How Much Tax NRIs Have to Pay on Property Sale in India
Here’s a clear breakdown of NRI property sale tax rules, including TDS rates, exemptions, and how NRIs can save tax legally.
Quick Summary (for Google Snippet)
NRIs selling property in India must pay capital gains tax — 20% on long-term and as per slab for short-term. TDS at 20% (plus surcharge & cess) applies. Exemptions under Sections 54 and 54EC can reduce tax liability.
Key Tax Rules for NRI Property Sale
When an NRI sells a residential or commercial property in India:
- Capital Gains Tax is applicable
- Tax depends on holding period, not residency
Let’s break it down.
1. Capital Gains Tax for NRIs
Based on Holding Period:
| Type of Capital Gain | Holding Period | Tax Rate |
|---|---|---|
| Short-Term (STCG) | < 2 years | As per income slab |
| Long-Term (LTCG) | ≥ 2 years | 20% with indexation |
Legal Reference: Section 111A & 112 of the Income-tax Act, 1961
2. TDS on Property Purchase from NRI
Buyers are mandated to deduct TDS at 20% (plus surcharge and cess) if the property is held for more than 2 years.
TDS Summary Table:
| Property Value | Seller Type | TDS Rate on LTCG | Section |
|---|---|---|---|
| Any value | NRI | 20% + cess/surcharge | 195 |
| < ₹50 lakhs | Resident | 1% only | 194-IA |
Source: Income-tax Act – Section 195
3. Can NRIs Save Tax on Property Sale?
Yes, NRIs can claim exemptions if they reinvest the capital gains.
Available Exemptions:
- Section 54: If gains are reinvested in another residential property in India
- Section 54EC: Invest in specified bonds (like NHAI, REC) within 6 months (up to ₹50 lakh)
Expert Tip: Apply for a lower TDS certificate via Form 13 to avoid excess deduction upfront.
4. How to Get Lower or NIL TDS Deduction
Many NRIs face cash flow issues as TDS is deducted on gross sale, not net gain. To resolve this:
Steps to Apply for Lower TDS:
- Login to TRACES Portal
- Submit Form 13 to the Assessing Officer (AO)
- Provide computation of gains and proof of exemptions
Legal Basis: Section 197 of Income-tax Act
5. Repatriation of Sale Proceeds – RBI Rules
NRIs can repatriate up to USD 1 million per FY from property sales, provided:
- Property was purchased in compliance with FEMA
- Tax clearance is submitted to authorized bank
Source: FEMA (Remittance of Assets) Regulations
Expert View:
CA Prakash Reddy, Hyderabad-based NRI tax advisor:
“Most NRIs lose money due to poor TDS handling. Filing Form 13 early can save 20–30% in tax refund delays. Always calculate actual gain and apply for a certificate to avoid cash crunch.”
FAQs on NRI Property Sale Tax
Q1. What if the buyer doesn’t deduct TDS from NRI?
Buyer becomes liable for tax dues, interest & penalty.
Q2. Is indexation benefit available for NRIs?
Yes, for long-term capital gains only.
Q3. Can NRIs invest in 2 properties under Section 54?
Yes, post Budget 2019 amendment, reinvestment allowed in 2 houses (if capital gain ≤ ₹2 crore, once in lifetime).
Final Thoughts
Understanding how much tax NRIs have to pay on property sale is crucial to avoid legal and financial hassles. From TDS deduction to capital gains exemptions, knowing the rules can save lakhs.