The sale of immovable property in India by a non-resident is one of the most tax-complex transactions an NRI can undertake. High TDS rates, FEMA compliance, repatriation rules, and DTAA provisions all intersect in a single transaction. This guide covers the complete tax framework.
Capital Gains Tax Rates for NRIs on Property Sale
Type | Holding Period | Tax Rate for NRI |
|---|---|---|
Short-Term Capital Gain | Less than 24 months | 30% plus surcharge plus cess |
Long-Term Capital Gain | 24 months or more | 12.5% without indexation (post Budget 2024) |
Budget 2024 removed the indexation benefit for LTCG on property and reduced the rate from 20% with indexation to 12.5% without indexation. For NRIs with property held for many years, this change may result in higher tax in some cases.
TDS on Property Sale by NRI - The Key Practical Issue
When an NRI sells property in India, the buyer must deduct TDS at 20% plus surcharge and cess on the entire sale consideration, not just the gain. For a property sold at INR 1 crore, the buyer may deduct TDS of INR 22-24 lakh even if the actual capital gain is much lower. The NRI seller must file an ITR to compute actual tax liability and claim the excess TDS as a refund.
Lower TDS Certificate Under Section 197
An NRI seller can apply to the jurisdictional Assessing Officer before the transaction for a certificate under Section 197 authorising TDS at a lower rate based on the actual capital gains computation. This requires a detailed computation of the gain, cost of acquisition, improvement costs, and holding period documentation.
DTAA Relief
If the NRI is a tax resident of a country with which India has a DTAA, treaty provisions may apply. Under the India-UAE DTAA, gains on immovable property are taxable only in India. Under the India-USA DTAA, gains are taxable in both countries but the US grants a credit for Indian taxes paid. A Tax Residency Certificate (TRC) and Form 10F are required to claim DTAA benefits.
Exemptions Available to NRI Sellers
Section 54 - Reinvestment in Residential Property
LTCG from sale of one residential property can be exempted by reinvesting in one or two residential properties in India within 1 year before or 2 years after the sale, or construction completed within 3 years. NRIs are eligible for this exemption.
Section 54EC - Investment in Specified Bonds
LTCG up to INR 50 lakh can be exempted by investing in NHAI or REC bonds within 6 months of the sale. These bonds carry a 5-year lock-in. NRIs are eligible.
Repatriation of Sale Proceeds
NRI property sale proceeds must be deposited in an NRO account. Repatriation up to USD 1 million per financial year is permitted after payment of applicable taxes. Form 15CB (CA certificate) and Form 15CA (self-declaration) must be filed before remittance.
How PGA & Co. Can Help
At PGA & Co. Chartered Accountants, we handle the complete NRI property sale tax process: capital gains computation, Section 197 lower TDS certificate applications, DTAA benefit claims, ITR filing for refund, and Form 15CA/15CB for repatriation.
Contact: +91 86998-87200 | info@pgaca.in | pgaca.in/contact
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