For many global Indian families, owning property abroad is no longer just an aspiration. A home for children studying overseas, a holiday apartment in Dubai, or an office unit in London are now within reach.
But here’s the caveat: every such purchase sits under the RBI’s Liberalised Remittance Scheme (LRS). One misstep like exceeding the USD 250,000 cap, using the wrong purpose code, or leaving funds idle abroad, can create compliance risks, tax mismatches, and even penalties.
This is why understanding the LRS framework is critical before investing in real estate overseas.
In this blog, we explain the limits, rules, and compliance caveats of buying property overseas, so you can plan with confidence and avoid costly mistakes.
Table of Contents
- What is LRS for property purchases?
- Who can buy property abroad under LRS?
- Annual limits and pooling rules
- Purpose code for property remittances
- Mortgages and FEMA rules
- Documentation banks require
- How to structure payments
- TCS on property purchases abroad
- Taxation of overseas property
- Repatriation rules
- What is not allowed
- Conclusion
- FAQs
What is LRS for property purchases?
The RBI’s Liberalised Remittance Scheme (LRS) is the framework that allows resident Indians to move money abroad in a legal and compliant way. When it comes to buying property abroad, here are the key points:
- Annual limit: Every resident individual can remit up to USD 250,000 per financial year (April to March) under LRS.
- Permitted use: The purchase of immovable property outside India is explicitly allowed. This includes both residential and commercial property.
- Examples of use:
- Buying a home for your child studying overseas.
- Investing in a holiday apartment in Dubai.
- Acquiring a commercial office in London or Singapore.
- Process: Remittance must be routed through an authorised dealer (AD) bank with the right documentation and FEMA compliance.
- Family pooling: The USD 250,000 cap is per individual. Families can pool their limits by making each contributor a co-owner.
- Example: A couple and their adult child can collectively remit USD 750,000 in one year towards a single property purchase.
- Why it matters: LRS is the only compliant channel for Indian residents to buy property overseas, defining how much you can remit, in what manner, and for what purpose.
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.
Annual limits and pooling rules
- 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.
Purpose code for property remittances
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.
Common Questions
Can I buy both residential and commercial property abroad under LRS?
Yes. LRS permits the purchase of both residential and commercial immovable property outside India. For example, you could buy an apartment in London or an office unit in Singapore, as long as the remittance is routed through an authorised dealer bank with purpose code S0005.
Is land purchase also covered under LRS?
Yes. The purchase of land abroad is also permitted under LRS, provided it is for investment or ownership. What is not allowed is indirect exposure through entities engaged in “real estate business” abroad, which is restricted under Overseas Direct Investment rules.
Can a family pool limits if only one member is shown as the owner?
No. Pooling is permitted only when all contributors are co-owners or co-partners in the property. For example, if three family members remit USD 250,000 each, all three names must appear on the sale deed or title to remain compliant.
What happens if the property price is higher than USD 250,000 but only one individual wants to buy?
That individual can spread the payments across multiple financial years, as long as each installment in a year is within the USD 250,000 cap. For instance, a USD 600,000 property can be funded over three years by the same person.
Can I use international credit card to buy property abroad?
No. Property purchases are classified as capital account transactions under FEMA, and banks explicitly disallow using credit or debit cards for such transactions. For instance, HDFC Bank notes that the purchase of immovable property abroad is not permitted through their credit, prepaid, or debit cards.
This view is reinforced by recent reporting. The Economic Times highlights that such transactions are being flagged as violations of LRS and FEMA, and The Times of India has warned Indian buyers of the regulatory risks.
It is also important to note that while no RBI circular uses the exact phrase “credit cards are banned for property purchases,” the compliance framework makes it clear: all remittances for overseas property must go through an authorised dealer bank with the correct purpose code (S0005). Using a card bypasses this channel, which is why banks and regulators treat it as non-compliant.
Mortgages and FEMA rules
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 (RBI ECB framework).
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.
As per the Borrowing and Lending Regulations, 2018 (RBI Notification), 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.
Local mortgages in the property’s country depend on that jurisdiction.
FEMA does not prohibit you from taking a mortgage abroad, but the foreign lender will decide whether you qualify. In practice, most overseas banks require local income or credit history to approve a mortgage. For instance, an Indian resident earning in the UK can qualify for a UK mortgage, but someone with income only in India will find approvals difficult. This is more a market reality than a FEMA restriction. If you do manage to secure a local mortgage, remember that servicing it must come from your permissible remittances under LRS, not from unreported channels.
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.
Common Questions
Can I take a home loan from a foreign bank (say HSBC UK) while living in India?
No. Under FEMA and the ECB framework, resident individuals are not eligible borrowers for overseas loans in foreign currency (RBI ECB Guidelines). A resident Indian cannot walk into HSBC UK and take a dollar- or pound-denominated mortgage. The compliant route is to use your own funds under LRS, or pool family limits if co-owning.
If I pledge the overseas property as collateral, does that count as an ECB and therefore get banned?
Yes. Mortgaging a foreign property to a foreign lender while you are resident in India is treated as a form of overseas borrowing, which falls under FEMA’s restrictions (FEMA Borrowing & Lending Regulations, 2018). This is not a permitted route.
Who qualifies as a “close relative” under FEMA?
The term follows the Companies Act definition, which includes parents, spouse, siblings, children, and in-laws in direct lines. It does not include cousins or friends. (MEA Circular)
Documentation banks require
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
- As per Income-tax Rule 37BB, Form 15CA/CB is not required for individual LRS remittances that fall within the USD 250,000 limit and do not need RBI approval.
- However, bank staff sometimes request it out of caution. In such cases, you can point them to the rule and clarify.
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 to structure payments
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: Buying an USD 900,000 apartment in Dubai
- 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.
TCS on property purchases abroad
Under the Income-tax Act, 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 (5%) are available only for education and medical remittances, not for property.
- Revised threshold (effective FY 2025–26)
- 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 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.
Taxation of overseas property
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 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.
Repatriation rules
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
- If the income is not reinvested abroad, FEMA requires that it be repatriated to India within 180 days of receipt.
- 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) 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
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.
Conclusion
Buying property abroad under LRS is fully permitted, but the rules are layered. The annual cap, family pooling requirements, purpose codes, and 180-day repatriation timelines make it very different from sending money for travel or education.
Even small errors like using the wrong purpose code or forgetting to add co-owners — can lead to compliance scrutiny or unnecessary TCS outflows.
If you are planning an overseas property purchase, the most important step is to treat the remittance correctly from day one. Choose the right code (S0005 – Indian investment abroad in real estate), keep your documentation airtight, and align every transfer with FEMA and tax rules.
Need clarity on your property remittance?
Paasa is a global investing platform for Indian investors, enabling access to equities and strategies across markets such as the US, China, Europe, Japan, and beyond. Our clients use Paasa to build globally diversified portfolios, from direct stocks to curated managed strategies.
- Every cross-border allocation sits within the FEMA and LRS framework, and our team has built deep expertise in compliance, documentation, and purpose code selection.
- While we do not facilitate property purchases abroad, we regularly guide investors on how to structure large-value remittances so they remain FEMA-compliant, tax-efficient, and transparent.
If you are planning a property purchase overseas and want to be certain your remittance is tagged correctly, pooled the right way across family members, and reported properly for tax, our team can help you navigate the rules with clarity and confidence.
You can reach us at support@paasa.com or schedule a consultation with our team.
About Paasa
Paasa is an Indian investor’s gateway to global investing, trusted by HNIs, family offices, and institutions to diversify into markets across the US, Europe, China, Japan, and beyond.
What sets Paasa apart is its India-facing compliance layer:
- FEMA and LRS compliance embedded into every transaction.
- Tax reporting and analytics built for Indian investors (LTCG, STCG, dividend tax, TCS tracking).
- End-to-end support for remittance structuring, reconciliation, and compliance queries.
Whether it’s equities, ETFs, UCITS funds, managed strategies, or even helping you protect your RSUs from estate tax, Paasa provides a single transparent platform for global portfolios with the confidence that India-specific compliance is taken care of.
Related Guides on LRS
Buying property abroad is just one part of how Indians use the Liberalised Remittance Scheme. Depending on your needs, you may want to understand how LRS applies in other scenarios too:
- LRS for Investments: How to use LRS for stocks, ETFs, bonds, and real estate abroad.
- LRS for Education: Step-by-step guide for funding overseas education, purpose codes, and TCS rules.
- LRS for Healthcare: Sending money abroad for medical treatment, what qualifies as medical, and how much you can remit.
- LRS for Travel: Using LRS for overseas trips, forex cards, limits, and claiming back TCS.
- LRS for Maintenance: Supporting family members abroad legally, purpose codes, and tax implications.
- LRS for Gifts & Donations: How to gift or donate overseas without triggering FEMA violations.
Explore these guides to get a complete picture of how LRS works across different use cases.
Disclaimer
This blog is for informational and educational purposes only. It is not intended as legal, tax, or financial advice. Regulations issued by the RBI, FEMA provisions, and Income Tax rules on outward remittances are subject to change, and banks may apply their own interpretations in practice.
Before making any remittance, readers should consult their authorised dealer bank, tax advisor, or legal professional.
Paasa does not directly facilitate property purchases or remittance services. Our role is limited to helping investors understand FEMA and LRS compliance as part of their broader global investment planning.
While we have taken care to ensure accuracy, Paasa does not guarantee the completeness or applicability of the information. Any reliance on this content is strictly at the reader’s own risk.
