Buying Property Abroad Under LRS: The Rules, the Tax and How to Pay

An apartment in Dubai, a flat in London, a holiday home in Portugal. Owning property overseas has become a real option for many Indian residents, and it is entirely legal. What trips people up is not the buying, it is the compliance around it, because sending money abroad to buy property is one of the more heavily regulated things you can do with your money, and the penalties for getting it wrong are serious.

Here is the short version. A resident Indian can buy property abroad, and the Liberalised Remittance Scheme is the route. Under LRS, each resident can remit up to USD 250,000 in a financial year towards a residential or commercial property overseas, paid by bank wire through an authorised dealer, using their own traceable funds. TCS of 20% applies on the amount above ₹10 lakh in a year, and it is recoverable against your income tax. The rules are strict on the details: the money cannot come from cash, a credit card or a loan taken in India, the property must be disclosed in your tax return every year you hold it, and the proceeds must be brought back when you sell. The rest of this guide covers each of these.

Can a resident Indian buy property abroad

Yes. A resident individual is permitted to acquire immovable property outside India, under the Liberalised Remittance Scheme and the Foreign Exchange Management (Overseas Investment) Rules, 2022, which govern this kind of overseas investment.

Both residential and commercial property are allowed. You can buy an apartment to live in or let out, or a commercial unit as an investment. What is not allowed is agricultural land, a farmhouse, or plantation property, which sit outside the permitted categories.

The property can be bought in your sole name, or jointly. A joint purchase with another resident is straightforward, and a joint purchase with a non-resident is permitted only where that non-resident is a relative. The route, the funding and the reporting all have specific rules, and the sections below take them in the order you will meet them.

How much can you remit, and how families pool it

The Liberalised Remittance Scheme sets the ceiling. Each resident individual can remit up to USD 250,000 in a financial year, and that single limit covers all your foreign remittances for the year combined, not property alone.

Property abroad often costs more than one person's annual limit, and the scheme allows families to pool, but with one condition that is easy to miss and important to get right. Family members can combine their LRS limits towards a single property only if each contributing member is a co-owner of that property. A couple and their adult child can together remit up to USD 750,000 towards one property in a year, provided all three are named co-owners. If a family member sends money towards a property they are not a co-owner of, that pooling is not permitted for this kind of transaction, and it is exactly the sort of mismatch that surfaces later in scrutiny.

So the rule is simple to apply: decide the co-owners first, and let each co-owner remit their own share from their own account under their own limit.

What money can you use to pay

This is where more purchases go wrong than anywhere else, because the source of the money is tightly controlled. Only your own clean, traceable funds may be used.

That means savings, accumulated bank balances, the proceeds of selling shares or mutual funds, a matured fixed deposit, or the sale of a property you own in India. The principle is that the money is legitimately yours and fully documented, and that it leaves India through proper banking channels.

Several common assumptions are simply not allowed. You cannot pay in cash, however small the amount. You cannot use an international credit card or debit card to buy the property. And you cannot take a loan in India to fund an overseas property purchase, which catches many people out, because borrowing in India to buy property abroad is not permitted, and even indirect structures like a loan against Indian securities used for this purpose can attract scrutiny. The money you remit has to be your own funds, sent through an authorised dealer bank.

How much TCS do you pay

Property abroad falls into the investment category for tax purposes, which carries the higher rate of TCS, and this is the most immediate cost to plan for.

No TCS applies on the first ₹10 lakh you remit in a financial year. Above ₹10 lakh, property purchase is charged at 20% on the amount over the threshold. This is the standard investment rate, and it is much higher than the 2% that applies to education and medical remittances, so it is worth being clear that property does not get the low rate.

Take a worked example. You remit ₹80 lakh to buy a studio apartment abroad. The first ₹10 lakh carries no TCS. The remaining ₹70 lakh is charged at 20%, which is ₹14 lakh collected at the time of the transfer. That is a large sum to find upfront, so you need the liquidity to cover it on top of the purchase price.

The ₹14 lakh is not lost, however. TCS is an advance tax, not a final one. It is adjusted against your total income tax when you file your return, and if your liability is lower, the balance comes back as a refund. Keep the Form 27D certificate the bank issues as proof. The point to plan around is the cash flow: you part with the TCS at the time of purchase and recover it later, so budget for the timing gap.

How the payment reaches the seller

The payment is made by wire transfer through an authorised dealer bank, sent to the seller, or more often to an escrow account or the title company handling the transaction abroad.

Your bank will want to see the sale and purchase agreement, or the equivalent closing documents, before processing the transfer, and where the money is going to an escrow or title company, the agreement needs to reference the property clearly. You will also complete the A2 form, which declares the purpose of the remittance, and the transfer is tagged with the purpose code for overseas real estate investment, S0005, so it is reported correctly to the RBI. A wrong purpose code causes a reporting mismatch that can create problems later, so this matters.

The exchange rate is where a large property remittance quietly gains or loses a lot. On a sum this size, a bank markup of 2 to 5% built into the rate is ₹1.6 lakh to ₹4 lakh on an ₹80 lakh transfer, dwarfing every fee on the transaction. A remittance at the live interbank rate with no markup, as Matrix Forex provides, is where the real saving on a property purchase sits.

What you must do every year after buying

Buying the property is not the end of your obligations. It is the start of an annual one that people forget, and forgetting it is costly.

Every year you own the property, you must disclose it in Schedule FA, the foreign assets schedule of your income tax return. This applies throughout the holding period, for as long as you own the property, and whether or not it earns you any income. Non-disclosure of a foreign asset is not treated lightly. It can attract severe penalties under the Black Money Act, which is a far heavier consequence than an ordinary tax error. So the moment you acquire the property, note that Schedule FA disclosure is now a permanent fixture of your return.

Bringing the money back: repatriation rules

Money sent abroad to buy property does not simply stay there indefinitely without rules. Both the income the property earns and the proceeds when you sell it are subject to obligations.

Rental income from the property is taxable in India whether or not you bring it back, because as a resident your global income is taxable here. When you eventually sell, the sale proceeds must be repatriated to India, within the timeline the Overseas Investment Rules set for bringing back such proceeds. These repatriation timelines and the exact treatment of income are among the more intricate parts of the framework, and they are worth confirming with your bank or a chartered accountant for your specific case rather than assuming. What is constant is that this is a monitored investment, not money that disappears offshore, and the reporting follows it from purchase to sale.

What you cannot do

A few hard lines are worth stating plainly, because crossing them turns a legitimate purchase into a FEMA violation.

You cannot round-trip, which means buying property abroad and then routing the funds or the ownership back into India, for instance through an overseas company that channels value back home. You cannot invest through a foreign entity whose business is real estate, since investment into overseas companies engaged in the real estate business is not permitted. You cannot buy agricultural land, a farmhouse or plantation property. And you cannot remit to jurisdictions that are prohibited, such as countries flagged as non-cooperative on financial standards. These are not grey areas, and the penalties for crossing them are real.

The costs beyond the purchase price

Finally, it helps to see the full cost of owning property abroad, beyond the headline price, so there are no surprises.

There is the TCS to fund upfront and recover later, and the exchange rate, where avoiding a markup makes a material difference on a large sum. There is currency risk that runs for as long as you hold the property, since the rupee value of both the asset and any rental income moves with the exchange rate. And there are the costs on the ground in the country itself: local property taxes, legal due diligence, the rules on property rights for foreign owners, and inheritance laws that can differ sharply from Indian ones. None of these should stop a well-planned purchase, but all of them belong in the budget.

Frequently asked questions

Can a resident Indian buy property abroad under LRS?

Yes. A resident individual can buy residential or commercial immovable property abroad under the Liberalised Remittance Scheme and the Overseas Investment Rules, 2022, up to USD 250,000 in a financial year, paid through an authorised dealer bank from their own funds. Agricultural land, farmhouses and plantation property are not permitted.

How much TCS applies on buying property abroad?

Property abroad is treated as an investment, so TCS is 20% on the amount you remit above ₹10 lakh in a financial year. It is much higher than the 2% for education and medical remittances. TCS is an advance tax and is recoverable against your income tax when you file your return.

Can my family pool our LRS limits to buy one property abroad?

Yes, but only if each contributing family member is a co-owner of the property. If all are co-owners, a couple and their adult child can together remit up to USD 750,000 in a year. A family member who is not a co-owner cannot pool their limit towards it.

Can I take a loan in India to buy property abroad?

No. Borrowing in India to fund an overseas property purchase is not permitted, and even indirect structures such as a loan against Indian securities used for this purpose can attract scrutiny. The money must be your own traceable funds, and it cannot be paid by cash or credit card.

Do I have to declare property I own abroad?

Yes. You must disclose foreign property in Schedule FA of your income tax return every year you own it, whether or not it earns income. Non-disclosure can attract severe penalties under the Black Money Act, so it is an obligation to take seriously.

What happens when I sell property I bought abroad?

The sale proceeds must be repatriated to India within the timeline the Overseas Investment Rules set. Any gain is taxable in India as your global income is taxable here. Because the repatriation and tax treatment have specific rules, confirm the current position with your bank or a chartered accountant for your situation.

Buying property abroad is well within reach for a resident Indian, but it rewards doing the compliance properly from the first rupee. Remit through the right channel, from the right funds, with the right purpose code and the co-owners settled, plan for the TCS, and keep the property on your tax return every year. Get those right and the purchase is clean. On the remittance itself, Matrix Forex is an RBI-authorised AD Category-II dealer with 15 years in foreign exchange, and it sends property payments through the authorised dealer route at the live interbank rate with no markup, which on a sum this size is a saving worth having. Visit matrixforex.in to remit for an overseas property purchase.