An NRI selling property in India pays capital gains tax of 12.5 per cent plus surcharge and cess on long-term gains (property held over two years), or slab rates on short-term gains. The buyer must deduct tax at source, normally on the whole price unless you obtain a lower deduction certificate in advance. After tax, proceeds in your NRO account can be remitted abroad up to one million US dollars per financial year with a chartered accountant's certificate.
Before you look for a buyer
Confirm three things. First, that the property is in your name in the Sub-Registrar's and revenue or municipal records; inherited property needs mutation and sometimes succession documents first. Second, that you have a PAN and an NRO account, both mandatory. Third, that you have proof of cost: the purchase deed, payment records and improvement bills, or for inherited property the previous owner's documents. Without cost proof your taxable gain is overstated.
Working out the gain
Gain equals sale price, less transfer expenses such as brokerage, less cost of acquisition and improvement. If the stamp duty value exceeds the agreed price by more than ten per cent, the stamp value is taken as the price. For property acquired before 1 April 2001, fair market value on that date, capped at stamp value, can replace actual cost. For inherited or gifted property, use the previous owner's cost and count their holding period too.
Held for more than twenty-four months, the gain is long-term and taxed at 12.5 per cent without indexation for transfers on or after 23 July 2024. Non-residents do not have the alternative of twenty per cent with indexation that resident individuals kept for older properties. Held for less, the gain is short-term and taxed at your slab rate.
What the buyer will deduct
A buyer paying a non-resident must deduct tax under the provision long known as section 195. The buyer needs a TAN, deposits the tax and files a quarterly statement. Because the buyer cannot verify your gain and is liable for any shortfall, the deduction is made on the full sale consideration at the capital gains rate with surcharge and cess. On a sale of one and a half crore rupees that is roughly twenty lakh rupees or more withheld, even if your real tax is a fraction of it.
The remedy is a lower or nil deduction certificate. You apply online to the Assessing Officer, International Taxation, with your computation and documents; the certificate tells the buyer the exact amount to deduct. Allow three to six weeks and apply before the sale deed. Full detail is on our page about TDS and capital gains.
Lawful ways to reduce the tax
- Buy or build a house in India. Long-term gain on a residential house is exempt to the extent reinvested in another residential house in India within one year before or two years after the sale, or built within three years, up to ten crore rupees.
- Invest in specified bonds within six months, up to fifty lakh rupees, with a five-year lock-in.
- Use the Capital Gains Account Scheme to hold the money if the new house is not ready when your return is due.
- Claim every cost: stamp duty and registration paid on purchase, brokerage, legal fees and documented improvements.
These can be reflected in the lower deduction application so that tax is not withheld on the exempt part.
Completing the sale without travelling
Give a special power of attorney to someone you trust, naming the property and directing payment to your NRO account. They sign the agreement and sale deed and appear before the Sub-Registrar. Take the whole price by bank transfer; cash cannot be repatriated and creates tax exposure. The steps are in our guide to giving a power of attorney from abroad and the document checklist.
Sending the proceeds abroad
From the NRO account you may remit up to one million US dollars per financial year across all sources. The bank asks for the sale deed, proof of acquisition, tax payment evidence, and Form 15CA with a chartered accountant's Form 15CB. If the property was originally bought with foreign exchange or NRE funds, that amount can go back through the NRE account outside the ceiling, for up to two residential properties. Proceeds of agricultural land, which can be sold only to resident Indian citizens, follow the NRO route. See repatriation of funds.
Finally, file an Indian return for the year to report the gain and claim any refund, and tell your tax adviser where you live, because many countries tax the same gain with credit for Indian tax.
- Long-term gains are taxed at 12.5 per cent without indexation; non-residents have no 20 per cent option.
- Without a certificate the buyer deducts tax on the full price, not the gain.
- Apply for the lower deduction certificate before signing the sale deed.
- Remit up to USD 1 million a year from NRO with Forms 15CA and 15CB.
Frequently asked questions
Can an NRI sell property in India without a PAN?
No. A PAN is needed for the sale deed, for the buyer's tax deduction statement and to claim credit or refund. It can be applied for online from abroad.
Does the buyer deduct one per cent or more when the seller is an NRI?
More. The one per cent rate is for resident sellers. For a non-resident seller, tax is deducted at the capital gains rate plus surcharge and cess, on the amount specified in a certificate or otherwise on the full price.
Is tax payable when an NRI sells inherited property?
Yes, on the capital gain, computed using the original owner's cost and holding period. There is no tax on the inheritance itself.
Can I take the full sale proceeds out of India in one go?
Up to one million US dollars per financial year from the NRO account. Larger amounts are spread over years or need Reserve Bank approval, except to the extent the property was bought with foreign exchange.
What if the buyer has already deducted too much?
File an income tax return for that year showing the actual gain. The excess is refunded to your Indian bank account, usually with interest.
