Selling Property in India as an NRI: TDS and Capital Gains Tax

Long-term or short-term?

A residential property you have held for more than 24 months is a long-term capital asset. Held for 24 months or less, the gain is short-term. For a new-launch home, the holding period usually counts from the date of allotment or the agreement for sale, not from possession, so check the dates with your CA.

Long-term gains on property sold on or after 23 July 2024 are taxed at 12.5%, without indexation, for NRIs. Short-term gains are added to your Indian income and taxed at the normal slab rates. Surcharge (capped at 15% on capital gains) and a 4% health and education cess apply on top.

How TDS works when the seller is an NRI

When the seller is a non-resident, the buyer must deduct TDS on the capital gain and deposit it with the government before releasing your money. In practice, because the buyer cannot work out your gain, most buyers deduct tax on the full sale price at the highest rate unless you give them a certificate allowing a lower rate.

• The buyer needs a TAN (tax deduction account number), deposits the TDS and files a quarterly TDS return
• The buyer gives you a TDS certificate (Form 16A or its equivalent under the new Act), which you need to claim credit
• The 1% TDS rule you may have heard of applies only when the seller is resident in India, not to NRIs

Get a lower deduction certificate before you sign

You can apply to the Income Tax Department for a certificate that tells the buyer to deduct tax only on your actual gain, or at a lower rate. Apply online through the income tax portal with your PAN, the purchase and sale documents and a computation of the gain. It usually takes a few weeks, so apply as soon as you have a buyer and an agreed price.

Without it, the excess TDS is refunded only after you file your Indian return and the department processes it, which can take months.

What you can deduct from the gain

• The purchase price, plus stamp duty and registration you paid when buying
• The cost of improvements, such as interiors that are part of the structure, with bills
• Expenses of the sale, such as brokerage and legal fees

Exemptions that can reduce the tax

Long-term gains can be partly or fully exempt if you reinvest them:

• Buy or build one residential house in India: buy within one year before or two years after the sale, or construct within three years. The exemption is capped at ₹10 crore of gain
• Invest up to ₹50 lakh in specified capital gains bonds (such as REC or PFC 54EC-type bonds) within six months of the sale, with a five-year lock-in
• If you plan to reinvest but have not done so by the return due date, park the gain in the Capital Gains Account Scheme at a bank

Each exemption has conditions, and the US may still tax the gain (see our guide on US taxes on Indian property).

Steps for a smooth sale from the US

• Make sure your PAN is active and linked, and your name matches across the title deed, PAN and passport
• Give a trusted person in India a specific power of attorney for the sale if you cannot travel
• Apply for the lower deduction certificate as soon as the price is agreed
• Have the sale proceeds credited to your NRO account
• File your Indian tax return for that year to report the gain and claim any refund
• Then repatriate the money (see our guide on sending sale proceeds to the US)

The new Income-tax Act

A note on the law: from 1 April 2026 India's Income-tax Act, 2025 replaced the Income-tax Act, 1961. The rules described here carried over, but section and form numbers changed, so your chartered accountant may use different references from older articles you read online.

FAQs

This guide is general information, not legal or tax advice. Rules change; confirm the details with a chartered accountant or lawyer before you act.