Inheriting property in India as an OCI or foreign citizen: what you can hold, sell and take out

Short answer: an Overseas Citizen of India (OCI) may inherit any property in India, agricultural land included, under the same rule as an Indian citizen living abroad. A foreign citizen without an OCI card may also keep property inherited from a person resident in India, but under a narrower rule: a sale is permitted only to a person resident in India, and anything else needs the Reserve Bank's permission. Citizens of eleven listed countries need that permission even to acquire. In every case the sale proceeds leave India within USD 1 million per financial year, and the buyer deducts tax on the whole price.

Much of what is written on this subject treats every overseas heir as a non-resident Indian. The foreign exchange rules do not, and the distinctions below decide what you can do with the property.

Three kinds of overseas heir, not one

Three points trip people up.

OCI means the card, not the ancestry. The former Person of Indian Origin card was merged into the OCI scheme in 2015. For property, FEMA now recognises an Indian citizen abroad and a registered OCI cardholder. A foreign citizen whose parents were Indian but who never registered as an OCI is a foreign national under the property rules.

Remittance uses a different definition. The RBI Master Direction on Remittance of Assets defines a person of Indian origin by descent: a citizen of any country other than Bangladesh or Pakistan who has held an Indian passport, or whose parent or grandparent was an Indian citizen, or the spouse of such a person or of an Indian citizen. So the same heir can be a foreign national for holding the property and a person of Indian origin for taking the money out.

FEMA residence is not citizenship. "Resident outside India" in FEMA turns on where you live and why, not on your passport or your tax residence. An OCI who has moved to India to work is, for FEMA, a person resident in India, and the non-resident rules below do not apply until they leave again.

What an OCI may inherit and hold

Rule 24(c) lets an NRI or OCI acquire any immovable property in India by inheritance, from:

• a person resident in India; or
• a person resident outside India who acquired it in accordance with the foreign exchange law in force when they acquired it.

"Any" is deliberate. An OCI cannot buy agricultural land, plantation property or a farm house in India, but can inherit one. No Reserve Bank permission is needed, and there is no FEMA reporting of the inheritance itself.

What a foreign citizen without an OCI card may inherit and hold

Section 6(5) of FEMA allows a person resident outside India to hold, own, transfer or invest in immovable property in India that they inherited from a person resident in India. That is the basis on which a foreign citizen without an OCI card keeps an inherited flat or house.

Two limits follow.

Where the deceased was not resident in India. Section 6(5) speaks of inheritance from a person resident in India. Where a foreign citizen without an OCI card inherits from someone who was themselves living abroad, the rules do not expressly provide for it. Put that case to the bank, and if necessary to the Reserve Bank, before the estate is distributed rather than after.

The listed countries. Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong and North Korea may not acquire or transfer immovable property in India, other than on a lease of up to five years, without the Reserve Bank's prior permission. The restriction does not apply to an OCI.

The consequence of ignoring the permission is not a fine. In Asha John Divianathan v Vikram Malhotra (2021), decided under the predecessor law, the Supreme Court held that a transfer of Indian property by a non-citizen without the required RBI permission was void. A buyer's lawyer who knows this will not complete without the permission on file.

Selling it, and to whom

Two further layers sit on top of FEMA. State land laws may restrict who can buy agricultural land, whatever FEMA says about the seller. And the property records have to be in your name, through mutation on the will or succession documents, before a buyer's lawyer will proceed.

Taking the proceeds out of India

Inherited property cannot use the route for repatriating the proceeds of up to two residential properties, because that route requires the property to have been paid for in foreign exchange. The RBI's directions send the heir instead to the Remittance of Assets facility.

The mechanics are the same in both cases. The proceeds are credited to an NRO account, the remittance is made on documentary evidence of the inheritance and of tax paid, and where it is spread over several instalments, every instalment goes through the same bank. The bank will want the death certificate, the will or succession documents, the sale deed, the tax deducted certificate and the Form 145/146 position, and it will not remit until it has them. The document side is covered in repatriating an inheritance and the limit in the USD 1 million NRO limit.

Tax on the sale

Inheriting is not taxed in India. The sale is.

The gain. Your cost is the previous owner's, and the holding period includes theirs, under Section 49 and Section 2(42A) of the 1961 Act, now Section 73 and Section 2(101) of the Income-tax Act 2025. An inherited property is therefore usually a long-term asset, taxed at 12.5% without indexation for a non-resident, plus surcharge and cess. The computation is set out in selling inherited property as an NRI, and it applies equally to an OCI or foreign citizen, because tax follows residence, not citizenship.

The deduction at source. The buyer must deduct tax on the entire sale price, not on the gain, under Section 195 of the 1961 Act, and for payments in tax year 2026-27 onwards under Section 393(2) of the 2025 Act. On an old inherited property with a low cost, that is far more than the tax you will owe. The remedy is a lower-deduction certificate under Section 197, now Section 395(1), applied for in Form 128 before the sale, as explained in NRI property sale TDS.

PAN. Obtain a Permanent Account Number before the sale. Without one, the deduction rate rises, and the refund of any excess, which needs a return, becomes harder to claim.

Where most guidance goes wrong

• Treating OCI and foreign citizen as the same. They are not, for holding or for selling.
• Saying OCIs cannot own agricultural land. They cannot buy it. They can inherit it, and sell it to a resident.
• Ignoring the listed countries. The permission is required to acquire and to transfer, and a transfer without it is at risk of being void.
• Assuming the proceeds can go out in one remittance. Above USD 1 million in a financial year needs the Reserve Bank's approval.
• Forgetting the buyer's side. Tax is deducted on the full price unless a certificate exists before completion.

The order that works

1. Confirm your status: Indian citizen, registered OCI, or foreign citizen, and whether you are a citizen of a listed country.
2. Confirm how the deceased held the property, and whether they were resident in India at death.
3. Obtain any RBI permission that your status requires, before anything else.
4. Mutate the property records into your name on the will or succession documents.
5. Compute the gain and apply for the lower-deduction certificate.
6. Agree the sale with a buyer you are permitted to sell to.
7. Repatriate within the annual limit through one bank.

This note sets out the general position as at 23 September 2026 under FEMA, the FEMA (Non-Debt Instruments) Rules 2019, and the RBI Master Directions on immovable property and on remittance of assets. The RBI's directions are updated from time to time; confirm the current text, and your own status under it, with your bank before inheriting, mutating or selling. Where Reserve Bank permission is needed, nothing in this note substitutes for it.