Learn 5 crucial NRI property rights and inheritance laws in India. Avoid costly mistakes in buying, inheriting, or selling property. Get expert legal guidance on RBI rules, TDS, POA, and repatriation.
NRI Property Rights and Inheritance Laws in India
NRIs and OCIs can (with rules) buy, hold, rent, and sell immovable property in India — but there are important restrictions, tax traps, and RBI/FEMA rules around payment, inheritance, and repatriation. This guide explains the law, outlines practical steps, and describes the role of a property lawyer for NRIs.
What NRIs can and cannot buy
- Allowed: NRIs/OCIs may acquire residential and commercial immovable property in India. Payment and acquisition must follow FEMA/RBI rules (payment via banking channels / NRE, NRO, or FCNR accounts).
- Not (generally) allowed: NRIs/OCIs cannot directly purchase agricultural land, plantation property, or farmhouses — with narrow exceptions for inheritance or gifts under regulation and RBI permission in some cases.
Practical takeaway: always check property classification (residential vs agricultural) before contracting to buy.
How to pay (permitted modes)
- Payment for property must be in Indian rupees and routed through normal banking channels: inward remittance, or debit to NRE / NRO / FCNR(B) accounts held in India. Payments in foreign currency notes, traveller’s cheques, or cash are not permitted.
Repatriation of sale proceeds & RBI caps
- Repatriation cap: NRIs may repatriate up to USD 1 million per financial year out of balances held in NRO accounts (this includes sale proceeds of property or inherited assets), subject to bank checks and a CA certificate in the prescribed format.
- Residential property cap: Repatriation of sale proceeds is restricted to a maximum of two residential properties purchased out of foreign exchange, subject to conditions.
Taxes & TDS when an NRI sells property (simple guide)
- Capital gains tax applies to the sale of immovable property. If the property is held >24 months, it’s a long-term capital asset; indexation benefits apply. For NRIs, the buyer is typically required to deduct TDS at the prescribed rates at the time of purchase — practical rates differ for short-term and long-term gains (buyer’s TDS obligations and exact rates should be verified with a tax advisor).
Practical step: consult a tax specialist before sale to calculate withholding (TDS), claim certificates and plan repatriation.
Inheritance, wills, probate, and letters of administration
- Which law applies? Inheritance depends on the deceased’s religion/civil status: the Hindu Succession Act, 1956 (for Hindus) and the Indian Succession Act, 1925 (for Christians, Parsis, and others) set the default intestacy rules. If the deceased left a valid will, estate distribution follows the will, subject to probate rules.
- Probate / Ancillary probate: If a will was executed abroad, the executor usually seeks ancillary probate in India or applies for probate/letters of administration in the Indian court to transfer title. Without probate/letters, buyers and registrars may not accept transfers.
Power of Attorney (POA): how NRIs should use it — and the caution
- POA helps NRIs manage property without being in India (rent, repair, sale), but it is not a substitute for a registered sale deed. The Supreme Court has ruled that a General Power of Attorney (GPA) cannot, by itself, transfer title — a registered sale deed is needed for valid transfer of immovable property. Use a specific, well-drafted, notarised & consular-attested POA, and register it in India if it’s executed for the sale of property (many registrars require registration for POAs used in sales).
Practical tip: use a Specific POA (not GPA), get it attested at the Indian consulate, and register it at the sub-registrar in India before actioning major transactions.
Step-by-step: How an NRI should buy property in India (practical checklist)
- Title due diligence — lawyer checks title chain, encumbrances, pending litigation, and approvals.
- Confirm land classification — ensure it’s not agricultural/plantation/farmhouse (or check whether gift/inheritance exception applies).
- Payment route — arrange funds via inward remittance or NRE/NRO/FCNR bank account; do not pay in cash/foreign currency.
- Agreement to sell — negotiate terms, earnest money via bank transfer, clear default & completion timelines.
- Stamp duty & registration — pay stamp duty and register the sale deed at the local sub-registrar (registration is the conclusive evidence of title).
- Loan/mortgage (if any) — banks offer NRI home loans; repayments must be routed through NRE/NRO as per bank rules.
- Post-sale formalities — mutation, property tax update (local municipal rules), rent filings if leased.
Step-by-step: How inheritance (foreign will) typically works
- Locate the original will (if any) and the Indian assets list.
- Obtain probate/letters (ancillary probate) — the executor applies to an Indian court to obtain probate/recognition; foreign probate documents may need attestation and translation.
- Transfer/mutation — with probate/letters, transfer title in land records, and register property in heirs’ names.
- Repatriation or sale — if heirs are NRIs wishing to sell, follow RBI’s repatriation procedures (CA certificate, limits).
Common NRI pitfalls & how a lawyer helps
- Buying land without checking the agricultural status → the purchase gets blocked. Lawyers verify land classification.
- Relying on an unregistered GPA for sale → title disputes. Lawyers draft specific POAs and ensure registration.
- Ignoring TDS / capital gains implications → buyer or seller faces penalties. Lawyers coordinate with tax advisors and obtain certificates.
- Improper repatriation paperwork → bank refuses outward remittance. Lawyers prepare CA certificates and liaise with banks.
FAQ (short)
Can an NRI inherit agricultural land in India?
A: Generally, NRIs cannot purchase agricultural land, but they can inherit agricultural land from a resident Indian in many cases (subject to RBI/FEMA rules and occasional state restrictions). Always confirm with counsel.
Q: How much can I repatriate from the sale of my Indian property?
A: Repatriation is subject to RBI caps — typically up to USD 1 million per financial year from NRO balances and special rules for residential properties bought out of foreign exchange (max two such properties for repatriation).
Selling, buying, or inheriting property from overseas is legally and administratively sensitive. Book a property review — get title checks, tax estimates, repatriation planning, and secure POA drafting from an experienced NRI property lawyer
