Key Takeaways
- For sales after 23 July 2024, NRI long-term capital gains on property are taxed at 12.5% without indexation (holding period over 24 months).
- The resident-only option to choose 20% with indexation on pre-July-2024 properties is not available to NRIs.
- Buyers must deduct TDS on the entire sale consideration unless you obtain a lower/nil deduction certificate before the sale.
- Section 54 (reinvest in one residential property) and Section 54EC (capital gains bonds up to ₹50 lakh) remain the main exemption routes.
- Short-term gains (held ≤24 months) are taxed at your slab rate.
What Budget 2024 Changed for NRI Sellers
The Finance Act 2024 made the most significant changes to property capital gains taxation in a decade. The headline changes:
- LTCG rate reduced: Long-term capital gains tax on property reduced from 20% to 12.5% (without indexation)
- Indexation benefit removed: The ability to inflate the purchase cost by the Cost Inflation Index (CII) — which reduced taxable gains — was eliminated for properties purchased after 2001
- Holding period unchanged: Property must still be held for more than 24 months to qualify as long-term
⚠️ Whether you're better or worse off depends on when you bought and how much inflation has occurred. For properties held since 2015 or earlier, the removal of indexation often results in a higher tax bill despite the lower rate. For properties bought after 2020, the lower rate typically wins. Use the calculation framework below to assess your specific position.
LTCG vs STCG: The Core Distinction
Capital gains on property are classified as Short-Term or Long-Term based on the holding period.
Long-Term Capital Gain (LTCG)
- Property held for more than 24 months
- Taxed at 12.5% (post-Budget 2024) without indexation
- Plus surcharge and cess depending on total income
- Section 54 exemption available (reinvestment into residential property)
Short-Term Capital Gain (STCG)
- Property sold within 24 months of purchase
- Added to your total income and taxed at applicable income tax slab rates
- For NRIs, this is typically 30% (the NRI tax rate on Indian income)
- No indexation or Section 54 exemption available
The distinction is significant: for a ₹3 crore gain, LTCG tax is ₹37.5 lakh (at 12.5%), while STCG tax could be ₹90 lakh (at 30%). Timing your sale to cross the 24-month threshold — if close — is very worthwhile.
Calculating Your Capital Gain — A ₹3 Crore Example
Let us model a concrete example: A Gurgaon apartment purchased in 2018 for ₹1.2 crore, sold in 2026 for ₹3 crore.
Under the New Regime (Post-Budget 2024)
- Sale price: ₹3,00,00,000
- Purchase cost (no indexation): ₹1,20,00,000
- Long-term capital gain: ₹1,80,00,000
- Tax at 12.5%: ₹22,50,000
- Add 4% cess: ₹22,50,000 × 1.04 = ₹23,40,000
Under the Old Regime (With Indexation, for comparison)
- CII-adjusted purchase cost (2018 to 2026 approx): ₹1,20,00,000 × (363/272) = ₹1,60,15,000
- Long-term capital gain (indexed): ₹1,39,85,000
- Tax at 20%: ₹27,97,000 + cess = ₹29,09,000
💡 In this example, the new regime results in lower tax (₹23.4L vs ₹29.1L). This is typical for properties purchased after 2015 with significant appreciation. For pre-2010 purchases with moderate appreciation, the old regime often would have been more favourable.
TDS on Property Sale Proceeds — Who Pays What
When an NRI sells Indian property, the buyer is required to deduct TDS on the sale price before making payment. This is separate from your capital gains tax obligation.
- TDS rate: 20% of sale consideration (for LTCG transactions) — note this is on the full sale price, not just the gain
- Filing: Buyer files Form 27Q (NRI TDS return) and issues you Form 16A
- Credit: TDS deducted appears on your Form 26AS and is credited against your capital gains tax liability
- Refund: If TDS exceeds actual tax liability (which it often does, since 20% of full price will exceed 12.5% of gain), file ITR to claim the excess as a refund
⚠️ Many buyers (and their lawyers) are unaware of the TDS requirement for NRI sellers. If your buyer fails to deduct TDS, you remain liable for the full tax. Ensure your sale agreement explicitly addresses this obligation and your lawyer follows up on Form 27Q filing.
Section 54: How to Legally Reduce or Eliminate Your CGT
Section 54 of the Income Tax Act provides an exemption on LTCG if the gain is reinvested in another residential property in India within specified timelines.
- Buy before sale: Purchase new residential property up to 1 year before the sale
- Buy after sale: Purchase within 2 years of sale date
- Construct: Construct a new property within 3 years of sale
- Exemption amount: Gain invested = Gain exempted (full gain can be shielded if fully reinvested)
- CGAS Account: If not yet invested by ITR filing date, deposit in Capital Gains Account Scheme (CGAS) to preserve exemption
For NRIs who intend to buy another Gurgaon property, timing the purchase and sale to maximise Section 54 exemption can save lakhs. PropTrustee's CA team models this in our Concierge plan's resale advisory service.
Repatriating Sale Proceeds Abroad
- Sale proceeds land in your NRO account after registration
- CA prepares Form 15CA and 15CB certifying tax has been paid on the gain
- Up to USD 1 million per financial year can be repatriated from NRO (after taxes)
- For larger sale amounts, plan repatriation across two financial years (April boundary)
- Funds transferred NRO → NRE → International wire
- Keep all sale documents, ITR acknowledgement, and Form 15CB/15CA on file permanently
PropTrustee manages the complete resale and repatriation process for NRI clients — from valuation and buyer sourcing to registration, ITR filing, and funds landing in your international account. See our Resale Management service for full details.
Frequently Asked Questions
What is the capital gains tax rate for NRIs selling property in India in 2026?
Long-term capital gains (property held more than 24 months) are taxed at 12.5% plus surcharge and cess, without indexation, for transfers on or after 23 July 2024. Short-term gains are taxed at your applicable slab rates.
Can NRIs claim indexation benefit on property sale?
No. The Budget 2024 grandfathering option — choosing 20% with indexation for properties bought before 23 July 2024 — was extended to resident individuals and HUFs only. NRIs pay 12.5% on the un-indexed gain.
How much TDS does the buyer deduct when purchasing from an NRI?
For long-term holdings, the buyer deducts tax at 12.5% plus surcharge and cess — and by default on the entire sale price, not just the gain. Applying for a lower/nil TDS certificate under Section 197 before the transaction aligns deduction with your actual liability and avoids locking up funds.
How can an NRI reduce capital gains tax on a property sale?
Two main exemptions: Section 54 — reinvest the gains in one residential property in India within the prescribed window (1 year before to 2 years after sale, or 3 years for construction); and Section 54EC — invest up to ₹50 lakh of gains in NHAI/REC/specified bonds within 6 months.
Can I repatriate property sale proceeds abroad?
Yes — after taxes, sale proceeds are repatriable within the USD 1 million per financial year scheme through your NRO account, with Form 15CA/15CB. For up to two residential properties, sale proceeds of homes bought from NRE funds enjoy additional repatriation flexibility.