12 Nov 2022Quick answer: An NRI selling property in India pays 12.5% tax on long-term capital gains (property held over 24 months), without indexation, plus surcharge and cess, up to 14.95%. The gain can be reduced legally before the sale by claiming the full cost (including improvements and transfer expenses), using the 1 April 2001 value for older property, splitting the gain between joint owners, timing the sale, and planning exemptions under sections 54, 54EC and 54F. Where you live also matters: in the US, UK, Canada or Australia the same gain is usually taxed again, with credit for Indian tax.
Updated: 23 October 2026 | Regi Tom Antony & Associates, Chartered Accountants, Kochi
This guide is about the planning you do before you sign a sale agreement. For the sale process itself (TDS by the buyer, the lower TDS certificate, Forms 145/146 and repatriation), see our complete guide for NRIs selling property in India. For documents, power of attorney and registration, see our step-by-step advisory guide.
How is the capital gain worked out?
| Item | What to include |
|---|---|
| Full value of consideration | Sale price, or the stamp duty value if it is more than 110% of the sale price (section 50C) |
| Less: transfer expenses | Brokerage, legal fees, and stamp duty or registration costs borne by you as seller |
| Less: cost of acquisition | Purchase price plus stamp duty and registration paid at purchase; for property bought before 1 April 2001, the fair market value on that date (capped at the stamp duty value then) |
| Less: cost of improvement | Capital additions after 1 April 2001, such as an extra floor, extension or major renovation, supported by bills and payments |
| = Capital gain | Long-term if held for more than 24 months; otherwise short-term at slab rates |
Seven ways to reduce the tax before you sell
1. Claim every rupee of cost, with evidence
Without indexation, every rupee of documented cost matters more. Gather the purchase deed, stamp duty and registration receipts, builder demand letters and payment proofs, interest paid to the builder before possession where it forms part of cost, and bills for improvements. Routine repairs and maintenance are not cost of improvement.
2. Use the 1 April 2001 value for older property
For property acquired before 1 April 2001, including property inherited from parents who bought it earlier, take the fair market value on 1 April 2001 as cost. Get a registered valuer's report, and remember it cannot exceed the stamp duty value on that date.
3. Inherited property: use the previous owner's cost and holding period
For inherited or gifted property, the cost is what the previous owner paid, and their holding period is added to yours. Inherited property is therefore almost always long-term, even if you sell soon after inheriting. Collect the previous owner's documents before you sell, not after.
4. Joint owners are taxed separately
Where property is jointly owned, each co-owner is taxed on their share of the gain, and each can claim section 54 or 54EC separately. Make sure the sale deed and payments reflect each owner's share, and that each co-owner has a PAN.
5. Plan the exemption before the sale, not after
- Section 54: gain on a residential house reinvested in one residential house in India (bought one year before or two years after, or built within three years); the investment counted is capped at ₹10 crore. Once in a lifetime, where the gain is up to ₹2 crore, two houses can be bought.
- Section 54EC: up to ₹50 lakh in a financial year in NHAI, REC, PFC or IRFC bonds within six months of the sale, locked in for five years.
- Section 54F: for land, plots or commercial property, reinvest the net sale consideration in a residential house in India.
- Capital Gains Account Scheme: if you have not reinvested by the return due date, deposit the amount in a CGAS account to keep the exemption.
An exemption you intend to claim also supports your application for a lower TDS certificate, so the buyer deducts less. See how to apply for a lower TDS certificate (Form 128).
6. Time the sale
- Selling a day before the 24-month mark turns a 12.5% gain into slab-rate income. Check the exact purchase and sale dates.
- If you are returning to India, you may become resident (including "resident but not ordinarily resident") in the year of sale. A resident individual selling land or a building acquired before 23 July 2024 can choose 20% with indexation instead of 12.5% without it, which NRIs cannot.
- If you are selling two properties, selling them in different financial years can keep total income below a surcharge threshold in each year.
7. Factor in your country of residence
| Where you live | Effect |
|---|---|
| UAE, Saudi Arabia, Qatar and other Gulf countries | No personal income tax there, so Indian tax is the final cost; exemptions in India are worth their full value |
| USA | The gain is taxable in the US too, computed in dollars; claim a foreign tax credit for Indian tax. Indian exemptions (sections 54 and 54EC) do not reduce US tax |
| UK, Canada, Australia, Singapore | Usually taxable where you live, with credit for Indian tax; check the local rules and currency treatment before choosing an Indian exemption |
For a US-resident NRI, saving Indian tax through a 54EC bond may simply increase US tax, so compare the combined position first. See also our guide to DTAA relief for NRIs.
Worked example
An NRI in Dubai sells a flat in Kochi for ₹1.2 crore, bought in 2012 for ₹45 lakh including stamp duty, with ₹5 lakh of documented improvements in 2018 and ₹1.2 lakh brokerage on the sale. Gain = ₹1.2 crore − ₹1.2 lakh − ₹45 lakh − ₹5 lakh = ₹68.8 lakh. Assuming no other Indian income, tax at 12.5% plus 10% surcharge (income between ₹50 lakh and ₹1 crore) and 4% cess is about ₹9.8 lakh. Investing ₹50 lakh in 54EC bonds within six months reduces the taxable gain to ₹18.8 lakh; surcharge no longer applies, and the tax falls to about ₹2.4 lakh, a saving of about ₹7.4 lakh. Because the UAE has no income tax, the saving is real.
Frequently asked questions
Can an NRI claim indexation on property sold in 2026?
No. NRIs pay 12.5% without indexation on long-term gains from land or buildings. The 20% with indexation option for property acquired before 23 July 2024 is available only to resident individuals and HUFs.
Is the basic exemption limit available against the gain?
No. NRIs cannot use the unused basic exemption limit against long-term capital gains.
Can both joint owners claim section 54?
Yes. Each co-owner claims the exemption on their own share, subject to their own reinvestment.
Planning a sale? Regi Tom Antony & Associates prepares capital gains computations, exemption plans and lower TDS applications for NRIs. Write to letstalk@rtaandassociates.com.