FEMA Regulations That Every NRI Must Know In 2026

The Foreign Exchange Management Act (FEMA) is a legal framework governing all non-resident Indian who have income, property, or investments in India. The FEMA regulatory framework ensures that every cross-border transaction, whether inward or outward, is authorised, transparent, and compliant with Indian law.

For NRIs, FEMA is not just another legal formality but a robust foundation that enables a smooth management of funds across borders. Hence, understanding FEMA regulations is non-negotiable for an NRI.

In this blog, we will be discussing five FEMA regulations that an NRI must not miss in 2026.

What is the Foreign Exchange Management Act (FEMA)?

The government of India in 1999 enforced the FEMA law to control the inflow and outflow of foreign currency across Indian borders.

FEMA is the modernized version of the Foreign Exchange Regulation Act (FERA). FEMA replaced FERA as it was more stringent, and the government wanted to modernize the Indian approach to foreign currency.

The objectives of FEMA regulations are:

• To encourage external trade and payments between India and other countries.
• Helps in promoting the orderly development of India's foreign exchange market.
• Defines the boundaries for cross-border transactions, investments, and lending.
• FEMA's regulatory framework prevents any misuse of foreign exchange and ensures accountability in financial transactions.
• FEMA clarifies for NRIs what they can do freely, such as investing or remitting funds, what operations require RBI approval, and the boundaries on cross-border investments, among other things.

5 Key FEMA Regulations For NRIs

The following are the five essential regulations about which every NRI must know.

1. Which Bank Account Can You Open as Per FEMA Rules?

Once your residential status is changed to an NRI from an Indian resident, you must immediately go through the formalities that put your resident savings account on hold.

As FEMA does not allow NRIs to use their residential savings bank account, NRIs must set up NRI-designated bank accounts, which are NRO or NRE accounts, as stated by the Reserve Bank of India (RBI).

NRO Account: An NRO account can be held jointly with another NRI or a resident Indian relative, subject to RBI conditions. This account is used by NRIs to park their income generated in India. This includes income earned from pensions, rent, interest, or dividends earned from any sources, such as investments or business returns.

NRE Account: An NRE account is a non-resident external rupee account. NRIs use this account to park the income earned in their country of residence in India. However, an NRE account is a rupee-denominated account; hence, income earned in foreign currency will be converted into Indian rupees upon deposit into an NRE account. The interest earned on the NRE account is completely tax-free in India.

FCNR Account: Since it is a foreign currency non-resident account, NRIs can deposit funds in any currency, and the funds will be held in that currency, such as USD, EUR, or GBP. FCNR is a fixed deposit account for NRIs that offers tax-free interest and complete repatriability upon maturity, thereby protecting NRIs from INR currency risk, though they may still be exposed to fluctuations between foreign currencies.

2. Where Can NRIs Invest In India As Per FEMA?

India offers a range of investment opportunities for NRIs. But NRIs are restricted from opening new PPFs and most small savings schemes. However, existing PPF accounts opened while resident may be continued, and investments like NPS and Sovereign Gold Bonds are permitted under FEMA.

3. Can NRIs Purchase Immovable Property As Per FEMA?

NRIs are permitted to purchase residential or commercial property in India. However, purchasing agricultural property, plantations, farmhouses, land, etc., is not permitted for NRI by FEMA.

Additionally, NRIs can receive immovable property as a gift from relatives through inheritance.

In a nutshell, FEMA permits NRIs to buy, hold, and sell immovable property in India, which is subject to the following conditions:

• All payments must be made in Indian rupees only through normal banking channels. Cash transactions for NRIs are not permitted.
• If the property is purchased using NRE funds, the sale proceeds (up to two residential properties) can be repatriated freely, subject to payment of applicable capital gains tax.

4. Can Earnings From Immovable Assets Be Repatriated For NRIs?

Non-resident Indians are allowed to remit foreign currency back to India on foreign repatriable assets, such as rent earned from an immovable property owned abroad. As per the FEMA regulatory framework for NRIs, Sale proceeds of property in India can be repatriated up to USD 1 million per financial year through an NRO account, subject to tax compliance, without RBI approval.

There are additional amendments and regulations regarding the repatriation of earnings from immovable assets; it is advisable to consult an NRI real estate and taxation expert.

5. What Provisions Apply to NRI Students?

Students studying overseas are also treated as NRIs and are eligible to reap all the facilities available to NRIs under the FEMA Act. One of the benefits of NRI students is that they may remit funds up to USD 1 million per financial year from their NRO account, including income or sale proceeds from property, subject to FEMA conditions and documentation.

The Bottom Line

The FEMA Act is the backbone of foreign exchange transactions. Whether you, as an NRI, are investing in the Indian stock market, buying a property, or repatriating funds, every single step you take must comply with FEMA rules and regulations. Hence, understanding FEMA ensures that every step you take is in accordance with the regulatory norms.

By understanding and applying these five key regulations, you not only remain compliant as an NRI but also build a secure, transparent financial relationship with India.