FEMA Compliance for NRIs Owning Property in Kerala: Your 2026 Guide

For Non-Resident Indians (NRIs), owning property in Kerala is a major investment and a matter of pride. However, navigating the Foreign Exchange Management Act (FEMA) is essential to ensure your transactions are legal and your money is repatriable. With significant updates in the 2026-27 Union Budget and new RBI regulations, here is your comprehensive guide to FEMA compliance for Kerala property.

Understanding the Basics: NRE vs. NRO

When buying or selling property in India, the type of bank account you use is the foundation of FEMA compliance.

• NRE (Non-Resident External) Account: Use this for funds earned abroad. Money in this account is fully repatriable.
• NRO (Non-Resident Ordinary) Account: Use this for income earned in India, like rent or the sale proceeds of property.

Crucial Rule: Payment for property transactions cannot be made in foreign currency or through traveler’s checks. All transactions must happen through regular banking channels in Indian Rupees.

Key Changes in 2026

The legal landscape for NRI property has shifted this year:

1. New TDS-without-TAN Rule (Effective October 2026)

A significant update for 2026 is the simplification of Tax Deducted at Source (TDS) for NRIs. Previously, buyers often needed a Tax Deduction and Collection Account Number (TAN). The new "TDS-without-TAN" rule streamlines the process for certain property transactions, reducing the compliance burden on buyers.

2. Repatriation Limits (USD 1M/FY)

Under current FEMA rules, an NRI can repatriate up to USD 1 million per financial year from their NRO account. This includes the sale proceeds of immovable property, provided all taxes are paid and the property was held for at least 10 years (or other conditions are met).

3. Broadening of PROI Status

The 2026-27 Budget has broadened the definition of Person Resident Outside India (PROI), making it easier for certain categories of overseas citizens to manage assets in India without triggering complex resident-status issues.

Restrictions on Agricultural Land

A common mistake NRIs make is attempting to purchase agricultural land, plantation property, or farmhouses in Kerala.

• General Rule: NRIs and OCIs are prohibited from purchasing such land.
• Exceptions: You can only inherit agricultural land. If you wish to purchase it, you must obtain prior approval from the Reserve Bank of India (RBI), which is rarely granted for individual investments.

LRS TCS Rate Reduction

The Liberalised Remittance Scheme (LRS) has seen a reduction in Tax Collected at Source (TCS) rates for certain transactions in 2026. This makes it more cost-effective for NRIs to move funds for property maintenance or small-scale investments from their Indian accounts.

Tips for Safe Property Transactions

1. Title Verification: Always conduct a thorough title search in the local Sub-Registrar's Office (SRO) in cities like Kochi, Trivandrum, Thrissur, or Kozhikode.
2. CA Certification: For repatriation of sale proceeds, you will need a 15CA/15CB certificate from a Chartered Accountant.
3. Gift Deeds: Remember that while residential property can be gifted to an NRI, agricultural land can only be gifted to a resident Indian.

Conclusion

FEMA compliance is not just about following rules; it's about protecting your hard-earned investment. With the 2026 updates, the process has become more streamlined in some areas but more strictly monitored in others.

Planning a property transaction in Kerala? Book a FEMA compliance review to ensure your investment is secure and your funds are legally manageable.

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Disclaimer: FEMA regulations are subject to frequent changes by the RBI and the Government of India. This article is for informational purposes only and should not be considered legal or tax advice.