Who can buy?
Under FEMA, NRIs and OCIs can freely purchase residential and commercial property. Restrictions:
- Cannot buy agricultural land, plantation, or farmhouses (unless inherited/gifted)
- Cannot buy in restricted areas (border zones, certain hill stations)
US citizens (without OCI) can buy ONLY if current Indian visa holder, NOT as tourist. OCI eligibility simplest workaround.
Funding the purchase
Options:
- NRE/NRO remittance: Standard
- LRS from another Indian resident (parents): Up to $250K/FY per person
- Direct wire US bank to seller: Allowed via FEMA with documentation
- Indian home loan: Major banks lend to NRIs. Repayable from NRE or USD remittance.
Documentation
Indian side:
- Sale agreement (₹ stamp duty value)
- Title verification + property survey
- Registration at sub-registrar office
- Form 26QB (TDS — 1% on resident sellers; 12.5%-20% on NRI sellers)
- PAN of buyer
US side:
- Bank wire receipts
- Source of funds (income tax returns, salary records)
- FBAR going forward if Indian bank account opened
TDS on purchase
Buying from NRI seller: TDS at 12.5%-20% of sale value mandatory. Failure can void sale.
Buying from resident seller: TDS at 1% if value > ₹50 lakh. Form 26QB.
US tax position
Buying Indian property NOT a US-taxable event. Basis = purchase price in USD (purchase-date FX).
Future taxable events:
- Rental income (Schedule E)
- Sale (Schedule D / Form 8949)
- Inheritance pass-through (Form 3520 for heirs)
FBAR / Form 8938
Property itself NOT directly FBAR-reportable (not a financial account).
But Indian bank account used (NRO, security deposit) IS FBAR-reportable.
Property tax (Indian)
Indian municipal property tax: Modest, varies by city. Paid in India, deductible against rental if property rented.
Tax planning before purchase
Considerations:
- Rental, personal use, or eventual resale?
- Family members will live in it? Rental dynamics change
- USD-INR outlook — buying when INR is weak is FX-positive
- Joint ownership with Indian spouse/parents — TDS rules and inheritance complications
Common buying mistakes for NRIs
- Not deducting TDS when buying from NRI seller (buyer liability)
- Funding via informal channels (hawala) — FEMA violation
- Using parents' resident accounts without documentation
- Not opening NRO account for rental income post-purchase
- Forgetting US basis calculation in USD for future sale
Post-purchase US disclosure
Year of purchase:
- Indian bank account (if newly opened) → FBAR if balance > $10K
- Form 8938 if foreign assets cross threshold
- No income tax event for purchase itself
Going forward:
- Annual FBAR
- Schedule E if rented
- Eventual Schedule D on sale
Practical advice
- Use a vetted Indian CA, especially for NRI-side compliance
- Document source of funds with wire receipts and US tax returns
- Open NRO account immediately for future rental
- Maintain USD-denominated basis log
- Consider title insurance (rare in India but available)
Explore our complete US Tax Return Guide to understand refunds, filing rules, and IRS procedures for NRIs.