Foreign Property Investment: Budget 2026 Introduces Key Provisions for NRIs and Overseas Investors

With overseas real estate investment gaining popularity, Budget 2026 has introduced measures that could impact Indian investors buying property abroad. Chartered Accountant C. Kamlesh Kumar, Taxation Partner at Ravi Rajan & Co. LLP, Delhi, explains the implications.

Rules for Buying Property Abroad:
Indian citizens purchasing property overseas must adhere to the RBI’s Liberalised Remittance Scheme (LRS). Under LRS, an individual can remit up to $250,000 per financial year. Families often pool their LRS limits to invest in international real estate. Payments can be made in installments, provided each remittance stays within the annual limit and is routed through proper banking channels. Compliance with the Foreign Exchange Management Act (FEMA), 1999 and maintaining accurate documentation is mandatory.

Taxation on Income from Overseas Property:
Rental income or profits from foreign property are taxable in India for resident Indians, regardless of whether the income is received in India or abroad. If the income is taxed in the foreign country, Double Taxation Avoidance Agreements (DTAA) allow taxpayers to claim a foreign tax credit, preventing double taxation.

Example: If an Indian resident owns a property in the UK and receives rental income, it will be taxable in India. Taxes paid in the UK can be offset against the Indian tax liability upon providing proof of payment, ensuring the income is not doubly taxed.

Loans for Foreign Property and Tax Benefits:
Investors can obtain bank loans to purchase property abroad. Interest paid on such loans may be eligible for tax deductions, subject to applicable limits.

Capital Gains on Selling Foreign Property:
Profits from the sale of overseas property are also taxable in India. Foreign tax credits under DTAA may reduce the tax burden, avoiding double taxation. All overseas assets must be disclosed in Indian tax returns; failure to do so can attract penalties under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015.

Budget 2026 Provisions:
The government has proposed amendments to the Black Money Act, 2015. Previously, failure to disclose foreign assets attracted 30% tax plus 120% penalty. Now, a one-time voluntary disclosure window is available for properties worth up to ₹1 crore, allowing investors to regularize them by paying applicable tax and penalties. For properties up to ₹5 crore where income has been taxed but not reported, the Budget provides limited immunity, making compliance easier for small investors.

These measures aim to streamline reporting, reduce compliance risks, and encourage transparency among Indian citizens investing in foreign real estate.