Most guidance written for NRIs focuses on selling property in India -- the TDS deducted, the exemptions claimed, the proceeds repatriated. Buying gets far less attention, which is unfortunate, because two separate regimes quietly govern it: FEMA decides what you're allowed to buy in the first place, and the Income-tax Act, 2025 decides what you owe the tax department as the person paying for it.
Confuse the two, or assume the familiar 1% TDS you've heard about from resident friends applies to you as well, and you can end up under-withheld, over-penalized, or holding a property FEMA never let you acquire in the first place.
What FEMA lets you buy -- and what it doesn't
Under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 -- the FEMA regulations governing cross-border property transactions -- an NRI or OCI can acquire as many residential or commercial properties in India as they like, funded the right way, with no prior RBI approval required. What they cannot acquire by direct purchase is agricultural land, plantation property, or a farmhouse, regardless of which state it's in or how it's currently zoned.
The classification that matters is the land's revenue record, not what's built on it -- a well-appointed weekend home outside a metro can still sit on agricultural-use land, which is precisely how well-meaning NRIs end up on the wrong side of this rule. Structuring around it by buying in a resident relative's name while funding and controlling the purchase yourself doesn't avoid the problem; it adds one, since that arrangement risks being treated as a benami transaction under the Benami Transactions (Prohibition) Act, 1988, with the property itself liable to confiscation.
- Residential or commercial property: freely purchasable, no RBI approval needed, no cap on the number of properties.
- Agricultural land, plantation property, farmhouse: cannot be purchased directly, even if funds are routed correctly.
- Inherited agricultural land: can be held, but if later sold, it can only be sold to a person resident in India, not to another NRI or OCI.
- Gifted agricultural land: can be received only as a gift from a resident relative, subject to the same restriction on onward sale.
Funding the purchase
Consideration for a permitted purchase has to move through banking channels -- an inward remittance from abroad, or a debit to an NRE, NRO, or FCNR(B) account. Cash, traveller's cheques, or funds routed outside the banking system don't satisfy the FEMA requirement, independent of whatever the income-tax side of the transaction requires.
The TDS trap: what changes when you're the buyer, not the seller
Resident-to-resident property deals run on a familiar, low-friction rule: Section 393(1) of the Income-tax Act, 2025 (the direct successor to the old Section 194-IA) requires the buyer to withhold 1% of the sale consideration, only if it's Rs 50 lakh or more, reported on Form 26QB (renumbered Form 141 under the 2025 Act) using nothing more than PAN. Many NRI buyers assume this is the whole story, because it's the version they've heard about from resident friends and family who've bought property.
It isn't, once the seller is a non-resident -- and this applies whether the buyer is resident or NRI. Section 393(1) doesn't apply at all in that case; instead, Section 393(2), the general non-resident-withholding provision covering S. No. 17 of the Act's TDS schedule (the successor to old Section 195), takes over. Under it there's no Rs 50 lakh threshold -- withholding is required on any amount -- and, absent a lower-deduction certificate from the seller, many buyers default to withholding on the full sale consideration at the applicable capital-gains rate (currently 12.5% on long-term gains, 20% on short-term, both plus surcharge and cess), rather than a flat 1%, because they have no reliable way to independently verify the seller's cost basis and actual gain.
The compliance mechanics differ too: the buyer needs a TAN, not just a PAN; deducted tax is deposited by challan; and reporting goes through the quarterly Form 27Q (renumbered Form 144 under the 2025 Act) rather than the one-off Form 26QB, with Form 16A issued to the seller afterward. Buyers who skip this -- often because nobody flagged that the seller was an NRI, or because a resident co-owner's PAN made the transaction look domestic -- can be treated as an assessee-in-default for the shortfall, with interest running from the date withholding should have happened.
What this means in practice for you as the buyer
Before you sign anything, get a written declaration of the seller's residential status, and ask directly whether they hold a Section 395 lower-or-nil-TDS certificate (the successor to old Section 197) for this specific sale -- it changes your withholding obligation, not just theirs. If multiple people are buying together, each co-owner making payment needs their own TAN. And because none of this touches the FEMA question of what you're permitted to buy in the first place, run both checks before, not after, you've committed funds.