An NRI or OCI cardholder selling a flat in India and sending the money abroad: the rules from 1 April 2026

A non-resident Indian (NRI) or an overseas citizen of India (OCI) cardholder may sell immovable property in India to a person resident in India, and the Reserve Bank of India's directions under the Foreign Exchange Management Act, 1999 (FEMA) let an authorised dealer bank send the money abroad, but each exit route has its own cap and conditions. For a sale in the tax year that began on 1 April 2026, the buyer's duty to withhold tax sits in section 393(2) of the Income-tax Act, 2025, long-term gains are taxed at 12.5 per cent under section 197, and remitting a Non-Resident (Ordinary) Rupee (NRO) account balance is limited to USD 1 million per financial year without the Reserve Bank's prior approval.

What changed on 1 April 2026?

The Income-tax Act, 2025 (No. 30 of 2025) says in section 1(3) that, save as otherwise provided, it comes into force on 1 April 2026, and section 536(1) repeals the Income-tax Act, 1961. A sale in the tax year 2026-27 is therefore governed by the 2025 Act, not section 195 of the 1961 Act.

The text read for this note is the Act as published in the Gazette of India on 21 August 2025, together with the Taxation and Other Laws (Amendment) Act, 2026 (No. 21 of 2026) of 17 August 2026. It does not touch sections 197, 393, 395 or 397. We have not read the Finance Act, 2026, so the surcharge and health and education cess that sit on top of the rates below are not stated here.

What does FEMA allow an NRI or an OCI to sell, and to whom?

The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 of 17 October 2019 replaced the 2018 regulations on immovable property. The Reserve Bank's Master Direction No. 12/2015-16, updated to 1 September 2022, compiles the working rules. Under paragraph 3.2 of its Part II, an NRI or an OCI may transfer any immovable property in India to a person resident in India. Transfer to another NRI or OCI is permitted except for agricultural land, plantation property or a farmhouse.

An NRI is a person resident outside India who is a citizen of India. An OCI is a person resident outside India who is registered as an Overseas Citizen of India Cardholder under section 7A of the Citizenship Act, 1955. The bar on citizens of certain named countries transferring property without the Reserve Bank's permission does not apply to an OCI (paragraph 9.2).

Which sale proceeds can leave India, and how?

Two routes sit in two different master directions, and the facts of the purchase decide which one is open.

The first is repatriation of the sale proceeds. Paragraph 8.2 of Part II says the authorised dealer (the bank licensed to deal in foreign exchange) "may allow repatriation of the sale proceeds outside India" of property other than agricultural land, a farmhouse or plantation property, if the property was acquired in accordance with the foreign exchange law in force at the time, and the purchase money was paid in foreign exchange received through banking channels or out of a Foreign Currency Non-Resident (Bank) (FCNR(B)) account or a Non-Resident (External) (NRE) account. For residential property, repatriation is restricted to not more than two such properties. Property that the seller held while resident in India, or inherited from a resident, is outside that route: paragraph 8.1 bars repatriating its sale proceeds without the Reserve Bank's permission, but a seller resident outside India can use the remittance facilities of the Remittance of Assets Regulations, 2016.

The second is the general remittance facility in Master Direction No. 13/2015-16 on remittance of assets, updated to 29 June 2026. Paragraph 3.2 lets an authorised dealer allow an NRI or a person of Indian origin (a term that includes an OCI cardholder) to remit, on documentary evidence, up to USD one million per financial year out of balances in an NRO account or sale proceeds of assets. An NRO account is a rupee account held by a non-resident for money earned or received in India. The words "including transfer to NRE and SNRR accounts" were inserted by Notification No. FEMA 5(R)(6)/2026-RB of 18 June 2026, SNRR being the special non-resident rupee account. Paragraph 4.1 requires the Reserve Bank's prior approval above USD 1,000,000 a year.

Paragraph 5 makes remittances subject to payment of applicable taxes.

What must the buyer withhold?

The Table in section 393(1) applies to payments to a resident, including the entry at serial number 3(i) for consideration on transfer of immovable property, which is 1 per cent of the higher of the consideration and the stamp duty value above a threshold of fifty lakh rupees. That entry is not the one for a non-resident seller. Section 393(2) covers payments "to a non-resident", and its Table at serial number 17 reaches "any other sum chargeable under the provisions of this Act" when paid by any person to a non-resident who is not a company or to a foreign company. The rate is "Rates in force". The Table has no threshold column, and tax is deducted at the earlier of credit to the seller's account and payment.

For serial number 17, section 2(90)(c) takes the "rates in force" from the Finance Act of the tax year or, where it applies, a tax treaty. The charge on a long-term gain under section 197(1)(b) is 12.5 per cent, and the deduction rate in the Finance Act, 2026 has not been read for this note. A capital asset is short-term if held for not more than twenty-four months (section 2(101)(a)); a flat sold within that period falls outside section 197 and its gain is taxed with the seller's other income. The indexation relief in section 197(3), which caps tax on land or building acquired before 23 July 2024, is limited to an individual or Hindu undivided family "being a resident", so an NRI seller does not have it, and section 72(1) computes the gain on actual cost of acquisition and improvement.

Section 393(2) deducts tax "on the amount of such income or sum". The Act does not say whether, on a sale, that is the whole price or only the gain. Where the buyer treats the whole price as the sum, the withholding can far exceed the tax due, which is the problem the certificate routes address.

If the seller gives no valid Permanent Account Number (PAN), section 397(2)(b) raises the deduction to the higher of the rate in the provision, the rate in force, or 20 per cent. A buyer who fails to deduct or pay is deemed an assessee in default under section 398(1).

How does a lower deduction certificate work?

Section 395 has two routes. Under section 395(1), the payee applies to the Assessing Officer for deduction at a lower rate or no deduction; if satisfied that the payee's total income justifies it, the officer issues a certificate, and the payer deducts at the certified rate, or nothing, until it expires. Without a valid PAN the certificate is not granted (section 397(2)(f)(ii)), and the officer may cancel a certificate after a reasonable opportunity (section 395(5)).

Under section 395(2), the person paying a non-resident a sum under serial number 17 may apply for a determination of "the appropriate proportion of the sum chargeable to tax", and tax is then deducted only on that proportion.

What do the figures look like?

An illustration. The seller, flat and figures below are hypothetical, as is the exchange rate. Surcharge and cess are left out because the Finance Act, 2026 was not read.

An NRI sells a flat in Bengaluru to a resident buyer, sale completed in 2026-27
  Sale price                                            INR 2,40,00,000
  Cost of acquisition (bought 2016, paid from NRE)      INR 1,20,00,000
  Expenses on transfer                                  INR 4,00,000
  Long-term capital gain (held over 24 months)          INR 1,16,00,000
  Tax at 12.5 per cent on the gain                      INR 14,50,000

Withholding, assuming a rate of 12.5 per cent
  If applied to the whole price                         INR 30,00,000
  If applied to the gain only                           INR 14,50,000
  Excess over the tax due in the first case             INR 15,50,000

Leaving India, at an assumed INR 90 to the dollar
  Price less tax at 12.5 per cent on the gain           INR 2,25,50,000
  In dollars                                            about USD 250,600
  Ceiling on the NRO and sale-proceeds route            USD 1,000,000 a year

What documents does the route call for?

The directions and the Act name these, and nothing else is claimed as required.

• Documentary evidence, which paragraph 3.2 of Master Direction No. 13 requires for the remittance.
• The undertaking on the source of funds, where the money is in an NRO account.
• Evidence of how the purchase was paid, namely inward remittance or debit to an FCNR(B) or NRE account, for the paragraph 8.2 route.
• The seller's PAN, without which the withholding rate rises and no certificate is granted.
• A section 395 certificate or determination, if one was obtained, and the deductor's certificate of tax deducted.
• The information form for payments to a non-resident, which section 397(3)(d) requires "in such form and manner as may be prescribed".

What remains unsettled?

Three points.

The name of the remittance forms. Until 31 March 2026, the information on a payment to a non-resident was given in Form 15CA, with a chartered accountant's certificate in Form 15CB. Published commentary reports that the Income-tax Rules, 2026 replace them with Forms 145 and 146 under rule 220. We were unable to open the rules on the Income Tax Department's site, so that rule text has not been read, and the Act says only that the form is prescribed.

Whether the USD 1 million cap applies to proceeds repatriated under paragraph 8.2 of Part II. The carve-out for "sale proceeds of assets held on repatriation basis" appears in paragraph 3.1 of Master Direction No. 13, which concerns persons who are not NRIs, and not in paragraph 3.2. The text does not say how a seller whose purchase was paid from NRE funds should count that sale.

Whether the withholding base is the price or the gain. Section 393(2) says "the amount of such income or sum", and section 395(2) assumes that the whole of a sum may not be chargeable, but neither fixes the base for a sale of a capital asset. In GE India Technology Centre Private Limited v. Commissioner of Income Tax, decided on 9 September 2010, the Supreme Court read the words "chargeable under the provisions of the Act" in section 195(1) of the 1961 Act to mean that the payer must deduct only if tax is assessable in India. We have seen no ruling that applies this to the 2025 Act.