Guide for buyers in India
Paying for a Malaysian property from India: LRS, TCS and the paperwork
Resident Indians pay for property in Malaysia through the Liberalised Remittance Scheme (LRS), and the bank collects TCS on the way out. This guide explains the annual limit, who can pool money, the forms your bank asks for, how to recover TCS, and how to match remittances to a Malaysian payment schedule.
In short
Key points
- Each resident individual, including a minor, can remit up to USD 250,000 per financial year (April to March) under LRS; buying property abroad is a permitted purpose.
- Family members can combine their limits for one property only if each of them is a co-owner on the Malaysian title.
- Your bank needs Form A2, your PAN, purpose code S0005 (investment in real estate) and proof of the purchase, such as the booking form or SPA.
- For property, TCS is 20% on the amount above ₹10 lakh in a financial year; it is not a final tax and is credited against your income tax.
- Keep every remittance record: the property must be reported in Schedule FA every year, and the penalty for leaving it out can be ₹10 lakh.
The rules
What the Liberalised Remittance Scheme allows
LRS is the Reserve Bank of India framework that lets resident individuals send money abroad for permitted current and capital account purposes, including buying immovable property outside India.
| Rule | What it means for a Malaysian purchase |
|---|---|
| Annual limit | USD 250,000 per person per financial year (1 April to 31 March), covering all your LRS remittances combined, not just the property. |
| Who can use it | Every resident individual, including minors (the natural guardian countersigns). Companies, partnerships, HUFs and trusts cannot use LRS. |
| PAN | Mandatory for every LRS transaction. |
| Designated branch | You nominate one authorised dealer bank branch for capital account remittances such as a property purchase. |
| Bank credit | LRS does not allow banks in India to lend to resident individuals for capital account remittances like this one. |
| Unused money | Foreign exchange bought but not used for the stated purpose has to be brought back within 180 days. |
Source: Reserve Bank of India, LRS FAQ (updated April 2023), seen October 2026.
Under FEMA a resident Indian generally cannot take a foreign-currency loan from an overseas bank, or borrow in India, to buy property abroad, so the purchase is paid from your own funds sent under LRS. Buyers who live and earn abroad are in a different position; see home loans for foreigners in Malaysia.
Malaysia sets its own conditions on the buyer. Each state has a minimum price for foreigners and needs state consent; in Johor the threshold is generally RM1 million. Check a specific unit with Can a foreigner buy it? before you send any money.
Joint purchases
Pooling remittances within the family
The RBI allows family members to consolidate their LRS remittances for buying property abroad, provided each relative is a person resident in India and complies with the scheme’s conditions. The catch is ownership: clubbing is not allowed for a capital account transaction such as a property purchase when the family member is not a co-owner. If your spouse and parent each send USD 250,000, both need to be named purchasers on the SPA and the title.
Why this matters in Malaysia: at the Bank Negara Malaysia interbank rate of about RM4.09 per US dollar (2 October 2026), one person’s full LRS limit is roughly RM1.02 million. That is close to the Johor minimum for foreigners before you add the 8% stamp duty that applies to home transfers to foreigners from 1 January 2026, legal fees and furnishing. A single buyer may need two financial years, or a co-owner, to complete. Run your own figures in the buying costs calculator.
At your bank
Form A2, purpose code and the documents your bank asks for
Each remittance is processed as a separate LRS transaction, so expect to give the bank a similar set of documents every time you pay a stage.
- Form A2: the application-cum-declaration for the outward remittance, in which you confirm the purpose and that you are within the LRS limit.
- PAN: mandatory for all LRS transactions.
- Purpose code S0005: the RBI code for investment in real estate abroad. Banks flag it as an LRS capital account remittance.
- Evidence of the purchase: the booking form, letter of offer or SPA showing that the payment is for buying the property.
- Proof of funds: some banks ask for a recent bank statement or your latest income tax return; IDFC First Bank’s purpose-code checklist, for example, lists both.
- Payee details: the account of the Malaysian lawyer acting for the purchase or of the developer, as stated in the SPA or the lawyer’s letter.
Banks also ask you to declare LRS remittances made through other banks in the same financial year, because the USD 250,000 limit and the ₹10 lakh TCS threshold apply to you as a person, not per account. Check processing times in advance.
Tax collected at source
TCS on property remittances: 20% above ₹10 lakh
TCS is an advance collection of tax, not an extra cost, but it ties up cash until you claim it back.
| Purpose of remittance | FY 2025-26 | From 1 April 2026 (tax year 2026-27) |
|---|---|---|
| Investment, including property abroad | 20% on the amount above ₹10 lakh | 20% on the amount above ₹10 lakh (unchanged) |
| Education or medical treatment (self-funded) | 5% above ₹10 lakh | 2% above ₹10 lakh |
| Education funded by a specified loan | Nil | Nil |
| Overseas tour packages | 5% up to ₹10 lakh, 20% above | 2% from the first rupee |
Sources: Finance Act 2025 and Finance Act 2026 changes as summarised by TaxGuru and BookMyForex; seen October 2026.
The ₹10 lakh threshold rose from ₹7 lakh on 1 April 2025. From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act, and the TCS rule moved from section 206C(1G) to section 394. For property remittances the rate and threshold did not change.
Example: if you remit ₹90 lakh for a property in one financial year with no other LRS remittances, TCS is 20% of ₹80 lakh, or ₹16 lakh. You need about ₹1.06 crore at the time of payment, although the ₹16 lakh comes back through your tax return.
Getting it back
Claiming TCS credit
- The bank deposits the TCS against your PAN and issues a TCS certificate. The amount should appear in Form 26AS and your Annual Information Statement; check it after each quarter.
- When you file your income tax return for that year, the TCS is set off against your total tax. If it is more than the tax you owe, the balance is refunded after the return is processed.
- Salaried buyers do not have to wait for the return: since October 2024 employees can ask their employer to take TCS into account when deducting tax from salary, which reduces monthly TDS.
- TCS is credited to the person whose PAN was used. If two co-owners remit, each claims their own TCS.
Timing
Matching remittances to a Malaysian payment schedule
Malaysian payments come in stages, and each stage is a separate LRS remittance.
| Stage | Typical amount | When | LRS point to watch |
|---|---|---|---|
| Booking fee / earnest deposit | About 1–2% of the price | When you sign the booking form or offer | Your first remittance; Form A2 and purpose code S0005 apply even to a small booking fee |
| Balance of deposit | Up to 10% in total | On signing the SPA | Usually needs to arrive within days, so prepare documents early |
| Balance purchase price (completed property) | About 90% | Within the completion period, usually three months, often with a one-month extension at a late-payment interest rate | Large sum; check your remaining USD 250,000 limit for the year |
| Progress payments (new project) | Stages tied to construction | Over the building period, on the developer’s billing | Spreads remittances over several financial years |
| Stamp duty and legal fees | 8% stamp duty on home transfers to foreigners, plus fees | Before or at completion | Counts towards your LRS limit too |
Sources: ASCO Law on Malaysian balance purchase price (seen October 2026); stamp duty per the site’s position from 1 January 2026.
For foreign buyers, the completion period in a sub-sale SPA is often linked to the date state consent is obtained rather than the SPA date, so the big remittance may fall months after signing. Records differ by state and by contract; confirm the trigger date with your lawyer. Because the LRS limit and the TCS threshold reset every 1 April, a schedule that straddles two financial years can make the limit easier to manage, though TCS remains a credit either way.
After you buy
Records to keep for Schedule FA
Once you own the property, every year’s income tax return needs to show it.
Resident and ordinarily resident taxpayers report foreign assets in Schedule FA, which runs on the calendar year (1 January to 31 December), not the Indian financial year. Foreign immovable property has its own table, and you report it every year you hold it, even if it earns nothing. Any rent goes in the schedules for foreign income and tax relief.
The penalty for failing to report a foreign asset under the Black Money Act is ₹10 lakh. The relief introduced from 1 October 2024, which waives the penalty for foreign assets worth up to ₹20 lakh in total, expressly excludes immovable property, and the 2026 Budget’s prosecution relief carries the same exclusion. A Malaysian home is never too small to report.
- Booking form, SPA, receipts from the developer or lawyer, and the final completion statement.
- Every Form A2, bank debit advice and SWIFT confirmation, with the exchange rate used.
- TCS certificates and the matching Form 26AS entries.
- The title or strata title once issued, and annual quit rent and assessment bills.
- If you rent the unit out: the tenancy agreement and your Malaysian tax filings.
The same records help when you sell. See also renting out property in Johor and a will for Malaysian property.
Straight answers
Frequently asked questions
How much money can I send from India to buy property in Malaysia?
Each resident individual can remit up to USD 250,000 per financial year under LRS, covering all LRS purposes combined. Family members can combine their limits only if each is a co-owner of the property.
Is TCS charged on money sent abroad to buy property?
Yes. For investment purposes, including property, TCS is 20% on the amount above ₹10 lakh in a financial year. This applies in FY 2025-26 and continues from 1 April 2026 under the Income-tax Act, 2025.
Can I get the TCS back?
Yes. TCS is credited against your income tax for the year and any excess is refunded after your return is processed. Salaried employees can also ask their employer to take it into account in salary TDS.
What purpose code is used for buying property abroad?
Banks use RBI purpose code S0005, investment in real estate abroad, and will ask for documents showing the payment is for a property purchase, such as the booking form or SPA.
Can my wife and I both use our LRS limits for one apartment?
Yes, if both of you are resident in India, both comply with LRS and both are named co-owners of the property. Clubbing is not allowed for someone who will not be a co-owner.
Can I take a loan in India to buy property in Malaysia?
Generally no. LRS does not allow banks in India to lend to resident individuals for capital account remittances like a property purchase, and a resident generally cannot borrow abroad for it either.
Do I need to declare Malaysian property in my Indian tax return?
Yes, if you are resident and ordinarily resident. Report it in Schedule FA every year, on a calendar-year basis, even if it earns no income. The penalty for leaving it out can be ₹10 lakh.
Planning a purchase from India?
Send me your budget, the city you are looking at and whether you will live in it or rent it out. I will explain the rules that apply and which units qualify.