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Last editorial review: 22 October 2026. This article principally addresses transactions governed by the Income-tax Act, 2025 from 1 April 2026. Earlier transactions require the law applicable to their period.
Selling property in India as an NRI involves three separate legal questions. How much capital gains tax must you pay? How much tax must the buyer deduct from the payment? And how much of the sale proceeds can you transfer outside India?
The answers are not necessarily the same.
Capital gains tax depends on the property’s acquisition history, holding period, eligible costs and available reliefs. TDS follows separate withholding rules. Repatriation depends on FEMA, the original funding route, your status and the applicable RBI permission.
A registered sale deed, tax deduction certificate and bank balance may all be perfectly valid. None of them, individually, establishes the complete answer.
This guide explains the India-side position for transactions governed by the Income-tax Act, 2025, from 1 April 2026, including the buyer-reporting changes effective 1 October 2026. Transactions from earlier periods require the applicable provisions of the Income-tax Act, 1961. FEMA requirements must be checked against the law in force when the relevant acquisition, transfer or remittance occurs.
Can an NRI sell property in India?
Generally, an Indian citizen resident outside India or a qualifying Overseas Citizen of India (OCI) cardholder may sell residential or commercial immovable property in India, subject to FEMA and other applicable laws.
Under RBI’s framework, an NRI or OCI may transfer Indian immovable property to a person resident in India. A transfer to another NRI or OCI is also generally permitted for property other than agricultural land, plantation property or a farmhouse.
That distinction matters.
An NRI or OCI selling agricultural land to a resident Indian is not in the same regulatory position as one proposing to transfer that land to another NRI or OCI. The latter transaction is outside the general permission available for transfers of ordinary residential or commercial property between eligible non-residents.
Applicable land laws, title restrictions and other statutory requirements must also be considered.
The seller’s title and legal capacity to transfer the property must be established through the relevant documents and, where appropriate, verified with property counsel.
The next question is residential status.
Indian income-tax residence and FEMA residence are different legal classifications.
Income-tax residence affects how India taxes a person and whether certain provisions apply. FEMA residence governs the permissibility of particular capital transactions and banking arrangements.
Someone who leaves India or returns to India may be treated differently under the two systems. An NRI label on a bank account does not establish residential status for income-tax purposes.
Official source: RBI Master Direction on Acquisition or Transfer of Immovable Property, Part II, paragraph 3.2.
How is capital gains tax calculated on an NRI property sale?
When an Indian property is held as a capital asset, the gain arising from its taxable transfer is generally chargeable under the capital gains provisions.
For transactions governed by the Income-tax Act, 2025, section 67 establishes the charge and section 72 provides the general computation framework.
Broadly:
Capital gain = Full value of consideration recognised under tax law, minus qualifying transfer expenses, acquisition cost and improvement cost.
The recognised consideration may differ from the stated sale price in certain cases.
There are also important exclusions and special rules. Agricultural land that falls outside the statutory definition of a capital asset, property held as stock-in-trade and certain business-related assets do not necessarily follow the same capital gains treatment as an ordinary residential flat held as an investment.
Short-term and long-term capital gains
For ordinary land or buildings held as capital assets, a holding period exceeding 24 months generally makes the asset long-term. Property held for a shorter period is ordinarily short-term.
This classification determines the applicable tax treatment.
Under section 197 of the Income-tax Act, 2025, the general rate on qualifying long-term capital gains is 12.5%, before applicable surcharge and cess.
For an ordinary investment property, short-term capital gains are generally taxable under the relevant income-tax rate structure rather than the long-term 12.5% provision.
Special holding-period and acquisition rules may apply to inherited property, gifts, certain allotments and other acquisition arrangements. The registration date alone should not be used as the universal starting date.
Can an NRI claim indexation on property acquired before July 2024?
This requires particular care.
For relevant long-term transfers on or after 23 July 2024, the general framework uses the 12.5% rate without indexation.
Section 197(3) of the Income-tax Act, 2025 preserves a specified comparison with the earlier 20% indexed-cost treatment for eligible resident individuals and resident Hindu undivided families transferring land or buildings acquired before 23 July 2024.
It operates through a statutory restriction on the excess tax. It is not a general election available to every seller.
A non-resident individual cannot automatically claim that resident-only grandfathering protection.
Therefore, an NRI selling a property acquired in 2012 should not simply rely on an older capital gains calculation applying 20% with indexation.
The transfer date, acquisition date, relevant tax year and statutory residence classification must all be established.
What if the property was inherited or gifted?
The cost of inherited property is not automatically zero.
Under section 73 of the Income-tax Act, 2025, specified acquisition modes require consideration of the previous owner’s cost under the applicable conditions.
The previous owner’s acquisition history and holding period may also become relevant.
For example, an NRI who inherited an apartment from a parent may need the parent’s original purchase deed and improvement records, in addition to inheritance and title documents.
A mutation entry identifying the current holder does not, by itself, establish the acquisition cost for tax purposes.
What if the stamp-duty value is higher than the sale price?
Section 78 of the Income-tax Act, 2025 addresses the substitution of stamp-duty value in specified transfers of land or buildings.
Its 110% tolerance rule is important. Where the stamp-duty value does not exceed 110% of the consideration, the stated consideration is recognised under that rule.
The provision also deals with different agreement and registration dates, qualifying banking or online payments, and valuation disputes.
Suppose the agreed consideration is ₹1.80 crore. The capital gains computation should not be finalised without considering the applicable stamp-duty valuation and the conditions of section 78.
Official source: Income Tax Department, Income-tax Act, 2025, as amended by Finance Act, 2026.
What capital gains exemptions are available to an NRI?
Non-resident status does not automatically disqualify an individual from every capital gains exemption.
However, eligibility depends on the particular asset sold, reinvestment, statutory limits, relevant dates and subsequent compliance.
Three provisions frequently matter.
Selling a residential house and buying another house
Section 82 of the Income-tax Act, 2025, corresponding to section 54 of the 1961 Act, provides relief for qualifying long-term capital gains from transferring a residential house.
Subject to the conditions, the seller may purchase a qualifying residential house in India within one year before or two years after the transfer, or construct one within three years after the transfer.
The exemption generally depends on the eligible capital gain and qualifying new-house investment, subject to the statutory limits.
The provision contains a once-in-a-lifetime option involving two qualifying residential houses where the capital gain does not exceed ₹2 crore. It also contains a ₹10 crore limitation relevant to the qualifying investment and relief computation.
Where the amount is not utilised within the relevant period before filing the return, the prescribed capital gains deposit arrangement may be necessary. Failure to complete the qualifying investment within the statutory period can result in taxation of the unutilised amount.
An early subsequent sale of the new property can also affect the relief through the prescribed cost adjustment.
Simply declaring an intention to purchase another house is not enough.
Investing in specified capital gains bonds
Section 85 of the Income-tax Act, 2025, corresponding to section 54EC of the earlier Act, provides relief for eligible long-term capital gains from transferring land or buildings where qualifying investment is made in specified bonds within six months.
The provision imposes a ₹50 lakh ceiling under the relevant investment conditions and includes restrictions connected with the prescribed holding period, transfers, conversions and specified borrowing arrangements.
The investment must qualify under the statute. An ordinary bond or fixed deposit does not become an eligible investment merely because it is purchased from property-sale proceeds.
Selling another qualifying long-term asset and buying a house
Section 86 of the Income-tax Act, 2025, corresponding to section 54F of the earlier Act, addresses eligible long-term gains from an asset other than a residential house where the proceeds are invested in a qualifying residential house in India.
This relief has a different computation and ownership conditions from section 82. The relationship between the net consideration, qualifying investment and other residential properties owned by the seller is relevant.
The reinvestment and subsequent holding conditions must also be satisfied.
A capital gains exemption changes the final income-tax computation. It does not automatically reduce the buyer’s withholding obligation or authorise repatriation of the proceeds.
How much TDS must the buyer deduct when purchasing property from an NRI?
The withholding obligation on payment to a non-resident seller is different from the familiar 1% TDS provision for specified resident-seller property transactions.
For transactions under the Income-tax Act, 2025, section 393(2), Table serial number 17 governs the relevant payment of a sum chargeable to tax to a non-resident.
The corresponding provision of the Income-tax Act, 1961 was section 195.
The applicable withholding rate follows the relevant rates in force, considering the income category, seller status and statutory conditions.
For qualifying long-term capital gains, 12.5% is the general capital gains rate before surcharge and cess. However, this does not authorise the buyer to apply 12.5% to an estimated gain supplied informally by the seller.
The actual withholding rate may also be affected by surcharge, cess and applicable higher-deduction requirements.
Is TDS required on the full selling price or only the gain?
This is one of the most important distinctions in an NRI property transaction.
The non-resident withholding provision concerns a sum chargeable under the Income-tax Act. However, a buyer cannot assume that the taxable gain calculated privately by the seller is necessarily the amount on which the buyer may deduct tax.
The law provides mechanisms for a lower or nil deduction certificate and for determining the appropriate proportion chargeable to tax.
Where the required certificate or determination is not available, the buyer must comply with the applicable statutory withholding obligation. The amount deducted at that stage may be substantially higher than the seller’s final income-tax liability.
The distinction is between the amount subject to withholding at payment and the capital gain finally assessed to tax.
It is legally unsafe to substitute a simple statement such as “TDS is always 12.5% of profit” or “TDS is always 1% of property value” for the applicable non-resident deduction rules.
Why might the TDS amount exceed the final tax liability?
An NRI may have a substantial documented acquisition cost and eligible transfer expenditure, resulting in a taxable gain much smaller than the selling price.
A seller may also qualify for a capital gains exemption.
But the buyer still has to comply with the withholding provisions at the time tax is required to be deducted.
The seller’s anticipated final liability and the buyer’s deduction obligation are not automatically identical.
Excess tax properly deducted and credited may be considered in the seller’s Indian income-tax return and refunded where the statutory conditions are satisfied.
A refund is not guaranteed merely because the deduction appears large.
Can an NRI obtain a lower or nil TDS certificate?
Yes, subject to the statutory conditions.
Section 395(1) of the Income-tax Act, 2025 permits a payee to apply to the Assessing Officer for a lower or nil deduction certificate where the applicable income and other conditions justify it.
Form 128 is the relevant application form under the 2026 regime. It replaces Form 13 under the previous framework.
The application must be supported by the required information, and the certificate must apply to the relevant payment. The buyer must follow the certificate’s conditions and validity.
There is a separate payer-side route.
Under section 395(2), the person responsible for paying a sum to a non-resident may seek determination of the appropriate proportion chargeable to tax.
| Statutory route | Applicant | Purpose |
|---|---|---|
| Section 395(1) | Seller or payee | Lower or nil deduction certificate |
| Section 395(2) | Buyer or payer | Determination of the appropriate chargeable proportion |
These provisions serve related but distinct purposes.
The relevant certificate or determination should be obtained before the payment at which the adjusted withholding treatment is to be applied.
When deduction has already been made and deposited, the ordinary route for claiming credit or any eligible refund is through the applicable tax-return process.
Official source: Income Tax Department, section 395.
What changed for NRI property transactions on 1 October 2026?
From 1 October 2026, a specified resident individual or resident HUF purchasing immovable property from a non-resident seller can report the applicable TDS through Schedule E of Form 141.
For this qualifying category of purchaser, obtaining TAN solely for the specified transaction is no longer mandatory.
The Income Tax Department identifies the earlier procedure as requiring TAN and the applicable TDS statement, Form 144, before this change.
However, the new Schedule E facility is not available to every purchaser.
A company or another purchaser outside the specified eligible category must follow the appropriate TAN-based deduction and reporting requirements.
The buyer must still calculate, deduct, deposit and report the correct TDS. The introduction of Form 141 does not remove the withholding liability.
For Schedule E transactions, the Income Tax Department states that the challan-cum-statement and deducted amount must be furnished and paid within 30 days from the end of the month in which deduction occurs.
Separate reporting may be necessary for different months of deduction, multiple buyers or sellers falling into different reporting categories.
For a seller without PAN, the higher-deduction rules and the prescribed non-resident documentation exception under section 397(2) and Rule 217 must be considered. The exception does not dispense with the need to satisfy its conditions.
This detail matters for transactions where payment is made in instalments or where different co-owners have different residential statuses.
Official source: Income Tax Department, Form 141 FAQs.
Can an NRI repatriate property-sale proceeds outside India?
An eligible NRI or OCI may be able to repatriate Indian property-sale proceeds through an applicable FEMA facility.
However, the permission cannot be established merely from the sale price, capital gains tax paid or account into which the proceeds are credited.
The original purchase-funding route is a critical fact.
Two regulatory routes are particularly relevant.
Route 1: Property acquired using qualifying foreign-exchange funds
RBI’s Master Direction on Acquisition or Transfer of Immovable Property, Part II, paragraph 8.2 provides for repatriation of sale proceeds in specified cases.
The principal conditions include:
- The property was acquired in accordance with the foreign-exchange law applicable at acquisition.
- The acquisition was funded through qualifying foreign exchange received through banking channels, or eligible NRE or FCNR(B) funds.
- Qualifying repayments of prescribed housing loans may be treated as equivalent foreign-exchange funding in the specified circumstances.
- For residential property, the facility is restricted to not more than two such properties.
The precise permitted remittance amount must be assessed under the operative regulatory framework and the documented acquisition history. Qualifying acquisition funding and the two-property condition do not automatically establish that every rupee of the later sale proceeds may be remitted without restriction.
The relevant evidence may include the original purchase deed, inward remittance records, NRE/FCNR(B) account statements and qualifying housing-loan repayment records.
The authorised dealer must establish that the proposed remittance satisfies the applicable permission.
Route 2: Remittance of assets, including qualifying NRO balances
A separate facility is available under RBI’s Master Direction on Remittance of Assets.
Subject to its conditions, eligible NRIs and PIOs, including relevant OCI cardholders covered by the framework, may remit up to USD 1 million per Indian financial year out of specified NRO balances, asset-sale proceeds and inherited assets.
The facility requires appropriate documentary evidence and satisfaction of the conditions imposed by the relevant regulations and directions.
Where remittance is made in instalments, the facility requires the instalments to pass through the same authorised dealer.
For transfers from NRO balances, the RBI direction also requires a prescribed undertaking concerning the legitimate source of the funds and the absence of specified borrowing or prohibited inter-account transfers.
A June 2026 amendment expressly added certain transfers to NRE and SNRR accounts within the scope of this facility.
Amounts exceeding the USD 1 million permission may require RBI approval in cases covered by the relevant rules.
USD 1 million is not a universal ceiling on all NRI property-sale repatriations. Its relevance depends on the facility being used.
Official sources: RBI Master Direction 12, paragraphs 8.1 and 8.2 and RBI Master Direction 13, updated 29 June 2026.
What happens if the property was purchased while resident in India?
Suppose an individual purchased a flat in Nagpur while living and earning in India, subsequently relocated to Dubai and later decided to sell.
Section 6(5) of FEMA is relevant to the person’s continued right to hold, own or transfer qualifying Indian property originally acquired while resident in India.
However, section 6(5) does not independently authorise unrestricted repatriation of the sale proceeds.
The outward remittance must qualify under another applicable permission, including the Remittance of Assets framework where relevant.
This is different from assuming that because the person now holds an NRE account, all proceeds from property purchased with earlier Indian earnings can automatically be repatriated through the original foreign-exchange-funded property route.
Does paying Indian tax make the money freely repatriable?
No.
Payment of Indian tax addresses the applicable Indian tax liability. It does not independently establish a FEMA permission.
Likewise, a bank’s receipt of the proceeds into an NRO account does not settle the underlying capital gains computation or the permissible outward transfer.
Tax compliance, account classification and repatriation permission each require their own supporting basis.
One sale price. Two property histories.
Consider two hypothetical property owners, both Indian citizens resident outside India.
Each sells a residential flat in India for ₹1.80 crore during Tax Year 2026-27.
Owner A purchased the flat while resident outside India using documented foreign-exchange remittances through banking channels.
Owner B purchased a flat from Indian salary savings while resident in India and relocated abroad several years later.
Assume each holds valid legal title and the property is eligible for transfer.
Both sellers must compute capital gains under the relevant income-tax provisions. The sale price alone does not tell us either seller’s taxable gain because their actual acquisition costs and other deductible amounts may differ.
Their repatriation analysis also differs.
Owner A’s acquisition history requires examination of the direct foreign-exchange-funded route under RBI Master Direction 12, paragraph 8.2.
Owner B’s history raises the separate treatment under FEMA section 6(5) and the Remittance of Assets framework.
Neither seller can determine the exact remittable amount merely from the ₹1.80 crore sale consideration.
A capital gains computation does not substitute for a FEMA determination.
What documents should an NRI retain when selling Indian property?
The documentary requirements depend on the acquisition history, transaction, applicable tax provisions and intended transfer of funds.
| Question | Supporting evidence |
|---|---|
| Who may legally sell? | Registered title documents, relevant succession or gift records, joint-ownership evidence |
| When was the property acquired? | Original purchase, allotment and transfer documents |
| What is the taxable gain? | Cost records, qualifying improvement expenses, selling costs, sale agreement and valuation evidence |
| What was the purchase-funding route? | Overseas remittance proof, NRE/FCNR(B) or Indian bank statements, relevant loan records |
| Has withholding been properly addressed? | Applicable certificate or determination, TDS deposit details and tax-credit evidence |
| Is an exemption claimed? | Qualifying reinvestment, deposit and holding-period records |
| Can funds be transferred abroad? | Applicable FEMA funding and ownership evidence, authorised-dealer documents and tax compliance records |
This is a guide to the relevant evidence categories. It is not an assertion that every bank will require every document listed.
A property transaction may also require verification of title, encumbrances and local registration obligations under the applicable property law.
Are Forms 145 and 146 required for repatriating sale proceeds?
For remittances governed by the procedures introduced from 1 April 2026, Form 145 replaces Form 15CA, and Form 146 replaces Form 15CB.
Rule 220 of the Income-tax Rules, 2026 establishes the relevant framework for reporting specified payments to non-residents or foreign companies.
It distinguishes taxable payments up to the ₹5 lakh aggregate threshold, taxable payments above that threshold supported by an Assessing Officer’s certificate or an accountant’s certificate, and non-chargeable payments.
The rule also contains reporting exclusions for specified non-chargeable remittances.
Not every payment requires an accountant’s certificate.
For an NRI transferring the balance of the person’s own Indian property-sale proceeds to the person’s own foreign account, the reporting position must be established by examining the legal identity and capacity of the remitter and recipient, nature of the transfer, chargeability, relevant RBI purpose classification and Rule 220 exceptions.
It would be incorrect to state that Form 146 is invariably required for every NRI property-sale repatriation.
The bank’s tax-document checklist must be reconciled with the actual statutory reporting obligation.
Official source: Income Tax Department, Form 145 guidance.
What if the property is inherited or jointly owned?
An inherited property may create three separate questions.
First, the heir must establish legal entitlement to transfer the property. Second, the capital gains computation must account for the applicable inherited-cost and holding-period rules. Third, the source and mode of acquisition may affect the FEMA remittance route.
These questions do not necessarily produce the same documentary conclusion.
Joint ownership creates additional questions.
Each owner’s legal interest, entitlement to sale consideration, residential status, applicable tax treatment and withholding position may require individual assessment.
The credit of the entire sale consideration into one bank account does not automatically establish that the account holder is the beneficial owner of the entire amount.
Likewise, the person who originally paid for a property is not necessarily the legal owner entitled to its proceeds.
Disputed title, beneficial ownership, succession and family settlement issues require separate assessment under the applicable legal framework.
Does an NRI pay tax abroad on an Indian property sale?
Indian taxation is only one part of a cross-border transaction.
A person who is tax-resident in the United States, the United Kingdom, the UAE or another country may have additional reporting or tax obligations under that country’s law.
The applicable double taxation agreement may affect the analysis, but treaty entitlement depends on the particular treaty, relevant provisions, qualifying residence, transaction and supporting requirements.
A DTAA does not automatically eliminate Indian income tax or the buyer’s withholding obligation.
The Indian computation cannot be assumed to be identical to the foreign-country computation. Different cost bases, currency rules, timing and tax-credit provisions may apply.
The foreign-country tax and legal position should be considered by an appropriately qualified professional in that jurisdiction.
What should be checked before completing an NRI property sale?
The standard process can be understood in four stages.
Before payment: Establish the seller’s legal title, income-tax and FEMA residence, type of property, acquisition history, capital gains treatment, relevant exemptions and whether a withholding certificate or determination is needed.
At payment and registration: Establish the correct buyer withholding procedure, applicable rate, deduction base, reporting obligation, supporting documents and any certificate conditions. Different payment dates and multiple owners require particular attention.
After completing the sale: Reconcile the sale proceeds and TDS records with the seller’s Indian income-tax return, capital gains computation, relief claims and any credit or refund entitlement.
Before remittance: Determine the applicable FEMA permission, verify the original funding trail, establish the permitted amount and satisfy the authorised dealer’s documentary and tax-reporting requirements.
These are standard compliance stages, not an assumption that every transaction requires the same forms or professional work.
The distinction that determines the transaction
One property sale may produce three different legal amounts.
The capital gain is calculated under income-tax law. The amount deducted by the buyer is determined under the withholding provisions. The proceeds eligible for repatriation are determined under FEMA and the applicable RBI permission.
Those amounts need not be identical.
The registered sale deed records the transfer. But the documents that determine taxation, withholding and repatriation may go back to the original acquisition many years earlier.
The property’s legal and financial history matters as much as its selling price.
Primary legal and regulatory references
- Income-tax Act, 2025, as amended by the Finance Act, 2026. Relevant provisions include sections 67, 72, 73, 78, 82, 85, 86, 197, 393 and 395.
- Income Tax Department, capital gains guidance.
- Income Tax Department, Form 141 and Schedule E FAQs.
- Income Tax Department, Form 145 guidance.
- RBI Master Direction 12, Acquisition or Transfer of Immovable Property.
- RBI Master Direction 13, Remittance of Assets, updated 29 June 2026.
Professional note: This article explains the general India-side tax, withholding and FEMA framework reviewed on 22 October 2026. It is educational material, not a determination of an individual’s income-tax liability, title, eligibility for a certificate or exemption, or permitted remittance. Property title and succession issues may require separate legal review. Foreign-country tax and legal consequences require consideration under that country’s law by an appropriately qualified professional there. The applicable law, forms and regulatory procedures must be checked for the actual transaction date.
Sources and review
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