NRI Buying / FEMA / Loans / Repatriation

NRI Property Taxation in India: TDS, Capital Gains and Double Taxation Explained

2026-06-16 · PropXplor

If you hold (or are about to buy) property in India from abroad, the tax you actually pay is rarely the number a broker quotes you. Three separate rules decide your real cost: TDS when money changes hands, capital gains when you eventually sell, and DTAA relief that stops the same income being taxed twice — once in India and once where you live.

This guide walks through each one with the rates and exemptions that genuinely move the needle for a Non-Resident Indian. The short version: India taxes property income and gains at source, your country of residence may tax it again, and a Tax Residency Certificate plus the right paperwork is what keeps you from overpaying.

Modern residential towers against a city skyline at dusk Premium residential property across Mumbai, Pune and Bangalore carries the same tax architecture — only the numbers change.

TDS when you buy property in India

Whenever an NRI is the buyer, the more familiar rule applies. If the property value is ₹50 lakh or more and the seller is a resident, you deduct 1% TDS under Section 194-IA and deposit it. Simple.

The complexity appears when the seller is also an NRI — common in resale of premium flats. Then Section 195 kicks in, and TDS is deducted not on a flat 1% but on the seller's capital gain, at the long-term or short-term rate (more below) plus surcharge and cess. As a buyer you are legally responsible for deducting and depositing this correctly; getting it wrong creates liability for you, not the seller. This single point trips up most NRI-to-NRI deals.

Practical takeaway: when buying from another NRI, insist the seller obtains a lower/nil TDS certificate from the Assessing Officer (Form 13). Otherwise the default deduction is high and recovering the excess means waiting for a refund.

Capital gains when you sell

Capital gains are where most of the real tax lives. The holding period decides everything.

Short-term vs long-term

Short-term capital gains (STCG) — property held 24 months or less. The gain is added to your income and taxed at your applicable slab rate, which for a high-value sale usually means the top bracket.
Long-term capital gains (LTCG) — property held more than 24 months. This is taxed at a flat 12.5% (plus surcharge and cess) under the regime applicable from FY 2024-25 onward.

The important nuance after the 2024 changes: the earlier 20%-with-indexation option was replaced for most assets by a 12.5%-without-indexation rate. Indexation — which inflated your purchase cost to reduce the taxable gain — no longer applies in the same way for property acquired after 23 July 2024. For older holdings, transitional relief can preserve a more favourable outcome, so the acquisition date materially changes your tax. Run both before you sell.

Surcharge and cess

LTCG and STCG figures are headline rates. On top sit a health and education cess of 4% and, for larger gains, a surcharge that scales with income. For NRIs, surcharge on LTCG is capped at 15% — a detail that meaningfully lowers the bill on a large sale.

Architect and buyer reviewing property drawings and documents at a table The acquisition date, holding period and supporting documents decide your gain — not the sale price alone.

The exemptions that legally cut your gains tax

You are not stuck paying LTCG in full. Two reinvestment exemptions are available to NRIs:

Section 54 — reinvest the capital gain from a residential property into another residential property in India (bought 1 year before or 2 years after the sale, or constructed within 3 years). The reinvested portion of the gain becomes exempt.
Section 54EC — invest the gain (up to ₹50 lakh) in specified bonds (NHAI, REC and similar) within 6 months of the sale, with a 5-year lock-in. This suits NRIs who don't want to buy another property immediately.

Both have strict timelines and conditions. Miss the window and the exemption is gone — there is no discretionary extension.

Double taxation and DTAA relief

Here is the question most NRIs actually worry about: if India taxes my rental income or capital gain, will my country of residence tax it again?

Often, yes — your home country may also tax worldwide income. But India has a Double Taxation Avoidance Agreement (DTAA) with most major countries (the US, UK, UAE, Singapore, Canada, Australia and more). The DTAA ensures you don't pay full tax twice through one of two mechanisms:

Tax credit method — you pay tax in India, then claim that amount as a foreign tax credit against the tax due in your country of residence.
Exemption method — the income is taxed in only one jurisdiction under the treaty.

To claim DTAA benefits you need a Tax Residency Certificate (TRC) from your country of residence and to file Form 10F in India. Without the TRC, India can deny the treaty rate and apply the higher domestic rate. For UAE-based NRIs in particular, where there is no personal income tax locally, the DTAA mechanics determine whether your India tax is your final tax — so the certificate is not optional.

Repatriating the money out of India

Tax paid, sale done — getting the proceeds abroad is its own step. Under FEMA, an NRI can repatriate sale proceeds of up to USD 1 million per financial year from an NRO account, subject to taxes being paid and the right forms (15CA/15CB, a CA-certified declaration) being filed. Property bought while resident, or inherited property, follows specific sourcing rules. Plan repatriation before you sell, not after.

Where an advisor changes the outcome

The recurring theme above is that the acquisition date, the seller's residency status, the holding period and your TRC paperwork — not the sticker price — decide what you actually pay. These are exactly the details that get glossed over when you're buying remotely and relying on the builder's or broker's word.

This is the gap a buyer-side advisor is built to close. At PropXplor, every property we shortlist comes with a PropScore report — an 80+ data-point assessment that surfaces the title history, ownership and acquisition facts that drive your future tax position, not just the marketing. Because we represent the buyer and, our curated shortlisting and dedicated human advisor exist to protect your downside — including the tax and repatriation realities of owning India property from abroad.

Curated premium apartment interior with natural light Buyer-side advisory means the property — and its paperwork — is verified before it reaches your doorstep.

Frequently asked questions

What is the TDS rate when an NRI sells property in India? TDS is deducted on the NRI seller's capital gain — 12.5% for long-term (held over 24 months) or slab rate for short-term, plus surcharge and cess. It is not the 1% that applies to resident sellers. The seller can apply for a lower-deduction certificate (Form 13) to avoid over-deduction.

Do NRIs pay capital gains tax in India and again in their home country? India taxes the gain at source. Your country of residence may also tax it, but the DTAA lets you claim a foreign tax credit (or exemption) so you aren't fully taxed twice — provided you hold a valid Tax Residency Certificate and file Form 10F.

Can an NRI claim Section 54 or 54EC exemptions? Yes. NRIs can reinvest long-term gains into another Indian residential property (Section 54) or into specified bonds up to ₹50 lakh within 6 months (Section 54EC) to legally reduce or eliminate the LTCG tax, subject to the holding and timeline conditions.

How much sale proceeds can an NRI repatriate abroad? Up to USD 1 million per financial year from an NRO account, after taxes are paid and Forms 15CA/15CB are filed, under FEMA rules.

Is indexation still available on NRI property sales? For property acquired after 23 July 2024, the regime is generally 12.5% LTCG without indexation. Older holdings may qualify for transitional relief, so the acquisition date directly affects which calculation is more favourable — always compare both before selling.