NRI Property Sale in India: Tax & TDS Rules

NRI Property Sale in India involves certain tax and regulatory requirements, including capital gains tax, Tax Deducted at Source (TDS) and rules for repatriating sale proceeds. Whether an NRI sells a residential property to another NRI or an Indian resident, the capital gains tax treatment generally remains the same. Here is what NRIs need to know about property sale tax, TDS deductions and applicable regulations in India.

Is There Any Tax Difference When an NRI Sells Property to Another NRI?

According to tax experts, there is no significant difference in the capital gains tax treatment when an NRI sells residential property in India to another NRI or an Indian resident.

Since the property is located in India, any capital gains arising from its sale are taxable in India, even if the seller lives overseas.

For the financial year 2026-27, the applicable capital gains tax depends primarily on how long the property has been held.

Capital Gains Tax on Property Sold by NRIs in India

The tax treatment depends on whether the property qualifies as a short-term or long-term capital asset.

• Long-term capital gains (LTCG): If the property has been held for more than 24 months, the gains are generally taxed at 12.5%, without indexation, along with applicable surcharge and cess.
• Short-term capital gains (STCG): If the property has been held for 24 months or less, the gains are taxed at the applicable income tax slab rates, along with surcharge and cess.

These provisions apply regardless of whether the buyer is an NRI or a resident Indian.

TDS Rules When an NRI Sells Property in India

Tax Deducted at Source (TDS) is an important consideration when an NRI sells property in India.

Under Indian tax laws, the buyer is required to deduct TDS when making payments to a non-resident seller. The applicable deduction is linked to the capital gains tax liability rather than simply the entire sale value.

However, in practice, buyers often deduct TDS on the full property sale consideration to avoid the risk of tax-related penalties.

To avoid excessive TDS deductions, the NRI seller can apply to the Income Tax Department for a Lower Deduction Certificate. This allows the buyer to deduct tax at a lower rate based on the seller’s estimated taxable capital gains.

Without such a certificate, the buyer may generally deduct TDS on the entire sale consideration.

Can NRIs Claim Tax Benefits Under the India-Singapore DTAA?

NRIs who are tax residents of Singapore may be eligible for benefits under the India-Singapore Double Taxation Avoidance Agreement (DTAA).

However, since the property is situated in India, India retains the right to tax the capital gains arising from its sale.

Singapore generally does not tax capital gains earned by individuals from the sale of overseas property. Therefore, the tax paid in India may become an actual tax cost for the seller.

NRIs may, however, be eligible for exemptions from long-term capital gains tax by reinvesting the gains in another residential property in India or specified bonds, subject to applicable conditions and investment limits.

Can NRIs Repatriate Property Sale Proceeds Outside India?

NRIs can repatriate the proceeds from the sale of property in India, subject to the applicable Reserve Bank of India (RBI) regulations and conditions.

The entire sale proceeds may be eligible for repatriation if:

• The property was acquired in accordance with the foreign exchange regulations applicable at the time of purchase.
• The purchase consideration was paid using foreign exchange received through banking channels or funds held in an NRE or FCNR(B) account.
• The repatriation facility is within the permitted limit of two residential properties during the NRI’s lifetime.

If these conditions are not met, NRIs may be able to remit funds abroad under the USD 1 million remittance facility per financial year, subject to applicable rules and documentation requirements.

Key Takeaway for NRIs Selling Property in India

Selling residential property in India to another NRI does not offer a separate capital gains tax advantage compared with selling to an Indian resident. The seller must comply with Indian capital gains tax provisions, TDS requirements and applicable foreign exchange regulations.

NRIs planning to sell property should consider obtaining a Lower Deduction Certificate to avoid excessive TDS deductions and consult a tax professional before completing the transaction, particularly if they intend to repatriate the sale proceeds overseas.