You can buy property abroad under the RBI's Liberalised Remittance Scheme (LRS): each resident can send up to $250,000 a financial year, and family members can pool their limits if each of them is a co-owner. The remittance goes through your bank under purpose code S0005, with 20% TCS above ₹10 lakh in the year that you claim back in your return.
What trips people up is the funding. A mortgage from a foreign bank is not allowed for residents, cards cannot be used, and the property's rent and sale proceeds carry FEMA and Indian tax obligations. Below are the limits, documents, payment structures and tax rules.
Table of contents
- Is buying property abroad allowed under LRS?
- Who can buy property abroad under LRS?
- What is the LRS limit for property, and can family members pool it?
- Which purpose code do you use for property?
- Can you take a loan to buy property abroad?
- What documents does your bank need for a property remittance?
- How can you pay for a property above the limit?
- How much TCS applies to property purchases abroad?
- How is overseas property taxed in India?
- Do rent and sale proceeds have to come back to India?
- What is not allowed when buying property abroad?
Is buying property abroad allowed under LRS?
Yes. The purchase of immovable property outside India, residential or commercial, is a permitted purpose under LRS; the complete LRS guide covers the rules that apply to every purpose. For property, the points that matter are the $250,000 limit per person per financial year, pooling across family members who are co-owners, purpose code S0005, and routing the remittance through an authorised dealer bank with the sale agreement.
Who can buy property abroad under LRS?
Not everyone can use the Liberalised Remittance Scheme (LRS) for property purchases. The eligibility is very specific under FEMA:
- Resident individuals only
- LRS is available only to Indian residents as defined under FEMA.
- HUFs, corporates, partnerships, and trusts are not permitted to use LRS for overseas property.
- Minors are also covered
- A minor can remit under LRS, but the declaration must be signed by the guardian.
- If a minor is included as a co-owner in a property purchase, the remittance will still count within the USD 250,000 limit assigned to the minor.
- NRIs cannot use LRS
- Once an individual becomes a Non-Resident Indian, LRS no longer applies.
- NRIs can still buy property abroad, but the route depends on:
- Indian rules: They must fund the purchase from NRE/FCNR accounts or overseas income.
- Foreign rules: Their ability to buy depends on the country of residence. For example, an NRI in Dubai can purchase freehold property in designated zones, while in some European countries, non-resident ownership may be restricted.
What is the LRS limit for property, and can family members pool it?
- Individual cap
- Every resident individual can remit up to USD 250,000 per financial year (April–March).
- This cap is absolute; you cannot exceed it without special RBI approval.
- Family pooling
- Families can pool their individual limits to buy a single property, but only if each contributor is also a co-owner of that property.
- Pooling is common in cases where the property value is higher than one person’s annual allowance.
- Example of pooling
- Husband: USD 250,000
- Wife: USD 250,000
- Adult child: USD 250,000
- Total in one year = USD 750,000 available for a single overseas property purchase.
- Each name must appear in the sale agreement or title deed to remain compliant.
- Across years
- If the property value is larger, families often spread the payments over multiple financial years.
- Example: A USD 1 million apartment in Dubai could be funded by a couple over two years (USD 500,000 per year, split USD 250,000 each).
In short, pooling across family members and across years makes larger property purchases possible in a fully compliant way.
Which purpose code do you use for property?
Every outward remittance under LRS must carry a purpose code. This code tells the bank and the RBI why the money is being sent abroad, and ensures it is tracked under the correct category. For property purchases, the code is specific: S0005 (Indian investment abroad in real estate).
- This is the standard code used when remitting for the purchase of immovable property abroad.
- It applies whether you are buying a residential apartment, a commercial office, or land.
- Documentation required
- Banks will insist on a Sale and Purchase Agreement (SPA) or equivalent closing documents before processing the transfer.
- If the payment is being made to an escrow or title company, the agreement must clearly reference the property details.
Why it matters
- Using the wrong purpose code can lead to reporting mismatches under FEMA.
- If your remittance is not tagged as S0005, it may not qualify as a valid overseas property investment, which could cause compliance issues later during audits or repatriation.
Can you take a loan to buy property abroad?
Buying property abroad is not only about how much money you can remit under LRS. It also depends on how you fund the purchase and whether the funding structure is permitted under FEMA. This is where many buyers run into confusion, because what looks like a simple home loan or payment plan abroad can actually fall into a restricted category in India.
Overseas borrowing by residents is not allowed.
Under FEMA’s Borrowing and Lending Regulations, 2018, no resident individual in India can borrow in foreign exchange from an overseas bank or financial institution unless specifically allowed by the Reserve Bank of India. The External Commercial Borrowings (ECB) framework applies only to eligible resident entities such as companies and LLPs, and it explicitly excludes individuals from raising loans abroad.
This means that if an Indian resident tries to take a home loan from, say, a UK bank to buy a property in London, it would fall outside FEMA permissions. Even if the loan is secured by the property itself, it still counts as a foreign-currency borrowing, which is restricted.
The only exception is family loans from non-resident relatives.
FEMA provides a narrow exception that allows a resident individual to borrow up to USD 250,000 from close relatives living abroad.
Under the RBI's rules on borrowing from close relatives abroad, such loans must be interest-free, carry a minimum maturity of one year, and be received through normal banking channels or by debit to the lender’s NRE/FCNR account. The Ministry of External Affairs also highlights these conditions in its official guidance (MEA circular).
The definition of “close relative” here follows FEMA norms and typically includes parents, siblings, spouse, and children. It does not extend to cousins or friends. In practice, this route is often used when parents or siblings abroad want to help fund a property purchase. Even so, the documentation must be precise, banks may still request additional proof before allowing the inflow to ensure the borrowing is within FEMA limits.
Deferred or vendor financing plans need extra care.
Many developers, especially in Dubai or Singapore, advertise post-handover or 0% interest payment schedules. If these plans are structured as simple stage payments using your own funds under LRS, they are compliant.
But if the plan effectively creates a credit obligation, for example, penalties for delayed payment, interest components, or disguised financing, then it may be treated as borrowing, which is not permitted. The safest approach is to share the agreement with your authorised dealer bank before signing, so they can confirm whether the schedule passes FEMA checks.
Payments must go through authorised dealer banks.
Property purchases abroad are classified as capital account transactions. That means remittances must be made via your AD bank with purpose code S0005. Using international credit or debit cards for property payments bypasses this reporting and is not accepted by banks for capital transactions.
Some banks, like HDFC, explicitly state that property purchases are not permitted through their cards, and media reports have flagged buyers in Dubai facing scrutiny for trying this route. The rule of thumb is simple: always route property-related remittances through your bank, never through card rails.
What documents does your bank need for a property remittance?
When remitting money abroad for a property purchase, your authorised dealer (AD) bank will process the transfer only after verifying a specific set of documents. These are not just routine forms, they serve as proof that the transaction is compliant with FEMA and properly reported under LRS.
- Form A2 and LRS declaration
- Form A2 is mandatory for all outward remittances.
- Most banks now issue a combined A2-cum-LRS declaration, which includes your confirmation that the total amount you remit in the year does not exceed the USD 250,000 cap.
- PAN and KYC documents
- A valid PAN is required for every LRS transaction.
- Banks will also check updated KYC records, which typically means passport copy, Aadhaar, and a valid address proof.
- Sale and purchase agreement (SPA) or closing statement
- A copy of the SPA or equivalent purchase contract is essential.
- If the funds are being sent to an escrow, conveyancer, or title company, the agreement must clearly identify that account as the beneficiary.
- Beneficiary account details
- Full name, address, account number, and SWIFT/IBAN of the overseas account.
- Some bank forms also require you to specify your relationship with the beneficiary (e.g. developer, lawyer, escrow agent).
- Property acquisition declaration (sometimes required)
- Certain banks, like ICICI, ask for a short declaration form that explicitly confirms the remittance is for property acquisition.
- This is in addition to the SPA, and banks use it as an internal compliance check.
- Supporting financial documents (case-by-case)
- If your relationship with the bank is less than a year, you may be asked for extra proof such as a bank statement from another institution or your latest income-tax assessment order.
- This is not an RBI requirement but a bank-level risk check.
- Form 15CA/15CB
- Not needed for LRS remittances by individuals that do not need the RBI's approval; the income-tax rules list them as exempt.
- Bank staff sometimes ask for it out of caution. Point them to the exemption.
Key takeaway
While RBI prescribes the core framework, banks are the frontline regulators. Expect the basics (Form A2, PAN, SPA, beneficiary details) everywhere, and be prepared for additional asks (property declarations, IT returns, 15CA/CB) depending on the AD bank’s internal policy.
How can you pay for a property above the limit?
Property transactions abroad are often larger than the USD 250,000 annual LRS limit for a single individual. The good news is that with careful structuring, you can still complete the purchase in a fully compliant way.
Staggered installments across years
- Developers and sellers abroad often accept milestone or stage payments.
- By aligning these installments with the LRS financial year cap, you can spread a large purchase over multiple years.
- Example: A USD 600,000 property can be paid as USD 200,000 in Year 1, USD 200,000 in Year 2, and USD 200,000 in Year 3 by the same individual.
Family pooling across co-owners
- Multiple family members can each use their USD 250,000 allowance, provided every contributor is also a co-owner in the property.
- Example: A couple remitting USD 250,000 each in one year gives them USD 500,000 in available funds. Adding an adult child’s limit brings the pool to USD 750,000.
Escrow or title company payments
- In many jurisdictions, property payments are made into an escrow or title company account rather than directly to the seller.
- Indian banks permit this, as long as the beneficiary account is clearly named in the Sale and Purchase Agreement (SPA) or closing documents.
- Always ensure the paperwork references the escrow account to avoid queries from your bank.
Example. Suppose you and your spouse are buying a USD 900,000 apartment in Dubai together:
- Year 1: Husband remits USD 225,000, Wife remits USD 225,000 → Total USD 450,000.
- Year 2: Same remittance split of USD 225,000 each → Another USD 450,000.
- Property fully funded in 2 years, with both names on the title deed.
In practice, the combination of staggered payments and family pooling is what makes higher-value overseas property purchases possible under LRS. Careful planning of the payment schedule with your bank ensures smooth compliance.
How much TCS applies to property purchases abroad?
Under section 394 of the Income-tax Act 2025, all remittances made under LRS for property purchases abroad attract Tax Collected at Source (TCS). This is not an extra cost of buying property, but an advance tax that can later be adjusted against your final tax liability.
- Applicable rate
- A flat 20% TCS applies on LRS remittances for property purchases and other capital account transactions.
- Lower rates (2%) are available only for education and medical remittances, not for property.
- Threshold (unchanged for FY 2026-27)
- TCS is triggered once your cumulative outward remittances under LRS exceed ₹10 lakh in a financial year.
- The first ₹10 lakh remitted in a year is exempt from TCS. Everything beyond that limit is subject to the 20% levy.
- Example calculation
- Suppose you remit ₹1.2 crore in one year for an overseas property.
- TCS-free threshold: ₹10 lakh.
- Taxable base: ₹1.1 crore.
- At 20%, your bank will collect ₹22 lakh upfront as TCS.
- Claiming credit
- The TCS collected appears in your Form 26AS (Form 168 from Tax Year 2026-27) and can be adjusted against your overall income-tax liability when filing your ITR.
- If your actual tax payable is lower, you can claim a refund from the Income-tax Department.
Key takeaway
When planning large property purchases abroad, always factor in the cash flow impact of TCS. While it is not an extra tax, it ties up 20% of the remittance amount until you file your tax return and adjust or claim it back.
How is overseas property taxed in India?
Owning property abroad comes with tax obligations both in the country where the property is located and in India. Under Indian law, residents are taxed on their global income, so overseas property cannot be ignored when filing your ITR.
Rental income
- Any rent earned from overseas property is taxable in India under the head “Income from House Property”.
- You can claim the standard 30% deduction on the net annual value, just as with Indian property.
- Example: If you earn USD 20,000 rent from an apartment in Dubai, it must be declared in India, even if tax is not levied in Dubai.
Foreign tax credit (FTC)
- If you have paid tax abroad on that rental income, you can claim a credit in India under the Double Taxation Avoidance Agreement (DTAA).
- To claim FTC, you must file Form 67 (Form 44 from Tax Year 2026-27) before filing your income-tax return.
- The credit is limited to the lower of (i) tax paid abroad or (ii) tax payable in India on that income.
Capital gains
- If you sell an overseas property, capital gains are first taxed in the country where the property is situated.
- The same gains must also be reported in India and taxed according to Indian rules (long-term or short-term, depending on holding period).
- Again, FTC is available for taxes already paid abroad, subject to DTAA terms.
Disclosure requirements
- All overseas assets, including property, must be reported in Schedule FA (Foreign Assets) of your Indian income-tax return.
- Non-disclosure can invite penalties under the Black Money (Undisclosed Foreign Income and Assets) Act.
Key takeaway
As an Indian resident, you cannot leave overseas property out of your tax filings. Both rental income and capital gains are taxable in India, with relief available via foreign tax credit. Proper disclosure in Schedule FA ensures compliance and avoids future scrutiny.
Do rent and sale proceeds have to come back to India?
Buying property abroad is only half the story. What happens to the income you earn from it: rent or sale proceeds, is equally important under both FEMA and the Income-tax Act.
- Retention abroad
- FEMA allows you to retain and reinvest rental income or sale proceeds abroad, as long as they are kept in foreign bank accounts and used for further investments.
- Example: If you sell an apartment in London, the proceeds can stay in the UK and be reinvested in another property or financial asset without being brought back to India immediately.
- Mandatory repatriation of idle funds
- Money you remitted under LRS, or sale proceeds, that you do not use or reinvest abroad must be brought back to India within 180 days, a rule the RBI added in August 2022.
- Holding funds overseas beyond this period without reinvestment may be treated as a FEMA violation.
- Tax treatment in India
- Regardless of whether the money is reinvested abroad or brought back, India taxes residents on their global income.
- This means rental income or capital gains from overseas property must always be reported in your Indian ITR.
- Relief is available via foreign tax credit (Form 67, now Form 44) if tax has already been paid abroad.
Why this matters
This dual compliance is often misunderstood. Investors sometimes assume that if they reinvest abroad, the income is not taxable in India, which is incorrect. Reinvestment only keeps you FEMA-compliant. Taxation in India is a separate obligation and applies in all cases.
Key takeaway
- FEMA: You can retain and reinvest funds abroad, but idle funds must come back within 180 days.
- Income Tax: Rental income and sale proceeds are always taxable in India for residents, whether repatriated or not.
What is not allowed when buying property abroad?
While LRS provides a legitimate pathway for Indians to purchase property abroad, there are clear red lines under FEMA that must not be crossed. These prohibitions are important because violations can attract penalties, reversal of transactions, or even scrutiny under the Black Money Act.
Round-tripping
- You cannot remit money abroad, buy property through a foreign entity, and then channel the funds or ownership back into India.
- Example: Using an overseas company to buy land abroad and then routing profits back into an Indian entity is considered round-tripping and is prohibited.
ODI in entities engaged in “real estate activity”
- Overseas Direct Investment (ODI) into companies that are engaged in “real estate business” (buying/selling land, trading in TDRs, construction without development) is not allowed under FEMA.
- Buying property directly under LRS is permitted, but investing into a foreign company whose primary business is real estate trading is not.
Using business structures to bypass LRS caps
- LRS is meant for individuals, with a USD 250,000 cap per person per year.
- It is not permissible to set up shell entities or use trusts/partnerships to artificially expand the remittance limit.
- HUFs, corporates, and trusts are not eligible for LRS remittances.
Deferred consideration that resembles a loan
- Stage payments under LRS are acceptable if they are clearly structured as installments of your own funds.
- But if the arrangement includes interest, penalties, or vendor financing features, it may be treated as overseas borrowing, which is not permitted for individuals.
About Paasa
Paasa is a global investing platform for Indian residents and NRIs. It gives you direct access to stocks on their home exchanges in the US, Canada, the UK, Germany, France, Switzerland, the Netherlands, South Korea, Japan, Hong Kong and Singapore, along with ETFs and UCITS funds.
- A dedicated relationship manager: one point of contact for questions about your account and your investments.
- Diversify beyond property: spread money you send abroad across stocks, ETFs and UCITS funds in several markets.
- Tax reports in one place: capital gains, dividends and Schedule FA workings, ready for your return.
