR accounts, proceeds can usually be repatriated.

• For properties acquired through inheritance or gift, repatriation is allowed up to USD 1 million per financial year, subject to submission of necessary documents.

📜 FEMA Compliance – Key Points

1. Title Verification: Ensure the seller has a clear title and there are no encumbrances.

2. Reporting Requirements: Transactions must be in compliance with FEMA guidelines to avoid penalties.

3. Power of Attorney (POA): NRIs can appoint a trusted representative in India for execution of documents, but the POA must be duly notarized and attested by the Indian Embassy/Consulate.

🏛️ Taxation Aspects

• Rental Income: Taxable in India, with TDS deducted at source.

• Capital Gains: Applicable on sale of property, with indexation benefits available for long-term holdings.

• Double Taxation Avoidance Agreements (DTAA): NRIs can benefit from DTAA to avoid paying tax twice, once in India and once abroad.

⚖️ Case Law & Judicial View

The Supreme Court of India in Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana (2012) clarified that property transactions must be completed by registered sale deeds and not merely by GPA/POA transfers, ensuring greater protection for buyers, including NRIs.

✅ Conclusion

For NRIs, real estate investments in India remain promising, but compliance with RBI and FEMA regulations is non-negotiable. With proper planning, documentation, and legal support, NRIs can secure their property interests while ensuring smooth repatriation and tax compliance.