NRI Property Sale Capital Gains Tax in India (2026)

Here is the shock most NRIs do not see coming. Sell property in India, and the buyer can withhold over 12% of the entire sale price upfront.

Not 12% of your profit. 12% of the whole sale value. On a ₹1.5 crore flat, that is nearly ₹19 lakh blocked upfront.

We see the panic this causes every season at Belong. An NRI sells a long-held flat, expects most of the money, and watches a huge slice vanish into TDS.

The good news is that most of this is recoverable or avoidable with planning. This guide explains the real tax, the TDS trap and how to protect your money.

The single most misunderstood rule

For residents, TDS on a property sale is just 1%. NRIs assume the same. They are wrong.

For NRI sellers, tax is deducted under Section 195 of the Income Tax Act. It applies to the full sale consideration, not only the gain.

So the buyer must deduct TDS on the entire sale value before paying you. This is the source of nearly every NRI property cash crunch.

👉 Tip: The 1% rule under Section 194-IA is for resident sellers only. As an NRI, expect a far larger deduction.

How your gain is actually taxed

Your tax depends on how long you held the property. The dividing line is 24 months.

Hold it for 24 months or less, and the profit is a short-term capital gain. Hold it longer, and it is a long-term capital gain.

Short-term gains are added to your income and taxed at slab rates. For most NRIs that means a high effective rate.

Long-term gains have a flat rate. Since 23 July 2024, that rate is 12.5% plus surcharge and cess.

Sources: ClearTax NRI property tax, NRI Information capital gains.

The indexation rule NRIs keep getting wrong

This is the part most articles get dangerously wrong. So read it carefully.

Before July 2024, long-term property gains were taxed at 20%, but you could use indexation. Indexation inflated your purchase cost for inflation, shrinking the taxable gain.

The Budget of 23 July 2024 removed indexation. The rate dropped to 12.5%, but the inflation adjustment is gone.

After public pushback, the government allowed a choice. For property bought before 23 July 2024, you could pick 20% with indexation or 12.5% without.

Here is the catch. That choice is for resident individuals and HUFs only. NRIs do not get it.

As an NRI, you pay the flat 12.5% without indexation, whatever the purchase date. Our DTAA on capital gains guide covers how treaties interact with this.

👉 Tip: If you held property for 15 years or more, losing indexation can hurt. Model the actual number before you sell.

A worked example

Numbers make this clearer. Take a simple long-held flat.

You bought a flat for ₹30 lakh and sell it years later for ₹1.5 crore. Your gain is ₹1.2 crore.

At 12.5%, the base tax is ₹15 lakh. Surcharge and cess then push the effective bill higher, often into the 14% to 15% range of the gain.

Meanwhile, the buyer deducts TDS on the full ₹1.5 crore, not the ₹1.2 crore gain. That is why so much cash gets blocked.

How to stop the TDS over-deduction

You do not have to accept TDS on the full sale value. There is a legal fix.

You can apply for a Lower or Nil Deduction Certificate. This is Form 13 under Section 197 of the Income Tax Act.

The certificate tells the buyer to deduct TDS on your actual gain, not the whole price. Apply before the sale completes, not after.

This single step can free up lakhs of rupees at the time of sale. Our NRI tax filing guide explains the supporting paperwork.

👉 Tip: Always share your PAN with the buyer. Without it, TDS can be deducted at an even higher penal rate.

Also read: Tax on Capital Gains for NRIS

Three ways to legally cut the tax

Indian law gives sellers genuine exemptions. Used well, they can wipe out most of the gain.

Section 54 exempts long-term gains if you reinvest in another residential property in India. Timelines and conditions apply.

Section 54EC exempts gains invested in specified capital gains bonds. There is a cap of ₹50 lakh on this route.

Section 54F applies when you sell an asset other than a house and reinvest in a residential property. Our NRI exemptions and deductions guide breaks these down.

Also read: Capital gains tax in India

Claiming back excess TDS

If TDS exceeds your real tax, the difference is not lost. You claim it back.

File your Indian income tax return for the year of sale. The excess TDS is refunded after the return is processed.

This is why filing matters even when you think no tax is due. Our online ITR filing guide and filing deadline guide keep you on track.

You can also use treaty relief so the same gain is not taxed twice. See our avoid double taxation guide.

Moving the money home

Selling is only half the job. Repatriating the proceeds has its own rules.

Sale proceeds usually go into your NRO account first. From there, you can repatriate up to USD 1 million per financial year under FEMA.

The remittance needs a chartered accountant certificate. Forms 15CA and 15CB must be filed on the Income Tax portal before transfer.

Our repatriation rules guide and repatriation guide for returning NRIs walk through the flow.

Also Read: NRI Property Rules

What to do with the proceeds

Once the money is free, the next question is where it should sit. Many NRIs simply leave it idle in an NRO account.

That is rarely the best choice. Idle rupees lose value to inflation and rupee depreciation.

Some NRIs reinvest in property again, but concentration in real estate carries its own risks. Our real estate vs mutual funds comparison and real estate investment mistakes guide are worth a read.

For dollar-denominated, tax-efficient options, GIFT City products are worth studying. Explore them with our GIFT City Mutual Funds tool and compare bank rates on our NRI FD Rates tool.

Global funds include the DSP Global Equity Fund and Edelweiss Greater China Equity Fund. India-focused funds include the Tata India Dynamic Equity Fund and Sundaram India Mid Cap Fund.

Larger surpluses can also be deployed into AIFs in GIFT City and the broader mutual funds range. Track markets live on our GIFT Nifty tool, and explore GIFT City IPO access via our IPO products page.

If you are a Resident Indian selling property

The rules differ for you in one helpful way. Resident sellers do get the indexation choice that NRIs lack.

For property bought before 23 July 2024, you can pick 20% with indexation or 12.5% without. Choose whichever is lower.

Your TDS position is also gentler. A resident buyer deducts just 1% under Section 194-IA, not the heavy NRI rate.

Want global diversification after a sale? The GIFT City Mutual Funds tool is a cleaner route than buying foreign assets directly.

Frequently asked questions

What is the LTCG tax rate for NRIs selling property?

For sales on or after 23 July 2024, long-term gains are taxed at a flat 12.5% plus surcharge and cess. NRIs cannot use the old 20% with indexation method.

Why is TDS so high when an NRI sells property?

Because TDS under Section 195 applies to the entire sale value, not just the gain. It is 12.5% for long-term and around 30% for short-term, plus surcharge and cess.

Can NRIs reduce the upfront TDS?

Yes. Apply for a Lower or Nil Deduction Certificate using Form 13 under Section 197 before the sale. This limits TDS to your actual gain.

How can NRIs save capital gains tax on property?

Use Section 54, 54EC or 54F exemptions by reinvesting in residential property or specified bonds within the required timelines.

How much sale proceeds can an NRI repatriate?

Up to USD 1 million per financial year from an NRO account under FEMA. You must first file Forms 15CA and 15CB on the Income Tax portal.

This article is for information only and is not tax, legal or investment advice. Belong is not a tax advisor. Property tax rules are complex and change over time. Please confirm your position with a qualified chartered accountant before selling.