RBI Clarifies Repatriation of Funds for NRI Property Sales

The Reserve Bank of India (RBI) has recently provided important clarifications concerning the repatriation of funds by Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) arising from the sale of immovable property in India. This development is crucial for NRIs and OCIs who have invested in Indian real estate.

Repatriation from NRO Account

Under the extant provisions of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, NRIs and OCIs are permitted to repatriate up to USD 1 million per financial year from their Non-Resident Ordinary (NRO) accounts. This limit applies to legitimate current income and sale proceeds of assets, including immovable property, acquired in India. The key clarification addresses situations where the property was initially acquired through funds held in a regular savings account.

Property Acquired via Savings Account

The RBI has affirmed that if an immovable property was acquired by an individual when they were a resident in India, using funds from a regular savings account, the subsequent sale proceeds can be repatriated subject to certain conditions:

• Residential Status Change: The individual must have subsequently become an NRI or OCI.
• NRO Account Channel: The sale proceeds must be routed through an NRO account.
• Repatriation Limit: The repatriation remains subject to the overall limit of USD 1 million per financial year from the NRO account, as prescribed under FEMA 1999.

This clarification is significant as it provides a clear pathway for NRIs/OCIs to repatriate funds from properties purchased prior to their non-resident status, even if the original investment did not originate from a specific NRE or NRO account. It reiterates the flexibility within the regulatory framework for managing assets in India for the diaspora.

Regulatory Framework

The framework governing such transactions falls under the purview of the Foreign Exchange Management Act, 1999 (FEMA 1999) and its associated rules, primarily the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. Authorised Dealer Category-I banks are responsible for ensuring compliance with these regulations before facilitating any such repatriation.