When an NRI sells property in India, the buyer must deduct tax (TDS) from the payment before paying the seller. The rate depends on how long the NRI held the property. The NRI can then send the money abroad through a bank, within RBI limits.
How capital gains are taxed
- Long-term (held more than 24 months): taxed at 12.5% plus surcharge and cess, without indexation, for sales after 23 July 2024.
- Short-term (held up to 24 months): taxed at the seller’s income tax slab rate, often 30% for NRIs.
TDS: what the buyer must do
The buyer of an NRI’s property must deduct TDS under section 195 of the Income Tax Act at the capital gains rate, plus surcharge and cess, and deposit it with the government. Unlike a purchase from a resident, the buyer needs a TAN (tax deduction account number) for this.
How to reduce TDS
By default, TDS is worked out on the sale price, which can be far higher than the actual tax due. An NRI can apply to the income tax department for a lower or nil TDS certificate based on the actual gain. Reinvesting a long-term gain in another residential house in India can also save tax under section 54.
Sending the money abroad
- Sale proceeds can be repatriated up to the amount originally paid in foreign exchange, for up to two residential properties.
- Money in an NRO account can be sent abroad up to USD 1 million per financial year, after taxes.
- Banks ask for Form 15CA and a chartered accountant’s certificate in Form 15CB.
If you are an NRI planning to buy, read our guide on how NRIs can buy property in India. Tax rules change often, so a chartered accountant should confirm the numbers for your sale.
Frequently asked questions
What is the TDS rate when an NRI sells property?
For property held over 24 months, TDS is based on 12.5% plus surcharge and cess. For shorter holdings, it is based on the slab rate, often 30%.
Can an NRI reduce TDS on a property sale?
Yes, by applying for a lower or nil TDS certificate from the income tax department.
How much can an NRI repatriate from a property sale?
Up to the amount paid in foreign exchange for up to two homes, and up to USD 1 million a year from an NRO account.
Does the buyer need a TAN to buy from an NRI?
Yes. The buyer must deduct TDS under section 195 and needs a TAN to deposit it.
