NRI Capital Gains Tax on a Property Sale in India: A Plain Guide

When an NRI sells property in India, two different tax questions get tangled together and it helps to separate them. The first is what the buyer must withhold at the moment of sale, the TDS, which we cover in a dedicated guide. The second, the subject here, is the tax you actually owe on your profit: the capital gains tax. The TDS is a rough up-front collection; the capital gains rules are what decide your true bill, and, crucially, how much of it you can legally avoid.

If you hold an OCI card rather than an Indian passport, read “NRI” throughout this guide as covering you too. Capital gains tax makes no distinction between an NRI seller and an OCI seller, and our guide on OCI and PIO property rules sets out the few places where status does change the answer.

Long-term vs short-term: the 24-month line

Everything starts with how long you held the property. The line for immovable property is 24 months:

• Hold for more than 24 months and your profit is a long-term capital gain (LTCG), taxed at a concessional flat rate.
• Sell within 24 months and it is a short-term capital gain (STCG), added to your total income and taxed at slab rates up to 30%, with TDS also deducted at 30% plus surcharge and cess: roughly double the 12.5% long-term rate. Because of that gap, most NRIs wait until they have held the property for more than 24 months before selling.

For inherited property, you count the previous owner’s holding period as well, so an inherited flat is almost always long-term by the time you sell it. Our guide on selling inherited property as an NRI covers the deemed-cost rules and the paperwork, legal heir certificates, mutation, settling other heirs, that has to happen before the tax question even arises.

How the long-term gain is taxed now

The important change came in July 2024. For a long-term property sale, the base rate is now 12.5% on the gain, without indexation, and the government’s own CBDT FAQ on the 2024 capital gains changes sets out the new regime. Surcharge (tiered by the sale value) and the 4% health and education cess stack on top, which is why the effective long-term TDS rates in our TDS guide land a little under 15% at higher values.

Here is the NRI-specific catch. Resident sellers who bought a property before 23 July 2024 were allowed to keep the old regime, 20% with indexation, if it taxed them less. Non-residents were not given that choice. For an NRI it is 12.5% without indexation, full stop. That distinction is not a footnote; on an old, cheaply-bought flat it can meaningfully increase your tax versus a resident selling the identical property.

Here is how the rate lands for a non-resident:

Rates per the Income Tax Act as amended in 2024. Surcharge is tiered by sale value; cess is 4%. Verified July 2026; confirm the current position with a chartered accountant before you sell.

What “without indexation” actually costs you

Indexation used to let you inflate your original purchase cost by a government inflation index before working out the gain, which shrank the taxable profit, especially on property held for many years. Removing it means your paper gain is larger: the full difference between sale price and original cost is taxed, with no inflation adjustment.

A quick illustration. Say you bought a flat in Vadodara for ₹30 lakh in 2008 and sell it today for ₹1.1 crore. Without indexation, your long-term gain is the full ₹80 lakh, and 12.5% plus surcharge and cess applies to that whole amount. Under the old indexed method, a chunk of that ₹80 lakh would have been treated as inflation rather than profit. The lower headline rate (12.5% vs 20%) softens the blow, but on a very long hold the loss of indexation can still leave you worse off, which is exactly why the exemptions below matter so much for NRIs.

You can put your own two figures against that arithmetic and estimate what actually reaches you after tax, which opens on this same ₹1.1 crore sale of a ₹30 lakh flat and converts the result into your home currency.

Cutting the tax: the three exemptions

Indian tax law lets you legally reduce or eliminate the long-term gain by reinvesting it. NRIs are eligible for all three of the workhorse sections:

Section 54: reinvest in another house

If you sell a residential house and put the gain into another residential house in India, buying within one year before or two years after the sale, or constructing within three years, that reinvested gain is exempt. There is an upper cap on the exempt amount (introduced in recent years), so very large gains are only partly shielded. This is the mainstay exemption for someone selling one flat to buy another. Note that the replacement has to be a property you are permitted to own as a non-resident, so the same limits set out in what an NRI can and cannot buy in India apply to the reinvestment as much as to the original purchase.

If you are tax-resident in the United States, pause before you claim it. The US does not recognise Section 54, and because its foreign tax credit only credits tax you actually paid, removing your Indian bill can also remove the credit that would have covered your American one. Our guide to US taxes on Indian property works the comparison through with numbers. The same trap applies in Britain, where it costs more because UK capital gains tax is the higher rate of the two, see UK taxes on Indian property.

Where you live decides whether this exemption is a saving or a false economy. In Canada and Australia it can go either way and needs working out. In the UAE there is no foreign credit to lose, so Section 54 saves exactly what it appears to save.

Section 54F: reinvest sale proceeds from a non-house asset

If the asset you sold is not a residential house (say a plot of land or other long-term asset) and you invest the net sale consideration into a residential house, Section 54F gives an exemption. The condition is stricter: broadly, you must not own more than one other residential house, and the exemption is proportionate to how much of the proceeds you reinvest.

Section 54EC: park the gain in bonds

If you would rather not buy more property, invest the gain in specified bonds (such as those issued by NHAI, REC, PFC or IRFC) within six months of the sale. The limit is ₹50 lakh and the bonds are locked in for five years. This is the clean option for an NRI who wants the tax break without becoming a landlord twice over.

If you can’t reinvest in time

The reinvestment windows often run past the date your tax return is due. To keep the exemption alive in the meantime, deposit the unused gain in the Capital Gains Account Scheme (CGAS) at a bank before the return deadline. You then draw on it to complete the purchase or construction within the allowed period. Miss the window and the parked amount becomes taxable in that later year, so treat CGAS as a bridge, not a hiding place.

How this ties back to TDS and getting your money out

Because the buyer usually deducts TDS on your full sale price, not your gain, and often before any exemption is applied, the tax withheld is frequently far more than you actually owe. Two ways to fix that:

• Apply for a lower-deduction certificate before the sale, reflecting your real gain and any exemptions, so less cash is locked up. See the TDS guide.
• Or reclaim the excess afterwards by filing an Indian income tax return.

Only once the tax position is settled can your CA issue the certificate that lets you send the money abroad, covered in our guide on repatriating property sale proceeds. Tax, TDS and repatriation are one connected chain.

Plan before you sell

The single most valuable habit here is to talk to a chartered accountant before you sign anything. The exemptions all have timing conditions that are easy to miss once the sale has happened, and for an NRI, without the indexation option and often with a low original cost, the gap between a well-planned sale and a careless one can run to several lakh. Run the underlying numbers first in the NRI capital gains calculator, check what the buyer will withhold with the TDS calculator, and read the rest of our city guides if you are still choosing where to buy or sell.

Tax rates, exemption caps and holding-period rules change with every Finance Act, and your own situation may differ. Treat the figures and sections here as a map of how the system works, not as advice for your specific sale, and confirm the current position with a chartered accountant experienced in NRI transactions before you rely on it.