Buying property in India after returning: Section 54F, home loans, stamp duty, and what actually changes

After 12 months of renting, many returning NRIs are ready to buy. The decision is financially clearer: you know which city, which neighbourhood, how much space you need, and roughly what things cost. The process is less familiar — Indian property transactions are more paperwork-intensive than US real estate, and the tax angles are different.

Here's what you need to know before you commit.

The year-1 renting case (and when it ends)

The rent vs buy in Year 1 guide makes the case for renting in the first year. That case weakens once you've settled:

• You know which city (not considering Pune after spending a year in Bengaluru)
• You know which micromarket (Koramangala vs Whitefield vs Sarjapur is meaningful to you now)
• Your CIBIL score has been rebuilt (secured card, paid diligently for 12–18 months)
• Your Indian income is established (2+ years of ITR filing)
• You have a cash down payment or asset-sale proceeds available

The ideal window to buy: Year 2–3 after return, once these boxes are checked.

Section 54F: how US stock proceeds fund Indian property tax-free

If you've been selling US stocks or RSUs, you may have accumulated long-term capital gains (LTCG) that would normally be taxable in India. Section 54F provides a mechanism to invest those gains in a residential house and defer the tax.

How it works:

• Section 54F exempts LTCG from sale of ANY long-term capital asset (US stocks, Indian equity, mutual funds, bonds — anything except another house) if proceeds are invested in one residential house in India
• The exemption is proportional: if you invest the entire net sale consideration (proceeds, not just profit), 100% of the LTCG is exempt. If you invest only part, the exemption is proportional.
• Timeline: purchase the house within 1 year before or 2 years after the sale date; OR construct within 3 years

Capital Gains Account Scheme (CGAS): if you've realized the gain but haven't yet bought the property (common — property transactions take time), deposit the proceeds in a CGAS at a bank (SBI, HDFC, most PSU banks offer this). The CGAS is a special bank account that "parks" capital gains until deployment. File ITR claiming the exemption; if the property isn't bought within the time limit, the parked amount becomes taxable in that year.

Condition: you must not own more than one residential house in India at the time of sale (excluding the new house you're buying). If you already own a house (or a flat you've been renting out), Section 54F is not available — look at Section 54 instead (which only covers gains from an existing house).

Example:

• Sell US RSUs: long-term gain = ₹80 lakh
• Net proceeds: ₹1.2 crore (cost basis + gain)
• Invest ₹1.2 crore in new house within 2 years
• 100% of ₹80 lakh LTCG is exempt from tax
• Tax saved at 12.5% = ₹10 lakh

The property purchase process: step by step

1. Decide on property type

GST: Under-construction flats attract 5% GST on the sale value (1% for affordable housing). Ready-to-move and resale flats don't attract GST. This is a meaningful additional cost on new flat purchases.

2. Title verification and due diligence

Before paying any money:

• Get the property's title search done by a lawyer (typically ₹5,000–20,000 for residential property)
• Verify: ownership chain going back 30 years (Encumbrance Certificate), no pending litigation, no mortgages/liens
• For a flat: verify the society formation, OC (Occupancy Certificate), CC (Completion Certificate), Khata (in Karnataka), property tax history
• RERA registration: any project launched after 2016 should be RERA registered — check on your state's RERA portal

3. Sale agreement (Agreement to Sale)

Once you've decided on the property:

• Pay token advance (₹1–5 lakh, refundable if deal falls through for specified reasons)
• Sign an Agreement to Sale (also called Sale Agreement or MOU)
• Get this registered — an unregistered agreement has weaker legal standing
• Set timeline for final registration (typically 2–3 months for under-construction; 30–60 days for ready)

4. Home loan (if applicable)

Document checklist for home loan application:

• Income: ITR for 2–3 years, Form 16 (if salaried), salary slips (3 months)
• Identity: PAN, Aadhaar
• Property: Agreement to Sale, property documents, builder's RERA certificate (for under-construction)
• Bank statements: 12 months

LTV (Loan to Value):

• Up to ₹30 lakh property: up to 90% LTV
• ₹30–75 lakh: up to 80% LTV
• Above ₹75 lakh: up to 75% LTV

Typical home loan rates (October 2026): 8.5–9.5% for floating EBLR-linked rates (post RBI rate cut cycle). Fixed rates are higher.

5. Registration and stamp duty

Costs:

• Stamp duty: 4–7% of property value (state-specific)
• Registration charges: 1% of property value

Process:

1. Pay stamp duty via e-franking or challan before registration
2. Both buyer and seller (or developer) appear at Sub-Registrar's Office (SRO) with:
   • Original property documents
   • Identity proof (Aadhaar, PAN)
   • Photographs
   • Stamp duty payment receipt
3. Register the Sale Deed — this is the moment of legal title transfer
4. Collect registered sale deed — keep this permanently; it's your proof of ownership

Khata transfer (Karnataka) / Mutation (other states): after registration, get the property mutated in the local authority's records (BBMP in Bengaluru, BMC in Mumbai). This officially updates who owns the property for tax purposes.

Tax on rental income from the property

If you purchase the property but don't live in it immediately (rent it out, or have your parents live there), rental income is taxable:

• Annual Rental Value (ARV) is taxed as income from house property
• Standard deduction: 30% of ARV for maintenance (automatic, no bills required)
• Home loan interest: deductible against house property income (₹2 lakh/year cap for self-occupied; unlimited for let-out property)
• Net rental income added to your other income and taxed at slab rate

Capital gains when you eventually sell

If you sell the property in the future:

• LTCG (held > 2 years): 12.5% without indexation (changed per Budget 2024; or 20% with indexation — choose whichever is lower under transitional rules)
• STCG (held < 2 years): taxed at slab rate
• On sale, TDS of 1% is deducted by the buyer (if property > ₹50 lakh) — claim this as credit in your ITR

Related: Rent vs buy in Year 1 as a returning NRI · Section 89A and your US retirement accounts · Estate planning across India and the US