Sale of Property by NRI – Tax, TDS and Other Implications

Sale of property by an NRI in India involves several tax and regulatory considerations that are different from a normal property sale by a resident Indian. Apart from capital gains tax, the buyer may have to deduct tax at source, the NRI seller may need a lower TDS certificate, and FEMA rules must be considered if the sale proceeds are to be repatriated outside India.

For an NRI planning to sell residential or commercial property in India, tax planning before signing or completing the transaction can significantly reduce unnecessary tax withholding and avoid delays in transferring the sale proceeds abroad.

NRIs who have taxable income or capital gains in India may also need to file an NRI Income Tax Return in India to report the transaction, claim eligible exemptions and obtain a refund of excess tax deducted.

Understanding Sale of Property by an NRI

Why NRI Property Sales Require Advance Tax Planning

The tax procedure for an NRI seller differs significantly from that applicable to a resident seller. The buyer has additional withholding-tax responsibilities, while the seller must determine the actual capital gain, applicable tax rate, available exemptions and repatriation requirements.

Where tax deducted by the buyer is substantially higher than the final tax liability, the NRI’s funds can remain blocked until a refund is obtained through the income-tax return. Advance planning can help avoid this situation.

Key Tax and Regulatory Issues

An NRI property sale can involve capital gains taxation, TDS, lower tax deduction certificates, stamp-duty valuation, reinvestment exemptions, income-tax return filing and FEMA requirements for repatriation.

Our broader NRI Taxation Services in India cover these connected tax and regulatory matters.

Who Is Treated as an NRI for Property Sale Tax Purposes?

Residential Status Under Income-Tax Law

Whether a seller is a resident or non-resident is determined according to the residential-status provisions of Indian income-tax law for the relevant tax year.

Citizenship, an overseas address or merely holding an NRE account does not by itself determine income-tax residential status. The number of days of physical presence in India and other applicable conditions must be examined.

Correct determination is important because the TDS procedure for a non-resident seller is different from that applicable to a resident seller.

Income-Tax and FEMA Residential Status Are Different

Residential status under the Income-tax Act and residential status under the Foreign Exchange Management Act, 1999 are determined under different tests.

Income-tax residential status primarily determines taxation, whereas FEMA status affects matters such as holding property, banking arrangements and repatriation of funds.

Accordingly, both laws should be reviewed separately in an NRI property transaction.

Can an NRI Sell Property in India?

Sale of Residential and Commercial Property

An NRI or OCI can generally sell eligible residential and commercial immovable property in India subject to applicable FEMA regulations.

The tax consequences will depend on factors such as the original date of acquisition, purchase cost, sale consideration, stamp-duty value, period of holding and whether any capital gains exemption is claimed.

The RBI’s rules governing acquisition and transfer of immovable property by NRIs and OCIs should also be considered where applicable.

Agricultural Land, Farm House and Plantation Property

Agricultural land, plantation property and farm houses are subject to special FEMA restrictions.

The permitted buyer and manner of transfer can differ from ordinary residential and commercial property. An NRI holding such property should therefore obtain specific advice before executing a transfer.

The applicable FEMA framework can be reviewed through the Reserve Bank of India’s regulations on immovable property transactions.

How Is Sale of Property by an NRI Taxed in India?

Capital Gains on Indian Property Are Taxable in India

Profit arising from the transfer of immovable property situated in India is generally taxable in India even where the owner resides outside India.

Capital gains are calculated under the applicable provisions of the Income-tax Act after considering the sale value, acquisition cost, eligible improvement cost, transfer expenses and any permissible exemptions.

The Income Tax Department also provides guidance on capital gains taxation.

Impact of DTAA on Property Sale

India has entered into Double Taxation Avoidance Agreements with several countries. Under most tax treaties, income and capital gains from immovable property may be taxed in the country where the property is situated.

Therefore, sale of Indian property by an NRI generally remains taxable in India.

However, the NRI’s country of residence may also require reporting of the transaction. Appropriate foreign tax credit or treaty relief may then be available.

NRIs requiring treaty analysis can explore our International Tax Advisory Services in India.

Long-Term vs Short-Term Capital Gain for an NRI

Property Held for More Than 24 Months

Where immovable property is held for more than 24 months before transfer, it is generally treated as a long-term capital asset.

The resulting gain is treated as long-term capital gain.

This distinction is important because the tax rate and tax-planning opportunities differ substantially from short-term capital gains.

Property Held for 24 Months or Less

Where the property is held for 24 months or less, the resulting gain is generally treated as short-term capital gain.

Short-term capital gains on ordinary immovable property are taxed according to the applicable normal rates rather than the concessional long-term capital gains rate.

Holding Period for Inherited or Gifted Property

Where property has been received by inheritance, gift or certain other specified modes, the period for which the previous owner held the property may become relevant when determining whether the asset is short-term or long-term.

The original acquisition documents of the previous owner should therefore be preserved wherever available.

Long-Term Capital Gains Tax on Sale of Property by NRI

Current LTCG Rate of 12.5%

Under the current capital gains framework, long-term capital gains arising from transfer of property are generally taxable at 12.5%, subject to applicable provisions, surcharge and Health and Education Cess.

The 12.5% regime applies to relevant transfers made on or after 23 July 2024.

The current statutory framework under the Income-tax Act, 2025 may be reviewed in the official Income-tax Act, 2025.

Indexation Benefit for an NRI

For transfers under the current regime, long-term capital gains are generally computed without indexation.

The special comparison mechanism allowing certain resident individuals and HUFs to compare tax under the 12.5% method with the earlier 20% indexed method for qualifying land or buildings acquired before 23 July 2024 is specifically restricted to residents.

Accordingly, an NRI seller should not automatically assume that the old 20% tax with indexation continues to be available.

Surcharge and Health and Education Cess

The applicable income-tax rate may have to be increased by surcharge, depending upon the taxpayer’s income level, and Health and Education Cess.

Accordingly, the effective tax and TDS rate can be higher than the headline 12.5% rate.

The Income Tax Department publishes applicable TDS rates for non-resident payments.

Short-Term Capital Gains Tax for NRIs

Short-Term Gain Is Taxed at Normal Rates

Short-term capital gains from ordinary immovable property are generally included in the NRI’s taxable income and taxed according to the applicable normal rates.

The exact tax liability will depend on the taxpayer’s status, total taxable income and the law applicable to the relevant tax year.

TDS Rate and Final Tax Liability May Differ

The rate at which the buyer deducts tax is not necessarily the same as the NRI’s final income-tax liability.

Income Tax Department guidance presently specifies a withholding rate of 30% for short-term property gains of a non-resident individual or firm, subject to applicable surcharge and cess.

The final liability should nevertheless be computed on the seller’s actual taxable income.

How Are Capital Gains on NRI Property Calculated?

Basic Capital Gain Computation

Broadly, capital gains are determined by deducting eligible amounts from the full value of consideration.

A simplified calculation is:

Sale Consideration
Less: Eligible transfer expenses
Less: Cost of acquisition
Less: Eligible cost of improvement
= Capital Gain

The exact computation must be made according to the provisions applicable to the particular transaction.

Cost of Acquisition and Improvement

The cost originally incurred to acquire the property is generally considered while computing capital gains.

Eligible capital expenditure incurred on improvement of the property may also be deductible subject to documentary support and applicable provisions.

For inherited or gifted properties, special rules may apply for determining the cost of acquisition.

Expenses Incurred on Transfer

Expenses incurred wholly and exclusively in connection with the transfer may generally be considered while computing capital gains.

Depending on the facts, these may include eligible brokerage and other directly connected transfer expenses.

Invoices and payment evidence should be retained.

Stamp Duty Value Can Affect Capital Gains

Where the declared sale consideration is lower than the stamp-duty value of the property, special valuation provisions can apply.

Under Section 78 of the Income-tax Act, 2025, which broadly corresponds to earlier Section 50C, stamp-duty value may be deemed to be the sale consideration in specified circumstances.

However, where the stamp-duty value does not exceed 110% of the actual consideration, the actual consideration may continue to be accepted subject to the statutory conditions.

TDS on Sale of Property by NRI

The 1% Property TDS Rule Does Not Apply to an NRI Seller

A common mistake is to deduct only 1% TDS because the transaction involves purchase of immovable property.

The 1% property TDS mechanism applicable to specified purchases from resident sellers does not govern payment to an NRI seller.

The buyer must first correctly establish the residential status of the seller.

TDS on Payment to NRI Seller

For tax years governed by the Income-tax Act, 2025, payment to a non-resident seller is principally governed by Section 393(2), Table Sl. No. 17, which corresponds broadly to earlier Section 195 of the Income-tax Act, 1961.

Tax is deducted at the applicable rates in force where the payment represents a sum chargeable to tax in India.

No ₹50 Lakh Threshold for an NRI Property Sale

The ₹50 lakh threshold associated with the resident property TDS provision should not be applied to a purchase from an NRI.

Withholding requirements on payments to non-residents operate under a different provision.

Accordingly, even where the property consideration is below ₹50 lakh, the buyer must separately evaluate the withholding requirement applicable to the NRI seller.

Timing and Rate of TDS

Tax is generally required to be deducted at the time prescribed under the applicable withholding provision, generally linked to credit or payment, whichever occurs earlier.

The applicable rate depends on whether the gain is short-term or long-term and must be increased by applicable surcharge and cess.

A lower deduction certificate can significantly change the amount actually required to be withheld.

Lower TDS Certificate for NRI Property Sale

Why a Lower TDS Certificate Is Important

One of the major practical problems in an NRI property sale is the difference between the sale consideration and the actual taxable capital gain.

For example, an NRI may sell property for ₹2 crore but have an actual taxable gain of only ₹30 lakh after considering acquisition cost and eligible deductions.

If excessive tax is deducted, the NRI may have to wait until filing the income-tax return and processing of the refund to recover the excess.

A lower TDS certificate can reduce this cash-flow blockage.

Form 128 – Earlier Form 13

With effect from 1 April 2026, an application for a lower or nil deduction certificate is made in Form 128 under Section 395(1) of the Income-tax Act, 2025.

Form 128 replaces the earlier Form 13 under Section 197 of the Income-tax Act, 1961.

The Income Tax Department has issued detailed FAQs on Form 128.

Apply Before Completion of the Transaction

The application should be made sufficiently before the proposed payment or property transfer.

The Income Tax Department’s Form 128 guidance specifically states that the application should be filed well before the transaction because a lower deduction certificate cannot ordinarily solve the issue after the transaction involving TDS has already been completed.

NRIs should therefore consider the lower TDS application while negotiating and documenting the sale rather than after registration.

Documents Generally Required

Depending upon the case, documents may include the PAN of the NRI seller, passport and residential-status information, purchase deed, proposed sale agreement, buyer details, original acquisition cost, improvement expenditure, capital gain computation, details of exemptions proposed to be claimed and relevant income-tax return or assessment information.

The exact documentation depends on the facts of each transaction.

Capital Gains Exemptions Available to NRIs

Section 82 – Earlier Section 54

Section 82 of the Income-tax Act, 2025 broadly corresponds to earlier Section 54.

An individual or HUF deriving long-term capital gain from sale of a residential house may claim exemption by investing the capital gain in another eligible residential house in India, subject to prescribed conditions.

Generally, the new property may be purchased within one year before or two years after the transfer, or constructed within three years after the transfer.

The benefit is not restricted only to residents and can therefore be relevant for eligible NRIs.

Section 85 – Earlier Section 54EC

Section 85 broadly corresponds to earlier Section 54EC.

Long-term capital gains arising from transfer of land or building may be eligible for exemption where the capital gain is invested within six months in specified bonds.

The investment eligible for this exemption is subject to the statutory ceiling, presently ₹50 lakh, and prescribed holding conditions.

Section 86 – Earlier Section 54F

Section 86 broadly corresponds to earlier Section 54F.

Where an individual or HUF sells a long-term capital asset other than a residential house and invests the eligible net consideration in a residential house in India, exemption may be available subject to prescribed ownership, investment and other conditions.

This provision can be particularly relevant where an NRI sells land or another eligible property which is not itself a residential house.

Capital Gains Account Scheme

Where the taxpayer intends to claim an eligible residential-property exemption but has not fully utilised the required amount before filing the return, the unutilised amount may need to be deposited under the prescribed Capital Gains Account Scheme before the applicable due date.

Missing the statutory deposit deadline can result in loss of the exemption.

Accordingly, reinvestment planning should begin before the income-tax return due date.

Special Situations in NRI Property Sales

Sale of Inherited Property by an NRI

NRIs frequently inherit Indian property from parents or other family members.

Inheritance itself may have different tax consequences from an eventual sale. At the time of sale, the acquisition history and cost in the hands of the previous owner may become important for determining capital gains.

Old purchase deeds, succession documents, wills, probate documents where applicable and improvement records should therefore be collected before the sale.

Jointly Owned Property

Where property is jointly owned, each co-owner’s legal ownership percentage, residential status, sale consideration and capital gain should be separately examined.

The buyer’s tax deduction and reporting should also appropriately identify each seller.

Incorrect allocation between resident and non-resident co-owners can lead to TDS mismatches and difficulties while claiming credit.

Gifted Property and Redeveloped Property

Gifted properties require examination of the previous owner’s acquisition details.

Redeveloped properties can involve additional questions regarding the original ownership rights, date of acquisition, additional area received, consideration and period of holding.

These transactions should be reviewed based on the underlying agreements rather than relying only on the date of possession of the redeveloped property.

Compliance Responsibilities of the Buyer

Confirm NRI Status Before Making Payment

The buyer should obtain sufficient information regarding the seller’s residential status before making advance or final payment.

Assuming that an NRI seller is a resident and deducting only 1% can result in short deduction of tax and consequent interest, penalty and compliance exposure for the buyer.

TAN Requirement and Change From 1 October 2026

Historically, a buyer deducting tax on purchase of property from a non-resident was generally required to obtain a Tax Deduction and Collection Account Number (TAN).

A significant amendment applicable from 1 October 2026 provides relief to a resident individual or HUF buyer from obtaining TAN for deduction of tax on consideration paid for transfer of immovable property by a non-resident.

Other categories of buyers and transactions should continue to examine the applicable TAN requirement.

Deposit, Reporting and TDS Certificate

After deducting tax, the buyer must deposit it with the Central Government and comply with the prescribed TDS reporting requirements within the applicable timelines.

The relevant TDS certificate should also be made available to the NRI seller.

The seller should subsequently verify that the tax credit correctly appears in the tax records before filing the income-tax return.

Income Tax Return and Refund After Property Sale

When an NRI Should File an Income Tax Return

An NRI selling property in India may need to file an income-tax return to report capital gains, claim eligible exemptions, reconcile TDS and discharge any balance tax liability.

Return filing is also generally necessary where the seller wishes to obtain a refund of excess TDS.

Professional assistance for such cases is available through our NRI Income Tax Return Filing Services.

Claiming Refund of Excess TDS

Where tax deducted by the buyer exceeds the NRI’s final income-tax liability, the excess amount can generally be claimed as a refund through the income-tax return.

For example, the final gain may be reduced because of a high acquisition cost, eligible transfer expenses, capital gains exemption or other legally available relief.

Obtaining a lower TDS certificate before the transaction is normally preferable to blocking a substantial amount and claiming it later as a refund.

Repatriation of Property Sale Proceeds Outside India

Property Purchased Through Foreign Exchange, NRE or FCNR Funds

FEMA regulations permit repatriation of eligible sale proceeds of residential or commercial property subject to prescribed conditions where the property was originally acquired in accordance with FEMA and consideration was paid through permitted foreign exchange channels, NRE account or FCNR account.

In the case of residential property, direct repatriation under this route is subject to the prescribed restriction relating to the number of properties.

The RBI regulations on repatriation of immovable property sale proceeds should be examined for the particular transaction.

USD 1 Million Remittance Facility

Where property was acquired from rupee funds or was inherited, an NRI may in eligible circumstances use the remittance-of-assets facility through the NRO account.

The general facility permits remittance of up to USD 1 million per financial year, subject to FEMA conditions, documentary evidence, applicable taxes and authorised dealer bank requirements.

The USD 1 million limit can cover other eligible remittances falling within the same facility and should therefore be reviewed on an aggregate basis.

Tax Documentation for Repatriation

Before processing an overseas remittance, the authorised dealer bank may require supporting documents relating to acquisition, sale, tax payment and the source of funds.

Applicable income-tax remittance reporting or CA certification may also be required.

Under the current framework, taxpayers should examine the applicability of Forms 145 and 146, which replaced the earlier Forms 15CA and 15CB for transactions governed by the Income-tax Act, 2025.

For professional assistance, see our Form 145 and Form 146 Filing Services.

Frequently Asked Questions on Sale of Property by NRI

Is Tax on NRI Property Sale Still 20%?

For relevant long-term property transfers under the current regime, the general long-term capital gains rate is 12.5%, subject to surcharge and cess.

The earlier 20% rate is therefore no longer the general LTCG rate for current NRI property sales.

The exact computation should nevertheless be reviewed based on the transaction date and applicable tax law.

Is TDS Only 1% if an NRI Sells Property?

No.

The 1% TDS mechanism is applicable to qualifying purchases from resident sellers. A purchase from an NRI is governed by the withholding provisions applicable to payments to non-residents.

The buyer should therefore confirm residential status before deducting tax.

Can an NRI Save Capital Gains Tax on Sale of Property?

Yes, subject to eligibility.

Depending upon the property sold and the proposed reinvestment, relief may be available through provisions corresponding to earlier Sections 54, 54EC and 54F, now contained principally in Sections 82, 85 and 86 of the Income-tax Act, 2025.

Tax planning should ideally be completed before utilisation of the sale proceeds.

Should an NRI Apply for a Lower TDS Certificate Before Selling Property?

Where the expected final tax liability is substantially lower than the withholding that may otherwise arise, applying for a lower TDS certificate can be beneficial.

The current application is made through Form 128.

It should be applied for sufficiently before the transaction and before completion of the payment on which tax is required to be deducted.

Can an NRI Transfer the Entire Sale Proceeds Abroad?

Not automatically.

The amount that can be repatriated and the applicable route depend upon how the property was originally acquired, the source of acquisition funds, whether the property was inherited, the type of property, taxes paid and the relevant FEMA facility.

The authorised dealer bank will normally review the supporting documentation before processing the remittance.

Related Services

• NRI Income Tax Return Filing Services
• NRI Taxation Services in India
• NRI Tax Advisory Services
• International Tax Advisory Services
• Direct Tax Advisory Services
• Form 145 and Form 146 Filing Services
• Income Tax Assessment and Litigation Services
• Contact EzyBiz India

Reviewed By

CA Anil Agrawal
Founder, EzyBiz India Consulting LLP

Chartered Accountant with more than 20 years of professional experience in Indian taxation, international taxation, NRI taxation, regulatory compliance and cross-border advisory.

Last Reviewed: September 2026

Disclaimer

The information provided on this page is for general informational and educational purposes only and should not be construed as legal, tax, investment, FEMA or regulatory advice.

Taxation of an NRI property transaction depends on several factors including residential status, nature and location of property, date and mode of acquisition, period of holding, acquisition cost, sale consideration, stamp-duty value, reinvestment, applicable tax treaty and FEMA regulations.

The Income-tax Act, 2025 is applicable from 1 April 2026. Transactions relating to earlier periods may continue to be governed by the provisions of the Income-tax Act, 1961 and the rules applicable to the relevant period.

Tax rates, forms, procedures and FEMA requirements may be amended from time to time. Professional advice should therefore be obtained based on the specific facts and applicable law before selling property, deducting tax, claiming an exemption or repatriating funds outside India.

EzyBiz India Consulting LLP does not accept responsibility for any action taken solely on the basis of the general information contained on this page without a specific professional review.