FEMA Rules for NRIs: Buying, Selling and Repatriating Money from Indian Property

Tax rules decide how much you owe the government when you sell property in India. FEMA — the Foreign Exchange Management Act — decides something different: whether, and how, you're allowed to move the money out of the country at all. NRIs frequently conflate the two, which leads to a common and stressful surprise: a sale that closes fine, tax paid correctly, and then a bank that won't let the proceeds leave India the way the seller expected.

Here's how FEMA actually applies to Kerala property.

What NRIs can and can't buy

Under FEMA, NRIs are permitted to purchase residential and commercial property in India without restriction. There's one significant exception: NRIs cannot purchase agricultural land, plantation property, or farmhouses. The only way an NRI can come to hold agricultural land is through inheritance from someone who was a resident of India — not through a fresh purchase. This matters directly for Kerala, where a large share of NRI-connected land is exactly this kind of inherited coconut, rubber, or paddy land. See our agricultural land guide for more on managing (rather than acquiring) this type of land.

How repatriation actually works

This is the part that catches people out. Sale proceeds don't automatically flow to your overseas account.

Step one: proceeds go to your NRO account. When you sell property in India, the sale proceeds must first be credited to your NRO (Non-Resident Ordinary) account in India. They cannot be directly credited to an NRE account or wired overseas without going through the formal repatriation process.

Step two: repatriation, up to the annual limit. From your NRO account, you can repatriate up to USD 1 million per financial year (roughly ₹8.3 crore, though this fluctuates with the exchange rate) from the sale of up to two residential properties — whether inherited or self-acquired. For inherited property specifically, you generally need to have held it for at least 12 months from the date of inheritance before selling and repatriating.

The exception that can work in your favour. If the property was originally purchased using foreign exchange remitted through an NRE or FCNR account — meaning you funded the original purchase with money that came from abroad — you can repatriate sale proceeds up to that original foreign-currency investment amount separately from, and in addition to, the USD 1 million annual limit, subject to a cap of two properties. Keeping clear records of how a property was originally funded is genuinely valuable here, sometimes years later.

The documentation you'll actually need

Banks handling repatriation typically require a clear paper trail: the sale deed, proof of how the property was acquired (purchase deed, gift deed, or inheritance documents), tax clearance (including proof of TDS deducted and, where applicable, your income tax return), and a chartered accountant's certificate confirming the source of funds and tax compliance — commonly referred to as Form 15CA/15CB. Missing or incomplete documentation is the single most common reason a repatriation request gets delayed at the bank stage, even when everything else about the sale was handled correctly.

Where NRIs commonly get tripped up

• Assuming sale proceeds can go straight to an overseas account. They can't — the NRO route and repatriation process are mandatory steps, not optional ones.
• Not tracking whether a property was originally funded in foreign currency, and therefore missing out on the higher repatriation allowance that applies to that portion.
• Treating tax clearance and repatriation as the same step. They're related but distinct — you need both TDS/tax compliance handled and a properly documented repatriation request.
• Trying to sell inherited agricultural land without realising the underlying land itself was only ever legally acquirable by inheritance — this affects how certain transactions are structured and documented.
• Underestimating how long the banking side takes. Repatriation isn't instant even with complete paperwork; building in a realistic timeline avoids unnecessary stress around a closing date.

The practical takeaway

Plan for FEMA compliance as a distinct workstream from tax planning, not an afterthought once the sale is done. If you're selling a Kerala property with any repatriation involved, start the documentation — proof of original funding source, tax clearance, CA certification — well before you're at the closing table, not after.

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This article is for general information only and is not financial or legal advice. FEMA rules, repatriation limits, and documentation requirements can change — confirm current requirements with your bank's NRI services desk and a chartered accountant before initiating a transaction. Get in touch if you'd like coordination support for a Kerala property sale, or see our legal and land transaction services.