Who is an NRI? Understanding the Legal Definitions
The term "Non-Resident Indian" carries two distinct definitions under Indian law, and the definition that applies depends on the legal context in which it is being used. Under the Foreign Exchange Management Act 1999 (FEMA) and its accompanying regulations, an NRI is defined as a person resident outside India — meaning a person who has gone out of India or who stays outside India for a period or periods aggregating more than 182 days during the immediately preceding financial year, for the purpose of carrying out employment or business outside India, or who is otherwise outside India in circumstances indicating an intention to stay outside India for an uncertain period. Under the income-tax law — the Income Tax Act 1961 and, from 1 April 2026, the Income-tax Act, 2025 — the residential status of an individual is determined primarily by the number of days the individual was present in India during the relevant year, using the criteria in section 6 of the 1961 Act and the corresponding provision of the 2025 Act.
The distinction matters because the FEMA definition governs the permissibility of transactions — what accounts can be held, what investments are permitted, and what repatriation is allowed — while the Income Tax Act definition determines the tax treatment of income arising from those investments. A person can be a resident for income tax purposes but an NRI under FEMA in the same year, or vice versa, depending on their specific pattern of travel and stay.
NRI vs OCI vs PIO
Overseas Citizens of India (OCI) cardholders — persons of Indian origin who have acquired citizenship of another country — are treated at par with NRIs for the purposes of FEMA and real estate investment regulations, with minor exceptions. Persons of Indian Origin (PIOs), a category that has been substantially merged into OCI following the consolidation of the PIO card scheme in 2015, similarly enjoy NRI-equivalent rights for investment in India in most respects. For practical purposes, an OCI cardholder has the same rights as an NRI when it comes to purchasing property in India, opening NRE and NRO accounts, and making equity investments through the NRI route — with certain sector-specific exceptions noted in the relevant FEMA regulations.
NRI Investment in Indian Real Estate
An NRI may freely purchase and hold immovable property in India under section 6(5) of FEMA 1999 and the FEMA (Acquisition and Transfer of Immovable Property in India) Regulations. The right to purchase residential and commercial property in India requires no prior approval from the Reserve Bank of India — it is a general permission. However, this general permission has important exceptions.
Permitted and Prohibited Property Types
An NRI is permitted to purchase any number of residential properties and any number of commercial properties in India. There is no statutory restriction on the number or aggregate value of properties an NRI may hold. However, an NRI is not permitted to purchase agricultural land, plantation property (tea, coffee, rubber, etc.), or farmhouses in India without prior approval from the Reserve Bank of India. This prohibition is unconditional — it applies regardless of the NRI's ancestral connection to the land, the commercial purpose of the acquisition, or the mode of purchase.
In Delhi NCR, NRIs purchasing properties in Gurugram, Noida, or Greater Noida should also verify the RERA registration status of the project. The statutory protections under RERA 2016 apply equally to NRI buyers — the obligation on promoters to disclose project information, the escrow requirements, and the right to file a complaint with H-RERA or UP-RERA are available to NRI purchasers on the same terms as resident buyers.
Funding the Purchase: NRE vs NRO Accounts
All payments for the purchase of immovable property in India by an NRI must be made through banking channels — cash transactions are not permissible under FEMA. An NRI holds two types of Indian bank accounts: an NRE (Non-Resident External) account and an NRO (Non-Resident Ordinary) account. The NRE account holds funds remitted from outside India in foreign currency, which are converted to Indian rupees upon deposit. Funds in an NRE account are freely repatriable — both principal and interest. The NRO account holds income earned in India — rental income, dividends, pension, and any other India-sourced income. Funds in an NRO account are subject to the repatriation limits described below.
Repatriation on Sale of Property
When an NRI sells an immovable property in India, the sale proceeds may be repatriated abroad subject to conditions under the FEMA (Acquisition and Transfer of Immovable Property in India) Regulations. If the property was purchased from funds held in an NRE account or from foreign remittances, the sale proceeds may be repatriated in full — up to the original cost of acquisition or the foreign exchange brought in, whichever is less — without any RBI approval, provided the property was held for a minimum period. If the property was purchased from NRO funds or from rupee income, the sale proceeds are credited to the NRO account and are subject to the general USD 1 million per financial year limit on repatriation from the NRO account, with production of a chartered accountant's certificate in Form 15CA and Form 15CB.
Equity and Portfolio Investment in India
An NRI may invest in the equity shares and convertible debentures of Indian companies through the Portfolio Investment Scheme (NRI-PIS) administered by the Reserve Bank of India, or through the Foreign Direct Investment (FDI) route for direct acquisition of stakes in unlisted companies. Each route has distinct regulatory requirements.
NRI Portfolio Investment (Stock Market)
Under the NRI-PIS, an NRI may purchase and sell shares of Indian listed companies on recognised stock exchanges. The purchase must be made through a designated branch of an authorised dealer bank and through a SEBI-registered broker. An NRI may hold no more than five percent of the paid-up capital of any listed Indian company under the NRI-PIS route, and the aggregate NRI holding in a company is capped at ten percent of paid-up capital, extendable to twenty-four percent by the company by special resolution.
FDI Route for Unlisted Companies
When an NRI invests in an unlisted Indian company — whether a startup, a family business, or an established private company — the investment is treated as Foreign Direct Investment under the FEMA (Non-debt Instruments) Rules 2019. The FDI must be reported to the Reserve Bank of India by the Indian company through its authorised dealer bank by filing Form FC-GPR (Foreign Currency — Gross Provisional Return) within 30 days of the issue of shares. The pricing of shares issued to NRI investors in a private limited company must comply with the pricing guidelines under the FDI regulations — the issue price must not be less than the fair market value as determined by a SEBI-registered merchant banker.
Tax Planning: DTAA, Form 10F, and TDS on India Income
India has entered into Double Taxation Avoidance Agreements (DTAAs) with over ninety countries. A DTAA determines which country has the primary right to tax specific categories of income, and where both countries have the right to tax the same income, provides a credit mechanism to avoid double taxation. For an NRI earning income from India — rental income, interest on bank deposits, dividends from Indian companies, capital gains from the sale of Indian property or shares — the DTAA between India and the NRI's country of residence is the primary document governing tax liability.
Form 10F and Tax Residency Certificate
To claim DTAA benefits in India, an NRI must furnish to the Indian payer — the tenant, the company paying dividends, the bank paying interest — a Tax Residency Certificate (TRC) issued by the tax authority of the country of residence, and a self-declaration in Form 10F providing specified information about the NRI's tax residence, nationality, and the period of residence. Without these documents, the payer is required to deduct TDS at the higher domestic rate rather than the DTAA rate. For example, interest on NRO deposits is subject to TDS at thirty percent under section 195 of the Income Tax Act, but the DTAA rate for interest may be as low as ten percent.
Form 15CA and Form 15CB for Repatriation
Any remittance outside India that is taxable in India must be preceded by the submission of Form 15CA (a declaration by the remitter) and, in most cases, Form 15CB (a certificate from a chartered accountant confirming the tax rate and the amount of TDS deducted). The requirement applies to the repatriation of NRO account balances, the remittance of rent, dividends, interest, and sale proceeds of property. The authorised dealer bank will not process the remittance without Form 15CA. Failure to complete this procedure before remittance is a FEMA violation attracting penalty.
Estate Planning for NRIs: Will, Succession, and HUF
An NRI who holds assets in India — property, bank accounts, equity investments, mutual funds — must have a properly drafted Will under the Indian Succession Act 1925 (or, for Hindus, the Hindu Succession Act 1956) to govern the transmission of those assets on death. Without a Will, assets in India pass by intestate succession under the applicable personal law, which may not reflect the NRI's intentions, particularly where assets are to pass to a foreign-resident spouse or children who are not Indian citizens.
A Will for Indian assets should be drafted and executed in India, in compliance with the Indian Succession Act 1925 for non-Hindu, non-Muslim testators, or under the Hindu Succession Act 1956 for Hindus. The Will must be attested by two witnesses who are not beneficiaries under it. For NRIs holding title to Delhi NCR properties in particular, clear title documentation — verified mutation records, completion certificates, and encumbrance searches — must accompany any estate planning exercise, as title defects in Delhi NCR properties are common and can complicate succession.
NRI Investment Legal Checklist
- Establish your FEMA residential status — confirm whether you are resident outside India under FEMA before making investments in India
- Open an NRE and NRO account with an authorised dealer bank in India before initiating any investment — all transactions must flow through these accounts
- Property purchase must be funded through banking channels (NRE, NRO, or home loan) — cash payments are prohibited under FEMA and the Income Tax Act
- Do not purchase agricultural land, plantation property, or farmhouses without specific RBI approval — the general permission does not cover these categories
- For equity investments in listed companies, open an NRI-PIS account through a designated bank and ensure all transactions are routed through the PIS account
- For equity investment in unlisted private companies, the Indian company must file Form FC-GPR with the RBI within 30 days of share allotment — follow up to confirm this is done
- Obtain a Tax Residency Certificate from your country of residence and prepare a self-declaration in Form 10F before the first India income payment of each year to claim DTAA benefits
- Ensure Form 15CA and Form 15CB are completed before any repatriation from NRO accounts — initiate this process at least two weeks before the intended remittance date
- Execute an India-specific Will covering all India-situated assets — ensure it is attested by two non-beneficiary witnesses and ideally registered with the Sub-Registrar
- If investing in a Delhi NCR real estate project, verify RERA registration on the relevant state portal (Delhi-RERA, H-RERA, or UP-RERA) and ensure the purchase price is stated in carpet area terms, not super built-up area