Key Takeaways
- NRIs and OCI cardholders may freely buy residential and commercial immovable property in India — no RBI approval needed, no limit on the number of properties.
- They may not purchase agricultural land, plantation property or a farmhouse. This prohibition flows from Section 6 of FEMA 1999 and the rules and RBI directions made under it.
- An NRI or OCI can still acquire agricultural land by inheritance, and by gift from a person resident in India — not by purchase, and not by gift from another non-resident.
- Payment must move through banking channels — NRE, NRO or FCNR(B) accounts, or inward remittance. Cash, hand-carried foreign currency and traveller’s cheques are not permitted modes.
- Repatriation of sale proceeds funded from foreign-currency sources is allowed, but for residential property only up to two such properties; NRO-funded repatriation runs through the USD 1 million per financial year window under the RBI Master Direction on Remittance of Assets.
- If you buy from an NRI seller, you are the one exposed — TDS under Section 195 is the buyer’s liability, not the seller’s.
Direct answer: Under FEMA 1999 and the RBI directions issued under it, an NRI or OCI cardholder may buy any residential or commercial immovable property in India without approval. They may not buy agricultural land, plantation property or a farmhouse. That single line resolves the vast majority of NRI land queries — but the exceptions, the funding rules and the exit route are where deals actually break. This guide sets out precisely what is allowed, what is banned, and the compliance traps that turn a clean purchase into a FEMA problem years later.
The Statutory Basis: Why the Restriction Exists
Section 6 of the Foreign Exchange Management Act, 1999 empowers the Reserve Bank of India to regulate or prohibit the acquisition and transfer of immovable property in India by persons resident outside India. The operative rules are the FEMA (Non-debt Instruments) Rules and the RBI’s Master Direction on Acquisition and Transfer of Immovable Property in India.
The policy logic is not about NRIs specifically. Agricultural land in India carries a layered regime — ceiling laws, tenancy laws, and in Maharashtra the agriculturist-status requirement under the Bombay Tenancy and Agricultural Lands Act. The FEMA prohibition sits on top of that, preserving agricultural land for cultivation and preventing capital inflows from bidding farmland out of agrarian use. The state-law side of the same question — who can buy agricultural land in Maharashtra — applies to residents and non-residents alike, and an NRI needs to clear both gates.
Critically, an NRI is not treated as a foreign national for this purpose. A foreign citizen who is not an OCI faces a far stricter regime. NRIs and OCIs occupy a favoured middle position — near-resident rights on housing and commercial stock, a hard wall on farmland.
Permitted vs Prohibited: The Complete Table
| Transaction | NRI / OCI position | Notes |
|---|---|---|
| Purchase of residential property (flat, house, plot in a sanctioned layout) | Permitted | No RBI approval. No cap on number of properties. |
| Purchase of commercial property (office, shop, warehouse, commercial plot) | Permitted | Same footing as residential. |
| Purchase of agricultural land | Prohibited | Applies regardless of intended use or later conversion plans. |
| Purchase of plantation property | Prohibited | Tea, coffee, rubber and similar estates. |
| Purchase of a farmhouse | Prohibited | The prohibition attaches to the character of the property. |
| Inheritance of agricultural land, farmhouse or plantation | Permitted | By succession, testamentary or intestate, from a person resident in India. |
| Gift of agricultural land, farmhouse or plantation | Permitted only from a person resident in India | A gift of such property from another NRI or OCI is not permitted. |
| Gift of residential or commercial property | Permitted | From a resident, or from an NRI/OCI relative. |
| Retaining farmland owned before becoming non-resident | Permitted | Property lawfully held while resident may continue to be held. |
| Sale of agricultural land held by an NRI or OCI | Only to a person resident in India | The exit is narrower than the entry. Plan for it. |
The Conversion Trap
The most common failed structure we see: an NRI identifies rural land, receives an oral assurance that non-agricultural conversion is “already in process”, and pays an advance. Until the competent authority actually passes the NA order and the revenue record reflects the changed classification, the land remains agricultural — and buying it is a FEMA contravention. An in-principle assurance, a pending file number, or a layout drawing is not conversion. Understand exactly what changes when land goes from agricultural to NA, then verify the classification in the 7/12 extract and read the NA order itself before a rupee moves.
What Happens If You Buy Anyway
Contraventions of FEMA are dealt with under Section 13, which provides for penalty proceedings and, where the amount is quantifiable, penalty up to three times the sum involved. The current text of Section 13 should be read in the bare Act linked in the Sources below, since penalty provisions are amended from time to time. Enforcement Directorate proceedings can also seek to have the property itself dealt with. Separately, a title acquired in contravention is a permanently unmarketable title — the practical loss usually exceeds the penalty.
Funding the Purchase: The Rules That Actually Get Broken
The prohibition on what you buy gets attention. The rules on how you pay get ignored, and they are enforced.
- Route funds through banking channels only. Payment must come by way of inward remittance through normal banking channels, or from funds held in an NRE, NRO or FCNR(B) account maintained with an authorised dealer bank in India.
- Do not pay in foreign currency directly. Handing the seller foreign currency notes or traveller’s cheques is not a permitted mode, however convenient it seems at a site visit.
- Keep the source account documented. Whether the money came from NRE or NRO determines your repatriation rights years later. Retain the foreign inward remittance certificates and bank statements permanently — reconstructing them a decade on is close to impossible.
- Pay all Indian taxes and duties in India. Stamp duty and registration charges must be paid domestically; there is no offshore settlement of Indian statutory dues.
- Use a home loan properly if you take one. Rupee loans from Indian banks and housing finance companies are available to NRIs for permitted property, and repayment must come through the same permitted channels.
Repatriation: Getting the Money Out Again
This is the question most NRI buyers ask last and should ask first.
Where the purchase was funded from foreign currency sources
If the property was acquired using inward remittance or funds held in an NRE or FCNR(B) account, sale proceeds may be repatriated up to the amount paid from those sources. For residential property, this repatriation facility is available in respect of not more than two such properties.
Where the purchase was funded from an NRO account
Proceeds route through the NRO remittance facility, under which an NRI may remit up to USD 1 million per financial year out of balances in NRO accounts, subject to tax compliance and the prescribed certification — see the RBI Master Direction on Remittance of Assets linked in the Sources below. The certification is typically an online Form 15CA together with a chartered accountant’s certificate in Form 15CB, but the applicable forms, thresholds and exemptions are revised periodically; confirm the current requirement with your bank and your chartered accountant. Balances above the annual ceiling are remitted in subsequent financial years.
The planning point is obvious once stated: if you intend to take capital back out one day, fund the purchase from NRE or by direct inward remittance, and keep the paper trail. NRO funding is not wrong — it is simply slower and more constrained on exit.
TDS: The Trap Sits With the Buyer
Please read this first. Income-tax rates, holding periods, thresholds, forms and deposit procedures change with every Finance Act and with subordinate notifications issued in between. Nothing in this section is a current rate. Treat it as a map of the machinery, and confirm the position applicable on your transaction date with a chartered accountant before you deduct or deposit anything. Deducting the wrong amount is the buyer’s problem, not the seller’s.
When the seller is an NRI, tax is deducted under Section 195 of the Income-tax Act, 1961 — not under Section 194-IA, which applies to resident sellers. This distinction costs buyers real money every year.
Under Section 195 the deduction is made at the rates applicable to the seller’s capital gains, grossed up with any applicable surcharge and cess. The long-term capital gains regime for immovable property, including the rate and the availability of indexation, was amended in 2024 and has been amended repeatedly before that, so the effective deduction rate must be established from the law in force on your transaction date rather than from any figure quoted in an article. The liability to deduct and deposit correctly is the buyer’s; a shortfall is recovered from the buyer with interest and penalty, long after the seller has left the jurisdiction.
The practical protocol for buying from an NRI seller
- Establish the seller’s residential status in writing, with passport and visa evidence — do not rely on an Indian address printed on the title deed.
- Comply with the deduction machinery under Section 195 and deposit within the prescribed time. Confirm the current TAN or PAN requirement, the rate and the deposit mechanism with your chartered accountant, as these have been under active amendment.
- Ask the seller to obtain a certificate for lower or nil deduction under Section 197 (at the time of writing, the application is made in Form 13 — verify the current form and procedure) if the actual capital gain is materially lower than the default deduction. Deduct at the default rate until that certificate is physically in your hands.
- Issue the TDS certificate and file the TDS return within the prescribed timelines. Retain proof of deposit with the title file permanently.
Power of Attorney: Necessary, and Frequently Abused
Most NRI purchases run on a Power of Attorney because the buyer cannot attend registration. This is legitimate and routine. The risks are procedural, and they are avoidable.
- A PoA executed abroad should be executed before the Indian Mission or a notary in the country of residence, apostilled or consularised as applicable, and then stamped in India within the prescribed period of its receipt in India.
- Draft it narrowly: identify the specific property by survey number and CTS number, name the specific transaction, and put an expiry date on it. A general PoA authorising the holder to deal with “all my properties” is an open cheque.
- A PoA does not transfer title. A “GPA sale” is not a conveyance — insist on a registered sale deed in your own name, and understand why only a sale deed actually transfers ownership.
- Revoke the PoA in writing and register the revocation once the transaction closes. Unrevoked PoAs are among the most common sources of NRI property litigation.
What To Do Before You Sign
- Confirm classification: pull the 7/12 extract or property card and confirm the land is not agricultural. If it is, stop.
- Confirm the NA order and the sanctioned layout where a plot is involved.
- Run a 30-year title search and obtain an advocate’s title report from a lawyer you appoint, not from the seller’s channel partner.
- Confirm the seller’s residential status and fix the TDS treatment with a chartered accountant before the agreement is drafted.
- Fund only from NRE, NRO, FCNR(B) or direct inward remittance, and retain the certificates.
- Register the sale deed and complete mutation in the revenue record — an unregistered agreement and an unmutated record are both incomplete acquisitions.
Frequently Asked Questions
Can an NRI buy agricultural land in India?
No. An NRI or OCI cardholder cannot purchase agricultural land, plantation property or a farmhouse in India. The restriction applies regardless of the intended use, the price, or a stated plan to convert the land later. The RBI retains residual discretionary power to permit acquisition in exceptional cases, but such approvals are rare and cannot be assumed.
Can an NRI inherit agricultural land in India?
Yes. Acquisition by inheritance is treated differently from purchase. An NRI or OCI may inherit agricultural land, a plantation or a farmhouse from a person resident in India, whether under a will or on intestacy. Such property may also be received as a gift from a person resident in India. A gift of agricultural land from one non-resident to another is not permitted.
How many properties can an NRI own in India?
There is no limit on the number of residential or commercial properties an NRI or OCI may own in India. The limit that does exist is on repatriation, not ownership: the facility to repatriate sale proceeds of residential property funded from foreign currency sources is available for not more than two such properties.
Who deducts TDS when a buyer purchases property from an NRI seller?
The buyer deducts. Where the seller is a non-resident, deduction is made under Section 195 of the Income-tax Act at the rates applicable to the seller’s capital gains, plus surcharge and cess, and not under Section 194-IA. The applicable rate changes with each Finance Act, so it must be confirmed with a chartered accountant for the transaction date rather than assumed. Failure to deduct correctly is recovered from the buyer with interest and penalty, so the buyer should verify the seller’s residential status in writing before drafting the agreement.
Can an NRI sell inherited agricultural land in India?
An NRI or OCI holding agricultural land, plantation property or a farmhouse may transfer it only to a person resident in India. The buyer must also satisfy any state-level eligibility conditions, which in Maharashtra can include agriculturist status. Plan the exit before accepting the inheritance, because the pool of eligible buyers is narrower than for ordinary land.
Sources
- Reserve Bank of India — Master Direction on Acquisition and Transfer of Immovable Property in India
- Reserve Bank of India — FAQs on Acquisition and Transfer of Immovable Property in India
- Foreign Exchange Management Act, 1999 (India Code)
- Reserve Bank of India — Master Direction on Remittance of Assets (USD 1 million per financial year NRO facility)
Related Reading
- Maharashtra Land Records Portals: The Complete Directory of Government Websites
- Benami Property Risks: Legal Protection for NRIs
- Power of Attorney in Land Transactions: Uses, Risks and Legal Limits in Maharashtra
- First-Time Land Buyer’s Checklist: 10 Due Diligence Steps
- Who Can Buy Agricultural Land in Maharashtra: Rules, Eligibility and Penalties
- NA vs Agricultural Land in Maharashtra: What Actually Changes
- 30-Year Title Search and Advocate’s Title Report: Process, Cost and Red Flags
- Infrastructure-Triggered Land Appreciation: Karjat Corridor Case Study
- Contact THE EDGE
Work With THE EDGE
THE EDGE is a premium master brand operating across four verticals — Land Development, Spotlight, Corporate Advisory and E-Learning — all powered by our shared Land Intelligence foundation. For NRI buyers, that means classification checks, title diligence, FEMA-compliant structuring and TDS treatment handled as one workstream rather than four disconnected opinions.
If you are evaluating land in Maharashtra from abroad, get in touch with our team before you sign anything.
Written by Girish Chhalwani, Founder & CEO, THE EDGE — 20+ years in Maharashtra land development and land intelligence. This article is general information, not legal, tax or investment advice. Tax rates and thresholds in particular change with each Finance Act. Verify the current position with the RBI Master Directions, the bare Act and your own legal and tax advisers before transacting.
