Buying property abroad under LRS: what is allowed, what it costs, where it gets stuck.

A resident Indian can buy a flat in Dubai, London or Toronto without RBI approval, within limits. How the LRS route works, what TCS does to cash flow, what the destination country may refuse, and what has to be reported every year after.

1. Yes, it is allowed. Within a fence.

A resident individual in India can buy immovable property outside India without prior approval from the Reserve Bank. The permission comes from the Foreign Exchange Management Act, 1999 and the Foreign Exchange Management (Overseas Investment) Rules, 2022. Rule 21 of those Rules lists the routes through which a resident may acquire property abroad. The one most people use is the Liberalised Remittance Scheme.

Under LRS, an individual may remit up to USD 2,50,000 in a financial year (April to March) for permitted current and capital account purposes. Buying property abroad is one of them. The RBI's own FAQ on the subject says so in plain words.

The fence has three posts: the annual limit, the source of the money, and what the destination country will let a foreigner buy. Most problems we see come from the second and third, not the first.

2. The routes, not just LRS.

Rule 21 allows a resident individual to acquire property outside India in these ways:

By inheritance or gift. From a person resident in India who held it in line with the law, or from a person resident outside India.

Out of a Resident Foreign Currency (RFC) account. Typically money earned abroad before returning to India.

Under LRS. Fresh remittance from India, within the annual limit.

Jointly with a relative who is resident outside India. Permitted where there is no outflow of funds from India.

Out of income or sale proceeds of assets held abroad. Other than overseas direct investment, those assets having been acquired in line with the law.

Knowing the route matters because the reporting, the tax and the paperwork follow it. A flat bought with a gift from a son in Singapore is a different file from a flat bought with fresh remittances from Ahmedabad.

3. How the LRS purchase actually works.

Check the destination first. Before any money moves, confirm that a foreigner may buy that type of property in that country, and at what extra cost. Section 5 gives examples.

Decide whose name it goes in. The limit is per individual. The RBI permits remittances to be consolidated for family members who will co-own the property, with each member complying with the scheme in his or her own right. A couple buying jointly can therefore remit up to USD 5,00,000 in one year. Clubbing a relative's limit is not permitted where that relative is not a co-owner.

Plan across financial years. For an under-construction property paid in instalments, spreading payments over two or three financial years keeps each year within the limit. A booking in February and the next instalment in April fall in different years.

Fund it from your own money. The LRS Master Direction states that banks should not extend any kind of credit facilities to resident individuals to facilitate capital account remittances under the scheme. An Indian home loan or overdraft cannot be the source. Whether a loan from a bank in the destination country is permissible is a separate FEMA question; take a written view from your authorised dealer bank before signing a foreign mortgage.

Go through one authorised dealer bank. PAN is mandatory. The bank will ask for the LRS declaration (Form A2), the sale agreement or booking letter, and proof of the source of funds.

Watch the 180-day clock. Money remitted under LRS that is not used for a permitted purpose within 180 days, and accruals not reinvested within 180 days, are to be brought back to India. Do not remit a year's limit into a foreign account months ahead of the payment schedule.

4. What TCS does to the cash flow.

Section 394 of the Income-tax Act, 2025 requires the bank to collect tax at source on LRS remittances. For purposes other than education and medical treatment, the rate is nil on the first Rs 10 lakh in a financial year and 20 percent on the amount above it. The threshold applies to the total of all LRS remittances in the year, not to each payment.

A worked example. An individual remits Rs 1 crore in a year towards a flat abroad, with no other LRS remittance that year.

Amount above the threshold: Rs 1,00,00,000 less Rs 10,00,000 = Rs 90,00,000.

TCS at 20 percent: Rs 90,00,000 x 20% = Rs 18,00,000.

That Rs 18 lakh is not a final cost. It is credited against the individual's PAN and can be set off against the year's tax or claimed as a refund in the return. But it has to be paid upfront, on top of the Rs 1 crore, and may sit with the government for up to a year. For a family spreading the purchase across members and years, the Rs 10 lakh threshold for each person in each year reduces the cash locked up.

5. Where the destination country says no.

India's permission is only half the story. Several markets restrict or price out foreign buyers, and the rules change often.

Canada. Non-Canadians are prohibited from buying residential property under a federal ban that is currently set to expire in 2027. The government is reviewing what replaces it.

Australia. Foreign persons are barred from buying established dwellings from 1 April 2025 to 30 June 2029, according to the Australian Taxation Office. New dwellings and vacant land remain open, subject to approval.

Singapore. Foreigners pay Additional Buyer's Stamp Duty of 60 percent on any residential purchase, on top of normal stamp duty.

Other markets allow foreign ownership only in designated areas, only for certain property types, or only on leasehold. Local lawyers, not brokers, should confirm title, the right to hold it as a foreigner, and the taxes on purchase, holding and sale.

6. After the purchase: tax and reporting in India.

Income is taxable in India. A resident and ordinarily resident individual is taxed on worldwide income. Rent from the foreign property, and any gain on its sale, are taxable in India. Tax paid abroad can usually be claimed as a credit under the tax treaty with that country, subject to the conditions and forms prescribed.

The property must be disclosed every year. Residents report foreign assets in Schedule FA of the income-tax return, whether or not the property earned anything. Schedule FA follows the calendar year, not the Indian financial year, which catches people out.

Non-disclosure is expensive. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 provides a penalty of Rs 10 lakh for failure to disclose a foreign asset. The Finance (No. 2) Act, 2024 relaxed this for small foreign assets up to an aggregate of Rs 20 lakh, but that relief does not extend to immovable property. A foreign flat is never small enough to skip.

Rent and sale proceeds. Income from the property and proceeds of sale that are not reinvested in a permitted way are subject to the same 180-day expectation as unutilised LRS funds. Confirm the position with your bank before leaving money abroad.

7. The checklist before you sign.

Confirm the destination country allows you to buy that property, and the full cost of doing so.

Fix the ownership: whose name, which relatives co-own, and in what shares.

Map the payment schedule to financial years and each owner's USD 2,50,000 limit.

Arrange the funds from own sources; no Indian loan.

Budget TCS at 20 percent above Rs 10 lakh per person per year, and plan the refund.

Keep the trail: Form A2, bank advices, sale agreement, local title documents.

Set a reminder for Schedule FA every year, and for foreign tax returns where the country requires them.

Make a will that the destination country will recognise. Succession to foreign property follows the law of where it sits, and probate abroad can take years.

The RBI does not ask you to seek permission. It asks you to stay within the fence. The fence is the limit, the source of funds, and the paperwork that follows.

This article is general in nature and does not constitute professional advice. Readers should seek specific advice before acting on any matter described here.

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