Property in India for OCI cardholders: what the law actually says

A practical guide to what Overseas Citizens of India can and cannot buy on the subcontinent, how the 2021 government notification settled the rules, why a Supreme Court judgment caused panic — and what the tax position looks like on the way out.

By Diaspora Dreams Newsroom · 4 June 2026

Property in India for OCI cardholders: what the law actually says — The Mumbai skyline at night. Residential and commercial property in cities like this is open to OCI buyers without RBI approval; agricultural land outside the city limits is not. Photo: Cididity Hat / Wikimedia Commons, CC BY-SA 3.0.

For a diaspora that buys a flat in Mumbai with one decision and sends a child to school in Toronto with another, the question of what an Overseas Citizen of India can actually own back home is surprisingly hard to find a clear answer to. Estate agents are confident. Family lawyers are cautious. Banks ask for paperwork no-one explains. And every other year, a headline about a court case or a Ministry notification convinces a new round of OCI buyers that the rules have changed under their feet.

The rules have not, in fact, changed much. What has changed is the framework around them — and one Supreme Court judgment, in 2021, that briefly looked like it had reopened settled questions before the Reserve Bank of India quietly closed them again.

Here is what the law actually says, in 2026, for the OCI cardholder thinking about buying, selling, inheriting, or repatriating the proceeds of property in India.

The framework, in one paragraph

OCI cardholders' property rights in India are governed by the Foreign Exchange Management Act, 1999 (FEMA), and specifically by the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. On top of that, the Ministry of Home Affairs notification S.O. 1050(E) dated 4 March 2021 clarified that OCI cardholders are to be treated at parity with Non-Resident Indians (NRIs) for the purpose of buying or selling immovable property — except for agricultural land, farm houses, and plantation property. The day-to-day operational rules sit in the Reserve Bank of India's Master Direction on Acquisition and Transfer of Immovable Property in India.

If you read nothing else, read that paragraph. Everything that follows is detail.

What you can buy

An OCI cardholder may purchase any number of residential properties and any number of commercial properties in India, without prior approval from the Reserve Bank of India. There is no ceiling on value. There is no requirement to be physically present in India for the transaction. The payment, however, must be routed through proper channels: either remittance from abroad through normal banking channels, or from balances held in an NRE, NRO, or FCNR account in India.

Joint ownership with another OCI or NRI is permitted. Joint ownership with a non-resident foreigner who is not an NRI or OCI — say, a foreign spouse who never held Indian citizenship — is not.

The list of what counts as "residential or commercial" is the obvious one: apartments, plots intended for residential construction, houses, offices, shops, godowns, warehouses, parking spaces. Buildings under construction qualify. So do plots of urban land where a residential building is to be put up.

What you cannot buy

The hard line, restated in the 2021 MHA notification and the underlying FEMA rules, is this: OCI cardholders cannot purchase agricultural land, farm house property, or plantation property in India. Not even one acre. Not with prior approval. Not by setting up an Indian company to buy it on their behalf — that route is also closed under the Non-debt Instruments Rules.

This is the rule that surprises new OCI buyers most often, because the definitions are wider than the words suggest. "Agricultural land" includes most of rural India's land titles, whether the land is currently being farmed or not. A weekend retreat in the hills, a coffee estate in Coorg, an ancestral mango orchard in Konkan, a vineyard in Nashik — these are not for OCI purchase. The fact that a seller is willing and the local sub-registrar accepts the deed does not make the transaction valid; under FEMA, the transfer is impermissible at source.

There are three doors out of this wall.

Inheritance is the widest. An OCI may inherit any immovable property in India — including agricultural land, farm houses, and plantation property — from a person who was a resident of India, or from a person who was themselves an NRI or OCI and had acquired the property in accordance with the foreign exchange law in force at the time. Inheritance does not require RBI approval.

Gift from a relative is the second door, but it is narrower than people assume. An OCI may receive residential or commercial property as a gift from a person resident in India, or from an NRI or OCI who is a "relative" as defined under Section 2(77) of the Companies Act, 2013 — broadly, parents, siblings, spouse, and lineal ascendants and descendants. Agricultural land received as a gift, however, is not on this list under the current Non-debt Instruments Rules. Practitioners disagree about the precise contours of the gift exception for agricultural land, and conservative legal advice errs on the side of treating it as not permitted.

Pre-acquisition is the third door, and it is a door that closes behind you. If a person owned agricultural land in India while they were still an Indian citizen — that is, before they took foreign citizenship and became an OCI — they may continue to hold that property. They cannot acquire more of the same kind.

The 2021 case that nearly broke things

In February 2021, the Supreme Court of India delivered judgment in Asha John Divianathan v. Vikram Malhotra & Ors. The court held that a property transfer involving a foreign citizen, made without the prior permission of the Reserve Bank of India, was void.

The decision sent a wave of alarm through the diaspora's lawyer-and-realtor WhatsApp groups. Was every property transaction by an OCI without explicit RBI approval suddenly at risk of being unwound?

The answer, on a closer read, was no — for one decisive reason. The transaction at issue in Asha John dated from the late 1970s and early 1980s, and the court was interpreting the Foreign Exchange Regulation Act, 1973 (FERA) — a much stricter law that required prior RBI permission for most foreign-citizen property dealings. FERA was repealed in June 2000 and replaced by the far more liberal FEMA regime. The Supreme Court did not, and could not, change the rules under FEMA; it interpreted the rules under a statute that has not existed for a quarter-century.

To extinguish the residual doubt, the Reserve Bank of India issued a formal clarification on 11 January 2022, confirming in writing that under the current FEMA framework, NRIs and OCIs do not require prior RBI approval for acquisition or transfer of immovable property in India, except in the specific case of agricultural land, farm house, or plantation property. The position has been stable since.

What Asha John did do — and this is worth remembering — is establish that foreign-exchange law has real teeth. A transaction that violates the foreign exchange rules in force at the time of the transaction can be void, with consequences that ripple through chain-of-title for decades. The case is a reminder, not a rule change.

The money: in, out, and what the tax authority takes

Payment for an OCI's property purchase in India must come through banking channels — either funds remitted from abroad to a normal banking channel, or funds held in an NRE, NRO, or FCNR account. Cash transactions, hawala routes, and informal payment arrangements are not permissible and create immediate FEMA exposure.

On the way out, the position is shaped by two regimes: India's capital gains tax, and India's tax-deducted-at-source rules for non-resident sellers.

If the OCI seller has held the property for more than 24 months, the gain is treated as a long-term capital gain. For properties acquired before 23 July 2024, the historical rate of 20 per cent with indexation benefit continues to apply. For properties acquired on or after 23 July 2024, the post-Finance-Act-2024 rate of 12.5 per cent without indexation applies. If the property has been held for 24 months or less, the gain is short-term and taxed at the seller's applicable slab rates.

Independent of the actual tax liability, the buyer of a property from a non-resident seller is required to deduct tax at source on the entire sale consideration, not merely the gain. The standard TDS rate under Section 195 of the Income-tax Act, 1961, is 20 per cent for long-term gains and 30 per cent for short-term gains, plus the applicable surcharge and cess. This frequently produces TDS withholding that is far higher than the true tax liability — and the seller's only practical remedy is to apply, before the sale, for a Lower Deduction Certificate from the Indian tax authorities, which allows the buyer to deduct at a lower rate matching the realistic tax.

Repatriation of the net proceeds is permitted up to US$1 million per financial year through the seller's NRO account, subject to filing Form 15CA (a self-declaration of taxes paid) and Form 15CB (a chartered accountant's certificate). Within this annual cap, OCI sellers can move sale proceeds out of India to their country of residence without further special permission.

Five practical pitfalls

In order of how often they trip buyers up:

1. Buying agricultural land through a relative. A surprising number of OCIs are quietly persuaded by family or brokers to "buy" agricultural land in the name of a parent or sibling resident in India, with informal understandings about who really owns it. Under Indian law, this is at best a benami transaction (prohibited under the Benami Transactions (Prohibition) Act, 1988, as amended in 2016) and at worst a FEMA violation. The "owner" on paper is the legal owner. The OCI has no enforceable claim.

2. Cash payments to sellers. Indian property markets still operate with significant unaccounted-cash components. For an OCI buyer, any payment outside a documented banking channel exposes them to FEMA penalties and, separately, to under-reporting consequences if Indian tax authorities reconstruct the true consideration.

3. Buying without verifying the seller's title and FEMA history. If a property has passed through the hands of a foreign citizen at any point, the FEMA compliance of that earlier transaction matters to current chain-of-title. A buyer who does not investigate this assumes the risk.

4. Letting TDS withholding crystallise without a Lower Deduction Certificate. Buyers will routinely deduct the full statutory 20 per cent or 30 per cent unless directed otherwise by a certificate. Recovering the over-withheld amount requires filing an Indian income tax return and waiting — sometimes years — for a refund.

5. Repatriation paperwork done after the fact. Form 15CA and Form 15CB must precede the repatriation, not follow it. Banks will not release funds without them, and constructing the paperwork retroactively triggers questions.

The bottom line

For the OCI considering Indian property: residential and commercial purchases are open, abundant, and procedurally well-understood. Agricultural land, farm houses, and plantations are closed, and the doors of inheritance and gift are narrower than they look. The 2021 Supreme Court judgment did not change the FEMA position. The 2022 RBI clarification confirmed it.

The practical work is in the paperwork — banking channels in, TDS and Lower Deduction Certificate planning out, Form 15CA/15CB for repatriation — and in the unromantic discipline of treating an Indian property transaction with the same documentary seriousness a Mumbai-resident family lawyer would treat it.

That discipline, more than the law itself, is what determines whether an OCI's Indian property turns out to be the asset they remember it as, or the headache their next of kin inherit.

Annexure — Sources

Primary law and regulations

Foreign Exchange Management Act, 1999 (FEMA) — the operative statute governing foreign exchange transactions including immovable property acquisition by non-residents.
Foreign Exchange Management (Non-debt Instruments) Rules, 2019 — the operative subordinate legislation under FEMA defining the framework for NRI and OCI property transactions. Ministry of Finance, Government of India.
Foreign Exchange Regulation Act, 1973 (FERA) — the predecessor statute, repealed in June 2000. Relevant only as the law interpreted in Asha John Divianathan.
Reserve Bank of India — Master Direction: Acquisition and Transfer of Immovable Property under FEMA
Reserve Bank of India — Master Circular on Acquisition and Transfer of Immovable Property in India
Reserve Bank of India — FAQs on Purchase of Immovable Property by non-residents
Income-tax Act, 1961, Section 195 — TDS on payments to non-residents, governing the buyer's deduction obligation on property purchases from non-resident sellers.
Finance Act, 2024 — amended the long-term capital gains regime for property with effect from 23 July 2024 (20% with indexation regime continues for pre-23-July-2024 acquisitions; 12.5% without indexation applies post-23-July-2024).
Benami Transactions (Prohibition) Act, 1988, as amended by the Benami Transactions (Prohibition) Amendment Act, 2016 — prohibits property held in the name of one person but beneficially owned by another.
Companies Act, 2013, Section 2(77) — definition of "relative" applied in the foreign exchange law's gift provisions.

Government notifications

Ministry of Home Affairs Notification S.O. 1050(E), dated 4 March 2021 — specifies the rights of OCI cardholders, including parity with NRIs for property purchase (excluding agricultural land, farm houses, plantation property). Summary and commentary by Dewan P N Chopra & Co.
Ministry of Home Affairs — Overseas Citizen of India Cardholder (official portal)
Reserve Bank of India — Clarification on acquisition or transfer of immovable property in India by NRI/OCI, dated 11 January 2022 — confirming that the Asha John Divianathan judgment does not affect current FEMA-governed transactions.

Case law

Asha John Divianathan v. Vikram Malhotra & Ors, Supreme Court of India, judgment delivered 26 February 2021. Holds that property transfer by a foreign citizen without prior RBI permission was void under the FERA, 1973 regime. Case summary and commentary.

Secondary commentary and practitioner guidance

Editorial note: This article is journalism, not legal advice. The legal position for an individual OCI buying, selling, inheriting, or repatriating from Indian property turns on facts specific to the transaction — including the state of the property, the chain of title, the residential status of the seller and buyer, the source of funds, and any state-specific land laws (which can be stricter than the central framework on agricultural land). Readers should obtain advice from a chartered accountant and a property lawyer in the relevant Indian jurisdiction before acting on any of the framework summarised here.