NRI buying property Bengaluru: TDS, FEMA and repatriation rules you must get right

It is June 2026, the AY 2026-27 return-filing window is open, and the inbox of every chartered accountant in Bengaluru is filling up with the same question from clients in Dubai, Singapore and San Jose: can I buy a flat in Whitefield, and what happens to the tax. NRI buying property Bengaluru demand has stayed strong across residential and commercial segments, but the tax mechanics split sharply depending on which side of the table a Non-Resident Indian (NRI) sits on.

The short answer. An NRI can freely buy residential and commercial property in Bengaluru under the Foreign Exchange Management Act (FEMA), 1999, but not agricultural land, plantations or farmhouses. When an NRI buys from a resident, the buyer deducts 1% TDS under Section 194-IA if the price is Rs 50 lakh or more. When a resident buys from an NRI seller, the buyer must deduct TDS under Section 195 on the sale consideration, with long-term capital gains taxed at 12.5% without indexation for transfers on or after 23 July 2024, plus applicable surcharge and cess. The trade-off: the Section 195 route is far heavier and more error-prone than the flat 1%, and getting it wrong lands the resident buyer with the liability.

Quick facts: as of 24 June 2026 in Bengaluru, an NRI buying property faces a 1% TDS under Section 194-IA on purchases of Rs 50 lakh or more (source: Income Tax Department), while a resident buying from an NRI must withhold under Section 195 at the NRI seller's capital-gains rate, currently 12.5% without indexation on long-term gains per the 23 July 2024 regime.

What property can an NRI actually buy in Bengaluru under FEMA?

An NRI can buy any number of residential and commercial properties in Bengaluru without prior Reserve Bank of India (RBI) approval, but cannot buy agricultural land, plantation property or a farmhouse. This is the core FEMA, 1999 rule, administered by the RBI. So an apartment in Sarjapur, an office floor on Outer Ring Road, or a retail unit in Indiranagar are all fair game. A coffee estate near the city's edge, a farmhouse on agri-classified land, or raw agricultural plots are not, regardless of whether the buyer holds an NRI or OCI status.

There is one narrow exception worth naming: an NRI can inherit agricultural land, a farmhouse or plantation property, even though they cannot purchase it. Funding the purchase also has rules. Payment must move through banking channels, that is, an NRE, NRO or FCNR account, or by direct inward remittance. Cash payment is not permitted under FEMA.

What TDS applies when an NRI buys property from a resident in Bengaluru?

When an NRI buys from a resident seller, the NRI buyer deducts 1% TDS under Section 194-IA if the consideration or stamp duty value is Rs 50 lakh or more. This is the same rule that applies to resident buyers. The 1% is calculated on the full consideration, not just the slice above Rs 50 lakh, and it is deposited using a challan-cum-statement in Form 26QB within 30 days from the end of the month of deduction. Importantly, the buyer does not need a Tax Deduction Account Number (TAN) for a Section 194-IA transaction; the buyer's and seller's PAN are sufficient. If the resident seller has no PAN, the rate jumps to 20%.

For a Bengaluru NRI buyer, this is the easy path. We walk through the mechanics in detail in our guide to TDS on property purchase under Section 194-IA in Bengaluru.

What TDS applies when a resident buys property from an NRI seller?

When a resident (or anyone) buys from an NRI seller, the buyer must deduct TDS under Section 195, not Section 194-IA, and the deduction is tied to the NRI seller's capital gains. For long-term capital gains, that is property held more than 24 months, the rate is 12.5% without indexation for transfers on or after 23 July 2024, plus applicable surcharge and cess. Short-term gains, on property held 24 months or less, are taxed at the NRI's applicable slab rate. The 12.5%-without-indexation rate is the post-Budget-2024 regime; for transfers before 23 July 2024 the long-term rate was 20% with indexation.

The compliance burden here is the trap. Unlike the 1% route, the buyer of NRI property must obtain a TAN, deduct under Section 195, deposit the TDS, and file Form 27Q (the quarterly TDS return for payments to non-residents). The Rs 50 lakh threshold of Section 194-IA does not apply; Section 195 can bite on any consideration. Get the rate, the TAN or the filing wrong, and the liability for short-deduction, interest and penalty falls on the resident buyer, not the NRI seller.

How can an NRI seller reduce the heavy Section 195 TDS?

An NRI seller can apply for a lower or nil TDS certificate under Section 197, which tells the buyer to deduct at a reduced rate matched to the actual capital gain rather than a higher base. Without it, TDS is computed on a basis that often exceeds the real tax liability, blocking the NRI's money with the department until a refund is processed after filing a return. The application is made in Form 13 through the income-tax portal or TRACES.

The catch is time. A Section 197 certificate is not instant; it typically takes a few weeks to a few months depending on case complexity and assessing-officer verification. For a transaction with a fixed registration date, that timeline matters. An NRI seller who wants the lower rate should start the Form 13 process well before agreeing on a closing date, and a resident buyer should ask to see the certificate before deducting, because absent the certificate, the safe move is to deduct at the full Section 195 rate.

How does an NRI repatriate Bengaluru sale proceeds out of India?

An NRI can repatriate up to USD 1 million per financial year from an NRO account, including property sale proceeds and capital gains, after taxes are paid. The remittance is processed by the bank against Form 15CA (the remitter's declaration) and Form 15CB (a chartered accountant's certificate confirming taxes have been accounted for). This USD 1 million ceiling is the standard FEMA limit for NRO-sourced funds.

There is a more generous lane for property bought with foreign funds. Sale proceeds of up to two residential properties that were originally purchased using foreign exchange (through NRE/FCNR funds or inward remittance) can be repatriated, subject to conditions, rather than being parked in the NRO bucket. The practical reading: keep clean records of how each Bengaluru property was funded, because the funding source determines which repatriation route you get. Note also that proceeds from inherited agricultural property sold by an NRI are generally non-repatriable.

NRI buying property Bengaluru: what is the real trade-off?

NRI buying property in Bengaluru gives you full market access and genuine repatriation rights, but the tax friction is asymmetric and that is the trade-off to plan around. Buying from a resident is light: 1% TDS, no TAN, Form 26QB. Buying from an NRI seller, or being the NRI seller, pulls you into Section 195, TAN, Form 27Q and a capital-gains computation where errors cost the buyer. If you are the seller, the Section 197 certificate is the relief valve, but only if you start early. For the financing side of an NRI purchase, see our breakdown of home loan tax deductions under Section 24(b) and 80C for FY27 in Bengaluru.

What is the seven-point checklist before an NRI signs in Bengaluru?

Run through these before you commit to any Bengaluru deal as an NRI buyer or seller.

1. Confirm the property is residential or commercial, not agricultural, plantation or farmhouse land, before paying any token.
2. Route all funds through NRE, NRO or FCNR accounts or inward remittance; never pay in cash.
3. If buying from a resident at Rs 50 lakh or more, deduct 1% under Section 194-IA and file Form 26QB within 30 days.
4. If buying from an NRI seller, obtain a TAN, deduct under Section 195 on the gains, and file Form 27Q.
5. As an NRI seller, apply for a Section 197 lower or nil certificate via Form 13 weeks ahead of closing.
6. Keep documentary proof of the foreign-currency funding source for every property you may later sell.
7. For repatriation, arrange Form 15CA and Form 15CB and stay within the USD 1 million per financial year NRO limit.

Can an NRI buy a farmhouse on the outskirts of Bengaluru?

No. Under FEMA, an NRI cannot purchase agricultural land, plantation property or a farmhouse anywhere in India, including the Bengaluru periphery. Residential and commercial property is permitted without RBI approval. An NRI can only inherit such restricted agricultural property; they cannot buy it.

Does the Rs 50 lakh threshold apply when buying from an NRI seller?

No. The Rs 50 lakh threshold belongs to Section 194-IA, which covers purchases from residents. Buying from an NRI seller falls under Section 195, which has no such threshold, so TDS can apply regardless of the price. The buyer must obtain a TAN and file Form 27Q.

What is the long-term capital gains TDS rate when buying from an NRI now?

For transfers on or after 23 July 2024, long-term capital gains on property sold by an NRI are taxed at 12.5% without indexation, plus applicable surcharge and cess, and TDS under Section 195 follows that basis. Before that date the long-term rate was 20% with indexation. Short-term gains are taxed at slab rates.

How much can an NRI repatriate from a Bengaluru property sale?

An NRI can repatriate up to USD 1 million per financial year from an NRO account, including property sale proceeds, after taxes are paid, using Form 15CA and Form 15CB. Sale proceeds of up to two residential properties bought with foreign funds enjoy a separate repatriation route subject to conditions.

Sources we verified for this guide: the Income Tax Department on TDS on purchase of immovable property under Section 194-IA, ClearTax on Section 195 TDS applicability for NRIs, and Tax2win on TDS on sale of property by an NRI.

Last updated 2026-06-24. PropNewz Team.