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Non-Resident Indians (NRIs) are exploring the property investment options in the Indian real estate sector and the relaxation in norms by the Modi-Government is encouraging them to do so. But, the NRIs must be aware of FEMA guidelines before they finalize a property buying deal in India. So, here we elaborate everything about FEMA rules that every NRI must know:

What is FEMA Guideline?

FEMA is the Foreign Exchange Management Act, 1999 that consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.

FEMA Guideline for NRIs

  • The Foreign Exchange Management Act encloses law for property purchase by the Non-Resident Indians in India. The Reserve Bank of India has also pilant the norms to make property purchase by the NRIs in the country easier.
  • The FEMA has issued POIs i.e. Person of India card to the NRIs so that property investment/purchase by them in India can be made hassle-free. Similarly, the Government of India has also issued the guideline for the NRI property buyers that states an NRI can purchase a property unit but he/she is not permissible to buy any plantation/agricultural land or a farm house.
  • FEMA guideline also restricts the citizens of Bhutan, Nepal, Pakistan, Sri Lanka, Afghanistan, Bangladesh or Iran from acquiring/transferring properties in India. These people can only lease the immovable asset upto 5 years only without the consent of the Reserve bank of India.
  • FEMA guideline allows the Non-Resident Indians to invest either in Residential or Commercial property in India. Similarly, the NRIs can’t buy land in India but they can receive the same as a gift. The NRIs can also inherit the same as per the FEMA guideline.
  • The FEMA guideline states that the NRIs can only pay by remitting funds to India via regular banking avenues or funds kept in NRE or FCNR (B) or NRO accounts which are maintained in the country.
  • As per the FEMA guideline the NRIs cannot make payment through foreign currency notes or traveller’s cheque. The NRI is supposed to visit India to make payment.

FEMA Guideline for NRIs to Repay Home Loan

The Non-Resident Indians can avail 80% loan of the total unit value if they comprise with the FEMA rules. The NRI can repay the same via:

  • Regular banking channels i.e. inward remittances
  • Rental income earned from the property
  • Debit from the FCNR (B)/ NRO/ NRE account
  • NRIs can repay the loan amount through their close relatives according to the rules laid under Section 6 of the Companies Act of 1956. The close relatives can repay the home loan through their Indian bank account and they must credit the loan account held in the name of the NRI borrower.

FEMA, Tax and NRIs

  • The NRIs also come under the lens of Income-tax depart in India and thus the Non-Resident Indians who are yielding rental amount from the property, long-term gains or the short-term gains are due to pay Income tax according to the Indian laws.
  • In case of Short-term capital gain, the payable tax amount is applicable to the profit earned by selling a property within two years of its purchase. The capital gain in such case is accumulated on the basis of acquisition cost and the proceeds of sale.
  • In case of Long-term gain, the NRI holding property for more than two years comes under income tax scanner as these gains are taxable at 20 percent. The NRIs can claim tax exemption under Sections 54 F, 54 and 54 EC.
  • In case of under-construction property, the Non-Resident Indians are required to produce power of attorneys to their associates/relatives/trusted personnel for the final transactions.


The NRIs must hire a lawyer to complete all the formalities according to the laws as it protects them from falling in trap of any mischievous seller.