Key takeaway
When an NRI sells property in India, the gain is taxable in India and the buyer must deduct tax at source. Because TDS is often worked out on the full price, many sellers apply for a lower deduction certificate before the sale. File an Indian tax return for the year, then repatriate the money through your NRO account within RBI limits. Plan this before you sign the agreement.
Step 1: Work out the gain
- Long-term or short-term — immovable property held for more than 24 months is generally long-term. For inherited property, the previous owner’s holding period counts.
- Long-term gains — following the 2024 changes, long-term capital gains on property are generally taxed at 12.5% without indexation, plus surcharge and cess. A grandfathering option to use indexation at 20% for property acquired before 23 July 2024 is available to resident individuals and HUFs, not to non-residents.
- Short-term gains — taxed at the normal slab rates.
- Exemptions — reinvesting long-term gains in a residential house in India, or in specified bonds, can reduce or eliminate tax, subject to conditions and time limits.
The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. Section numbers have changed, so check current provisions with a tax adviser — the broad structure above is what most NRIs need to know when planning.
Step 2: TDS deducted by the buyer
A buyer purchasing from a non-resident must deduct tax at source — under section 393(2) of the Income-tax Act, 2025 for payments from 1 April 2026 (earlier section 195 of the 1961 Act). The buyer needs a TAN, deposits the TDS and issues you a TDS certificate. Unlike a sale by a resident, the 1% rule does not apply.
In practice many buyers deduct on the full sale price, which can be far more than the tax you actually owe. To avoid this, you can apply to the Income Tax Department, online, for a lower or nil deduction certificate before the sale, supported by your purchase cost, improvement costs and any exemption you plan to claim.
Step 3: File your Indian return
File an income tax return in India for the year of sale, report the gain and claim credit for TDS. If excess tax was deducted, you can claim a refund.
Step 4: Move the money abroad
- Sale proceeds are normally credited to your NRO account.
- RBI rules allow NRIs and PIOs to remit up to USD 1 million per financial year from NRO balances, including sale proceeds, subject to tax compliance.
- Banks usually need Form 15CA and, for larger amounts, a chartered accountant’s certificate in Form 15CB (or the equivalent forms under the current rules).
- Special rules allow repatriation of the amount originally paid in foreign exchange for residential property, for up to two such properties.
Step 5: Your country of residence
Your home country may also tax the gain or require you to report it. Tax treaties and foreign tax credits can reduce double taxation. Speak to a local tax adviser.
Documents to keep ready
- Purchase deed and payment proofs; inheritance documents if inherited
- Bills for improvements
- PAN, passport and address abroad
- NRO and NRE bank details
- Power of attorney if a representative will sign the sale deed
Common mistakes to avoid
- Signing the sale agreement before applying for a lower deduction certificate.
- A buyer deducting TDS at the resident 1% rate — this creates problems for both sides.
- Not filing an Indian return, which delays refunds and repatriation.
- Forgetting the tax rules of your country of residence.
Frequently asked questions
Can I sell without travelling to India?
Usually yes, through a specific power of attorney signed abroad and stamped in India.
How long does a lower deduction certificate take?
Timelines vary. Apply well before the planned sale date.
Can I move the full sale price abroad?
Generally yes within the USD 1 million per financial year limit from NRO, after taxes, with the bank’s documentation. Larger amounts may need to be spread over years or require approval.
Related LegalCops services
- Buying and selling property from abroad
- NRI Power of Attorney
- CA and tax services
- Find a lawyer in India · Request a call back
References
- Income-tax Act, 2025 (in force from 1 April 2026) and Income-tax Act, 1961 for earlier years
- Reserve Bank of India — Master Direction on Remittance of Assets
- Foreign Exchange Management (Non-debt Instruments) Rules, 2019
- Income Tax Department — e-filing portal guidance on lower deduction certificates
Last reviewed: November 2026. Tax rates and section numbers change — verify current law before acting.
The information provided is for general educational purposes only and does not constitute legal advice. Applicable laws and procedures may vary depending on the facts, jurisdiction, and circumstances of each matter. Consult a qualified legal professional before taking action.
