USA NRI Buying Property in India 2026 — FEMA, FATCA, Repatriation Guide

OCI vs NRI Status — Which One Are You?

Indian tax and foreign exchange law treat people differently based on citizenship and residency. Under Section 6 of the Income-tax Act, an individual is a "non-resident" for a financial year if they spent fewer than 182 days in India (and fewer than 60 days in that year combined with fewer than 365 days over the preceding four years, with caveats for Indian-origin individuals). NRIs in this sense include both Indian passport holders living in the US on H1B, L1, F1, or green card status, and US citizens who once held Indian citizenship and now carry an OCI card. For property purchase under FEMA, the relevant category is the broader definition: any "person resident outside India" of Indian origin, which captures both groups. OCI cardholders enjoy property rights nearly identical to NRIs except for one notable carve-out — OCI holders cannot vote, hold constitutional office, or buy agricultural land. If you are a US citizen without OCI and have no Indian passport history, you are a "foreign national of non-Indian origin" and need RBI prior approval before buying any property except by inheritance.

What Property US NRIs Can Buy (and What They Cannot)

The Foreign Exchange Management (Non-debt Instruments) Rules, 2019, Schedule II, list what an NRI or OCI cardholder can acquire in India. Permitted: any residential property (apartment, villa, plot intended for residential construction), any commercial property (office, retail, warehouse, hotel asset). Not permitted to buy: agricultural land, plantation property (tea estate, coffee estate, rubber plantation), and farmhouses. There is one important exception — an NRI or OCI can acquire any property type, including agricultural land, through inheritance from an Indian resident, or as a gift from a close relative (defined under Section 56(2) of the Income-tax Act). If you inherit agricultural land, you can hold it but you cannot sell it to another NRI; only an Indian resident can be the buyer. There is no upper limit on the number of residential or commercial properties an NRI can own in India, but repatriation rights are capped to two residential properties per lifetime.

Funding the Purchase — NRE, NRO, FCNR, and the FEMA-Compliant Inbound Route

All property purchases by NRIs must be funded through banking channels — never cash or hawala. The cleanest route is to wire USD from your US bank account directly to your Indian NRE (Non-Resident External) account, which converts at the prevailing rate and credits INR. From the NRE account, funds can be used to make the booking, pay stamp duty, and pay the builder via cheque or NEFT. NRE balances and any rental income earned on properties bought through NRE funds are freely repatriable back to the US without any cap. The NRO (Non-Resident Ordinary) account is used for income earned in India — rent, dividends, sale proceeds from non-NRE-funded properties — and is subject to the USD 1 million per year repatriation cap. FCNR (Foreign Currency Non-Resident) deposits in USD/EUR/GBP can also fund purchases without exchange-rate risk. For inbound remittances, your US bank may require RBI purpose code S0005 (purchase of immovable property by NRI) on the wire instructions, though most banks default-categorise NRE credits correctly. Avoid informal money-changer routes — they violate FEMA Section 3 and PMLA, and the property can be attached by the Enforcement Directorate.

NRI Home Loans from Indian Banks — Eligibility and Process

Most major Indian banks — ICICI Bank, HDFC, SBI, Axis Bank, Kotak Mahindra, Bank of Baroda — run dedicated NRI mortgage desks tuned for US-based borrowers. Eligibility documents typically required: copy of passport with valid US visa or OCI card, the last two US federal tax returns (Form 1040) with W-2 statements, three to six months of US bank statements showing salary credit, an employment verification letter from the US employer on company letterhead, and credit history (US FICO is increasingly accepted; some banks also request a CIBIL pull on any existing Indian credit). Loan-to-Value (LTV) is capped at 75-80% of the property value for self-occupied residences and 60-70% for investment / rental properties. Tenure is typically 20-25 years, with the loan ending by the borrower's age 60 or 70 depending on the bank. Interest rates for NRIs in 2026 sit between 8.5% and 9.5% per annum, floating, linked to the External Benchmark Lending Rate (EBLR). All disbursements happen in INR to the builder; you cannot draw the loan in USD. A resident Indian co-applicant (parent or sibling) or a Power of Attorney holder is usually required for documentation in the buyer's absence.

TDS on Purchase (Section 194-IA) — Your Obligation as Buyer

When you buy any property in India with a sale consideration above ₹50 lakh, Section 194-IA of the Income-tax Act requires you, as buyer, to deduct 1% TDS on the gross sale value and deposit it with the government. This applies regardless of whether the seller is a resident or NRI, though Section 195 (covered next) supersedes Section 194-IA for NRI sellers. The mechanism: at the time of payment to the seller (whether a single payment or instalments above the ₹50L cumulative threshold), withhold 1%, fill Form 26QB on the TIN-NSDL portal, pay the TDS within 30 days from the end of the month in which deduction was made, and issue Form 16B to the seller within 15 days of payment. The seller's PAN is mandatory — without it, TDS is deducted at 20%. Failure to deduct or deposit attracts interest at 1% per month under Section 201, and disallowance of the expense for the seller. Note: stamp duty value and consideration are both relevant — TDS applies on the higher of the two if they differ by more than 10% (Section 50C / 56(2)(x) cross-references).

TDS When You Sell as NRI (Section 195) — The 20% Withholding Trap

When an NRI sells Indian property, Section 195 of the Income-tax Act requires the buyer to withhold TDS at the income-tax rate applicable to the NRI seller — not the 1% applicable to resident sellers under Section 194-IA. For long-term capital gains (property held more than 24 months), the rate is 20% plus surcharge (10-37% depending on gain amount) plus 4% health and education cess — an effective rate between 22.88% and 28.5%. For short-term capital gains, TDS is 30% plus surcharge plus cess. Critically, this TDS is computed on the entire sale consideration, not just the gain, unless the seller obtains a Lower Deduction Certificate (LDC) under Section 197 from the jurisdictional Assessing Officer. The LDC process: file Form 13 online on the TRACES portal, attach computation of expected capital gain, indexed cost of acquisition, and supporting documents (purchase deed, improvement bills, valuation report if pre-2001 acquisition); the Assessing Officer issues a certificate authorising TDS at a lower rate (often closer to the actual tax liability of 10-15% on gain). Without an LDC, the buyer must withhold at the headline rate, and the NRI seller blocks significant working capital until refund through ITR filing. Start the LDC process at least 60-90 days before the planned sale date.

Repatriation of Sale Proceeds Back to the USA

Repatriating funds back to the US after a sale requires three things: a clean source-of-funds trail, Form 15CA + 15CB filings, and adherence to the USD 1 million annual cap from NRO accounts. If the property was originally purchased with NRE-account funds or via inward remittance from abroad, the original consideration in foreign currency equivalent is repatriable without the USD 1M cap; only the gain falls under the cap. If purchased with NRO / rupee funds (rental savings, inheritance), the entire post-tax sale proceed sits in NRO and is subject to USD 1M / financial year. Process flow: deposit sale proceeds (net of TDS) into NRO account → engage a Chartered Accountant to issue Form 15CB certifying that tax has been deducted or is not applicable → file Form 15CA Part C on the income-tax e-filing portal referencing the 15CB acknowledgement number → submit Form A2 (foreign exchange declaration) and the 15CA/15CB to your bank → bank wires to your US account, typically within 2-4 working days. RBI also permits repatriation of sale proceeds of a maximum of two residential properties per NRI in a lifetime. Inherited property has separate treatment — proceeds from inherited assets are repatriable up to USD 1M / year with documentary proof of inheritance (Will, succession certificate, or legal heir certificate).

FATCA and IRS Reporting Obligations in the USA

Buying property in India does not by itself create US tax obligations beyond the rental income already covered, but the bank accounts that hold the purchase funds and rental receipts do. FBAR (FinCEN Form 114) is required if the aggregate maximum value of all your non-US financial accounts — including NRE, NRO, FCNR, and any Indian mutual fund or PPF account — exceeds USD 10,000 at any point during the calendar year. FBAR is filed separately from your tax return, by April 15 (automatic extension to October 15), through the BSA E-Filing System; penalties for non-willful violations start at USD 10,000 per account per year. IRS Form 8938 (Statement of Specified Foreign Financial Assets) is filed with Form 1040 if your foreign financial assets exceed USD 50,000 on December 31 or USD 75,000 anytime during the year (USD 100,000 / 150,000 for married-filing-jointly). The Indian property — held directly in your name — is not a "specified foreign financial asset" for Form 8938 purposes, but a property held through an Indian LLP, partnership, or company would be. Rental income flows onto Schedule E of Form 1040 with depreciation under MACRS (30 years for foreign residential property under TCJA 2017), and Indian tax paid on the same income is creditable on Form 1116. The India-USA DTAA Article 25 prevents double taxation through the credit mechanism. Consult a US-licensed CPA familiar with FBAR/8938/Form 1116 mechanics — penalties for self-prepared errors are severe.

Key Numbers Reference Table

Frequently Asked Questions