Returning Residents: Legal, Financial Steps to Buy Property in India

(INDIA) Returning Indians planning to buy a home or plot this year face a tighter rulebook that puts their residential status and tax compliance at the center of every sale deed and loan sanction. Banks are reassessing home loans after status changes from Non-Resident Indian (NRI) to resident. Buyers must quote a PAN card at every stage and collect property documents that satisfy both lenders and local registrars. A 2025 tribunal ruling has further sharpened the focus on residency under India’s foreign exchange law, making timing and documentation more important for families moving back and looking to settle quickly.

Why residential status matters

At the heart of this shift is residential status. Once you live in India for at least 182 days in the preceding financial year and you show intent to stay in India for the long term, your status changes from NRI to resident. That change:

• Opens the door to certain property types.
• Triggers updates to bank accounts and how you repay a home loan.
• May affect whether you can buy agricultural land (typically restricted to residents).

Banks and tax authorities are taking a closer look at how buyers prove status and route funds, which means careful planning is now part of a smooth closing.

PAN, TDS and timelines — the tax mechanics

The Permanent Account Number (PAN) sits alongside your passport as a must-have for any property deal. Key points:

• PAN card is mandatory to execute a sale deed and to meet tax rules tied to the purchase price.
• If the seller’s PAN is not linked to Aadhaar, the TDS rate on high-value purchases jumps from 1% to 20%, a large difference for first-time returnee buyers.
• You have 30 days to deposit TDS with the government using Form 26QB. After that, you must issue a TDS certificate via Form 16B.

Important links (preserve originals):
– Income Tax Department – TDS on property (Form 26QB)
– TRACES – Form 16B (TDS Certificate) for Property

Missing PAN, e-payment access, or TDS timelines can cause painful delays at registration and disbursement.

FEMA, the 2025 tribunal ruling, and account conversion

A fresh compliance pressure point comes from the foreign exchange rules that define who is a resident for property and banking purposes.

• The 2025 tribunal ruling emphasized both:
  • Physical presence of 182 days, and
  • A clear intent to stay.
• This creates a narrow window where a returning Indian might still be treated as an NRI under FEMA even after moving back.

Consequences during the transitional period:

• Banks may hold off converting NRE/NRO accounts to resident accounts.
• Lenders may recheck loan terms or delay disbursements.
• Certain property types—such as agricultural land—may remain out of reach.

For official guidance, review the RBI’s FEMA FAQs: Reserve Bank of India FEMA FAQs.

Can you buy before completing 182 days?

It depends on several factors:

• Property type (agricultural land is more restricted).
• Funding route (NRI-structured loans vs resident loans).
• How the bank interprets your status.

Options and mitigants:

1. Some lenders will approve a home loan as an NRI then reassess when you become resident.
2. Others may prefer to wait for the status change, especially if EMIs must come from a resident savings account.
3. A carefully drafted Power of Attorney (PoA) can help manage sale deed, disbursement, and registration while you finish the physical presence requirement.

Buyer tax obligations and practical steps

Tax compliance is squarely on the buyer. Essentials:

• For purchases above INR 50 lakhs from a resident seller, the buyer must deduct 1% TDS if the seller’s PAN is valid and linked to Aadhaar; otherwise 20%.
• Deposit TDS online within 30 days using Form 26QB.
• Issue Form 16B via TRACES to the seller.
• These are buyer obligations—even if a loan is involved, the buyer remains responsible for TDS.

Keep these on file:
– Form 26QB challan copy.
– Form 16B certificate.

These may be requested at registration, loan disbursement, or during tax assessments.

Lender checks and loan administration

Banks and housing finance companies will lend to returnees but expect a fresh review when status changes:

• Lenders may ask for updated income proofs, Indian address details, and resident-account information for EMI instructions.
• If you took a loan as an NRI, the lender may switch your repayment from NRE/NRO to a resident account after you become a resident.
• Systems often require EMI pulls from resident savings accounts for resident borrowers—failure to switch can cause EMI failures, late charges, and credit score impact.

Property due diligence and society/developer compliance

Buyers should insist on a full title review and obtain a No Objection Certificate (NOC) from the housing society or developer before paying major sums.

• If a developer had compliance issues, lenders may withhold disbursements until approvals and lien-free status are confirmed.
• Returning buyers may find local paperwork different from what they’re used to; using local advocates or resident relatives can speed collection of deeds, tax receipts, and encumbrance certificates.

Policy and Compliance Snapshot

The legal rules that matter most fall into four buckets:

Practical steps and documentation checklist

Map your process around five anchors: status, accounts, tax, documents, delegation.

1. Set your status plan
   • If you’ve met 182 days and plan to stay, treat yourself as resident and initiate account conversion.
   • If not, check property eligibility for NRIs or use an NRI-structured loan. Get bank confirmation in writing.
   • Keep copies of immigration stamps, e-Gate entries, and flight itineraries as proof of presence.
2. Convert and route your money
   • Convert NRE/NRO to resident savings once settled.
   • Transfer overseas funds via NRE/NRO channels; keep a clean audit trail.
   • Avoid large cash payments.
3. Prepare for TDS
   • Verify seller’s PAN and Aadhaar linkage early.
   • Budget for 20% TDS if the seller’s PAN is not linked.
   • File Form 26QB within 30 days (from month end of deduction) and issue Form 16B.
4. Build your property documents file
   • Identity: passport and PAN card.
   • Address proofs: one overseas and one Indian (utility bills, bank statements, Aadhaar, rental agreement).
   • Agreements: allotment letter, builder-buyer agreement, or registered sale agreement.
   • Title papers: past sale deeds, title deed, encumbrance certificate.
   • Society/Developer NOC.
   • Tax receipts: property tax, maintenance, completion/occupancy certificates.
   • Power of Attorney: notarized/consular-attested if you cannot attend in person.
   • TDS records: Form 26QB challan and Form 16B.
5. Delegate smartly
   • Appoint a trusted relative or professional as PoA to sign, collect cheques, and attend sub-registrar office.
   • Ensure PoA format meets local bank and sub-registrar requirements.

Real-life examples

• Case 1 (smooth): A couple returning from Dubai booked a resale apartment in Pune for INR 1.2 crore. They had NRI loan approval but not 182-day residency. The banker disbursed under NRI terms, asked for EMIs from an NRO account, and flagged future conversion. They deducted 1% TDS, filed Form 26QB within 30 days, issued Form 16B through TRACES, and eventually converted accounts and claimed tax deductions—no surprises at possession.

• Case 2 (blocked): A returning professional tried to buy agricultural land before meeting 182 days. The sub-registrar and bank declined. The buyer redirected funds to a non-agricultural plot, used a PoA to close, then returned to the farm purchase after meeting the residency test.

Impact on buyers and sellers

• Buyers: The two-part residency test (presence + intent) can leave returnees in transition. Matching bank rules, registrar expectations, and property type is critical.
• Sellers: For deals over INR 50 lakhs, sellers expect buyer-managed TDS to be timely so the credit appears in Form 26AS. Delays can lead sellers to withhold possession documents—some include clauses withholding keys or NOCs until Form 16B is received.
• Banks: Want money routed through compliant channels. Builders insist on bank transfers tied to invoice numbers to document flows.

Common bottlenecks and practical tips

• Account conversion may take longer if fresh KYC and Indian address proofs are required—book bank appointments early.
• Sub-registrar offices may have city-specific document lists—get a local checklist.
• If your deal crosses a financial year, organize records so the day-count test is provable.
• If relying on rental income for EMI servicing, use a property manager to avoid deposit gaps.

Most delays trace back to missing property documents, PAN issues, or unclear status—problems you can solve with a methodical approach.

Final checklist — make your purchase a project

Treat your home purchase like a project with legal, banking, and tax milestones:

• Confirm your residential status and timeline.
• Line up your PAN card and ensure seller PAN is Aadhaar-linked.
• Organize your property documents and NOC.
• Map TDS deadlines and submit Form 26QB within 30 days; issue Form 16B.
• Ensure EMIs will be paid from a resident account when required.

The rules are detailed but knowable. With the 2025 residency interpretation, timing matters more than before—but a clear plan leads to a safe purchase, a steady loan, and a peaceful move back home.