Paying for property from NRE, NRO or FCNR(B) accounts

The rule on payment

The RBI Master Direction on immovable property says that NRIs and OCIs may pay out of “funds received in India” through banking channels by way of inward remittance, or by debit to an NRE, FCNR(B) or NRO account. Such payments “cannot be made either by traveller’s cheque or by foreign currency notes or by other mode”. The RBI FAQ repeats the point.

The three accounts compared

The RBI’s FAQ on accounts by non-residents (as on 16 January 2025) sets out the main features.

The FAQ describes income on NRE accounts as exempt from income tax and income on NRO accounts as taxable. That line of the FAQ refers to wealth tax as well and predates the Income-tax Act, 2025; confirm the present tax treatment on incometax.gov.in before relying on it.

Why the source of funds matters

When you sell, an authorised dealer bank may allow repatriation of sale proceeds only if conditions are met. Paragraph 8.2 of the Master Direction asks that the property was acquired in line with the foreign exchange law then in force and that the purchase price was paid “in foreign exchange received through banking channels” or out of FCNR(B) or NRE funds. Repayments of a housing loan can count as foreign exchange if they come from abroad or from NRE or FCNR(B) accounts. For residential property, repatriation under paragraph 8.2 is “restricted to not more than two such properties”. See repatriating sale proceeds.

If you paid from an NRO account, the sale proceeds sit in the NRO account. They can then be remitted abroad under the Remittance of Assets Master Direction, section 3.2: NRIs and PIOs may remit up to USD 1 million per financial year, from NRO balances or sale proceeds of assets, on documentary evidence, and the money may also be moved to an NRE account within the same limit. Above that amount prior RBI approval is needed (section 4.1).

Practical points

• Rent. Under paragraph 4.7 of the Deposits and Accounts Master Direction, current income such as rent can be credited to an NRE account if the bank is satisfied that it is current income of the holder and that income tax “has been deducted/paid/provided for”. Rent otherwise goes to the NRO account; see rental income tax for NRIs.
• Loans. Loans against NRO deposits “cannot be used for relending, carrying on agricultural/plantation activities or investment in real estate” (RBI FAQ). A loan against an NRE deposit may be used to acquire a home for own residential use, subject to the regulations (paragraph 4.8.1). A home loan from a lender is a separate route: see NRI home loans.
• Joint accounts. The FAQ allows a joint NRO account with residents on a “former or survivor” basis, and a joint NRE account with a resident relative on the same basis; the resident relative may operate an NRE account only as a power of attorney holder.
• Keep the paper trail. Keep the bank advice showing each payment came from abroad or from the named account. The Remittance of Assets direction requires “documentary evidence”.

What differs by state

The account rules are central. The state decides the stamp duty and registration charges you pay on the purchase: stamp duty calculator.

Which professional to consult

Your authorised dealer bank manages the accounts and the remittance paperwork. A chartered accountant can explain the tax on NRO interest and rent. A property lawyer (advocate) enrolled with the State Bar Council checks the sale agreement (property lawyer).