Selling Property in India as an NRI? Here's Every Tax Rule You Need to Know (2026)

Selling a property in India while living abroad sounds simple on paper. You agree on a price, sign documents, and expect money to arrive in your foreign account. In reality, there are three separate things that will take a cut before you see a single rupee: capital gains tax, TDS deducted by buyer, and FEMA compliance for repatriation. Miss any one of them and either you pay more than you should, or your money gets stuck.

This guide covers everything as it stands in FY 2026-27 — clearly, with real numbers.

Step 1 — Is your gain long-term or short-term?

Everything starts here. holding period of your property determines how much tax you pay.

• If you have owned property for more than 2 years — it is a Long-Term Capital Gain (LTCG).
• If you owned it for 2 years or less — it is a Short-Term Capital Gain (STCG).

For inherited property, holding period counts from when original owner purchased it — not from when you inherited it.

Step 2 — How much tax will you pay?

Budget 2024 changed rules, effective 23rd July 2024. Here is how it works now:

Surcharge and cess are added on top. For most NRIs, effective LTCG rate after surcharge and cess lands between 13% and 15% depending on sale value.

Real example: You bought a flat in Bangalore for ₹40 lakh in 2012. You sell it in 2026 for ₹1.2 crore. Your gain is ₹80 lakh. At 12.5%, tax is ₹10 lakh — plus surcharge and cess, roughly ₹11.5 to ₹12 lakh in total. If you had chosen 20% route with indexation, your cost would be indexed to inflation, potentially reducing taxable gain and tax. A CA can calculate which route saves more for your specific case.

Step 3 — TDS: why buyer deducts so much upfront

This is where most NRIs get caught off guard.

When a resident Indian sells property, buyer deducts 1% as TDS. When an NRI sells, rules are different. buyer is legally required to deduct TDS on entire sale value — not just gain — at following rates:

That is problem. tax is calculated on your gain, but TDS is deducted on full sale price. So you will almost always get more TDS deducted than your actual tax liability. excess can be claimed as a refund when you file your ITR in India — but that takes time.

Same example continued: You sell for ₹1.2 crore. buyer deducts TDS at 14.3% on full sale value — that is ₹17.16 lakh deducted upfront. But your actual tax was only ₹11.5 to ₹12 lakh. You have overpaid by roughly ₹5 lakh. That ₹5 lakh comes back as a refund after you file your ITR — but you need to wait for it, and file correctly.

A better option: Lower Deduction Certificate (LDC)

Before sale closes, you can apply to Income Tax Department for a Lower Deduction Certificate under Section 197. If approved, buyer deducts TDS only on your actual gain — not full sale value. This means your money is not locked up in excess TDS. Applications are filed through your CA and can take 4–6 weeks, so plan ahead before signing sale agreement.

Step 4 — How to legally reduce your tax

Income Tax Act gives NRIs three ways to reduce or eliminate capital gains tax. These are not loopholes — they are provisions designed to encourage reinvestment.

Section 54 — reinvest in a residential property (selling a house)

If you sell a residential property and reinvest capital gains amount into buying or constructing another residential property in India, gains are exempt from tax. You must buy within 2 years of sale, or construct within 3 years. You cannot own more than one other house at time of sale. new property must be held for at least 3 years.

Section 54F — reinvest in a residential property (selling any other asset)

If you sell land, commercial property, or any other long-term capital asset and reinvest full sale proceeds (not just gain) into a residential property in India, gains are exempt. distinction from Section 54 is important — here you must invest entire sale amount, not just gain, for full exemption. Partial investment gives proportionate exemption.

Section 54EC — invest in government bonds (no property needed)

If you do not want to buy another property, you can invest capital gains in specific government-notified infrastructure bonds (NHAI, REC). investment must be made within 6 months of sale. Maximum investment allowed is ₹50 lakh. bonds have a 5-year lock-in. This is often simplest option for NRIs who do not plan to own property in India.

You can combine exemptions. If your gains are ₹1.5 crore, you can invest ₹50 lakh in 54EC bonds and reinvest remaining ₹1 crore in a property under Section 54. two exemptions are not mutually exclusive.

Not ready to invest yet? If you need more time to identify a property, deposit gains in a Capital Gains Account Scheme (CGAS) at a nationalised bank before ITR filing deadline. This preserves your exemption while you search for right property. You have 2 years to complete purchase from that account.

Step 5 — Bringing money home (repatriation)

Once sale is complete and taxes are paid, you will want to transfer money to your foreign bank account. This is governed by FEMA rules.

• You can repatriate up to USD 1 million per financial year from sale of property in India, after paying all applicable taxes.
• Your CA must certify compliance through Form 15CA and Form 15CB before bank allows transfer. Without these, bank will not process an international wire.
• If property was originally purchased using NRE or FCNR funds, sale proceeds are freely repatriable. If it was purchased from NRO funds or Indian income, only up to USD 1 million per year can go out.
• If sale value exceeds USD 1 million, you can transfer balance in following financial year.

Do not skip Form 15CB. This is a certificate your CA issues confirming that taxes have been paid correctly. Without it, your bank will delay or block international transfer.

Quick summary — what you need to do

What changed in Budget 2026

capital gains tax rates and TDS rates on NRI property sales were not changed in Budget 2026. What did change is one procedural step that affects buyer.

Until now, any resident Indian buying property from an NRI had to first obtain a TAN (Tax Deduction and Collection Account Number) — even for a single one-time transaction. This was a paperwork burden that often caused delays in closing deals. Budget 2026 removes this requirement. From 1st October 2026, a resident buyer purchasing property from an NRI will no longer need a TAN. obligation to deduct and deposit TDS remains — only process of obtaining a TAN is removed.

For NRI sellers, this means fewer delays at buyer's end and smoother execution of property transactions going forward.

One final point — DTAA and your country of residence

India has Double Taxation Avoidance Agreements (DTAA) with most countries where NRIs live — US, UK, UAE, Canada, Australia, and others. In most of these treaties, capital gains from Indian property remain taxable in India. Your country of residence may also want to tax same gain, but DTAA typically provides a credit for tax already paid in India, so you are not taxed twice on full amount. Ask your local tax advisor in your country of residence to confirm treatment under relevant DTAA.

Have questions about your specific property sale? Every situation is different — purchase date, how it was originally funded, your country of residence, and whether you plan to reinvest all affect outcome. Book a free consultation with our CA team.