NRI Property Sale Proceeds: NRE or NRO Account Choice in Focus
Non-resident Indians selling property in India face two separate questions: which account should receive the sale money, and how much of it can later be sent abroad. An Economic Times report of 12 August 2026 put the choice between NRE and NRO accounts back in focus. The answers lie in the Reserve Bank of India's rules under the Foreign Exchange Management Act, 1999 (FEMA), summarised in RBI's own FAQs.
What the two accounts allow
RBI's FAQ on accounts in India by non-residents (updated 16 January 2025) sets out the permitted credits for each account:
| Account | Permitted credits | Repatriation |
|---|---|---|
| NRE (Non-Resident External) | Inward remittances from outside India, interest on the account, interest on investments, transfers from other NRE or FCNR(B) accounts, maturity proceeds of investments | Repatriable |
| NRO (Non-Resident Ordinary) | Inward remittances from outside India, legitimate dues in India, transfers from other NRO accounts | Up to USD 1 million per financial year (April to March), along with other eligible assets |
Sale consideration for property in India is a rupee receipt in India, and legitimate dues in India are a permitted credit to the NRO account. That is why buyers are commonly asked to pay into the seller's NRO account. The same FAQ states that funds can be moved from the NRO account to the NRE account within the USD 1 million facility.
When sale proceeds can be repatriated
RBI's FAQ on purchase of immovable property in India by non-resident individuals (Q.7) sets out the conditions. An NRI or person of Indian origin who sells a property other than agricultural land, a farmhouse or a plantation can repatriate the sale proceeds if:
- the property was acquired in accordance with the foreign exchange law in force at the time;
- the purchase was paid for in foreign exchange received through banking channels, or out of funds held in an FCNR(B) or NRE account; and
- for residential property, repatriation is limited to not more than two such properties.
Where these conditions are not met, for example where the property was bought from rupee funds in India, the money received in the NRO account can be remitted under the general facility: NRO balances of NRIs and PIOs are remittable up to USD 1 million per financial year along with their other eligible assets. The property FAQ also states that repatriation up to USD 1 million per financial year is allowed under the Foreign Exchange Management (Remittance of Assets) Regulations, 2016 for NRIs, PIOs and foreign citizens (other than citizens of Nepal and Bhutan) who have inherited from a person referred to in section 6(5) of FEMA, have retired from employment in India, or are non-resident widows or widowers who inherited assets from a deceased spouse. A person who acquired property under section 6(5) of FEMA, or that person's successor, cannot repatriate the sale proceeds without RBI approval.
Practical sequence for an NRI seller
- Before signing: collect proof of how the property was paid for, such as NRE or FCNR(B) statements or inward remittance certificates. This decides whether the proceeds fall under the two-property route or the USD 1 million route.
- Payment instruction: give the buyer written details of the receiving account and keep the sale deed and bank records consistent with it.
- Tax: the buyer's tax deduction and the seller's capital gains computation are separate from the FEMA question. The choice of account does not settle the tax position.
- Remittance: approach the authorised dealer bank in advance with the sale documents and source-of-funds records, and plan remittances within the per-year limit where the USD 1 million facility applies.
Chartered accountants advising NRI clients should keep the FEMA analysis, the tax computation and the bank's documentation as three linked but separate workstreams, and settle the account route before the sale deed is executed.
Updated on 27 September 2026: added RBI's FAQs as official sources, the permitted credits and repatriation rules for NRE and NRO accounts, the three conditions for repatriating sale proceeds, the two-property limit and the USD 1 million facility.
