You sold some shares. Or maybe you’re thinking about selling that flat in Bangalore. Either way, if you’re an NRI with assets in India, one question comes up fast: how much of that profit goes to the taxman?
Capital gains tax in India has changed significantly since July 2024, and the rules for NRIs carry extra layers — TDS deducted upfront, mandatory ITR filing, and special exemptions that can save you lakhs if you use them at the right time.
This guide covers everything in one place: rates by asset type, what gets deducted at source, how to legally reduce your tax bill, and the NRI-specific rules that most generic tax articles skip entirely.
Note: This blog covers capital gains on property, shares, and gold. For the complete mutual fund tax framework, “how mutual funds are taxed for NRIs“.
What Is a Capital Gain — and When Does It Apply to NRIs?
A capital gain is simply the profit you make when you sell an asset for more than you paid for it. If you bought shares at ₹50 and sold at ₹80, your capital gain is ₹30 per share.
For NRIs, this applies to any capital asset located in India — property, listed shares, equity mutual funds, gold, bonds, and unlisted shares — regardless of where you live or whether the money stays in India. The asset is in India, so it’s taxable under the Income Tax Act.
Capital gains are split into two categories:
Short-Term Capital Gains (STCG) — when you sell before the minimum holding period. Long-Term Capital Gains (LTCG) — when you hold beyond that threshold, attracting lower rates.
The holding period differs by asset type, and this distinction is where smart planning begins.
Holding Periods and Tax Rates: What's Changed Since July 2024
The Union Budget 2024 overhauled capital gains tax from July 23, 2024. Budget 2025 and 2026 made no further changes — so these rates apply fully for FY 2025-26.
Here’s the current framework:
Listed Equity Shares and Equity Mutual Funds
- STCG (held under 12 months): taxed at 20% flat (was 15% before July 23, 2024)
- LTCG (held 12 months+): taxed at 12.5% on gains above ₹1.25 lakh per financial year
- No indexation. First ₹1.25 lakh of equity LTCG per year is exempt.
Immovable Property (Land, Flat, House)
- STCG (held under 24 months): taxed at your applicable slab rate (up to 30%)
- LTCG (held 24 months+): taxed at 12.5% without indexation for property acquired after July 23, 2024
- Property acquired before July 23, 2024: you can choose between 12.5% without indexation OR 20% with indexation — whichever gives you the lower tax bill
Gold (Physical or ETF) and Unlisted Shares
- STCG (held under 24 months): taxed at slab rates
- LTCG (held 24 months+): taxed at 12.5% without indexation
Add 4% health and education cess to all of the above. Surcharge applies on higher incomes and can push the effective rate meaningfully higher.
One critical rule NRIs often miss: you cannot offset your basic exemption limit against equity STCG (Section 111A). As a non-resident, that buffer doesn’t apply to gains from listed shares or equity funds. Every rupee of equity STCG is taxable.
The Big NRI Difference: TDS Is Deducted Before You See the Money
Resident Indians pay capital gains tax when they file their ITR. NRIs don’t get that option — tax is deducted at source under Section 195 of the Income Tax Act before the sale proceeds reach you.
For equity shares and mutual funds, the brokerage or AMC deducts TDS automatically at the time of sale or redemption. For mutual funds specifically, see “how mutual funds are taxed for NRIs” which covers AMC-level TDS in full detail.
For property sales, it’s more complex — and the numbers can be startling.
How TDS Works When You Sell Property as an NRI
When an NRI sells property, the buyer is legally required to deduct TDS before paying you. The rates under Section 195:
- Property held under 24 months (STCG): TDS at 30% of the full sale consideration (plus surcharge and cess — total can reach ~31.2%)
- Property held 24 months+ (LTCG): TDS at 20% of the full sale consideration (plus surcharge and cess — total around 20.8–23.92% depending on income level)
The critical word here is full sale consideration — not your profit. If you sell a ₹1 crore property for a ₹30 lakh gain, TDS could be deducted on the full ₹1 crore, not just the ₹30 lakh gain.
This is why many NRIs end up with a large TDS refund — they overpaid at source. You reclaim it by “file ITR-2 as an NRI” filing an ITR-2 in India, but that process takes time.
The smarter approach: Apply for a Lower Deduction Certificate (Form 13 under Section 197) before the sale. You submit this to your Assessing Officer, disclose the actual capital gain, and if approved, the buyer deducts TDS only on your real tax liability — not the full sale value. This prevents a large cash flow gap at the time of sale.
Our team helps NRI clients navigate this process before they finalise a property transaction — if you’re planning to sell, speak with us before you sign anything.
For a full breakdown of the economics of NRI property ownership versus mutual funds, see “NRI property vs mutual funds comparison“.
Three Legal Ways to Reduce Your Capital Gains Tax
India’s tax laws provide meaningful exemptions for NRIs — but the windows are time-bound and conditions are strict. Plan ahead.
Section 54 — Reinvest in Another Residential Property
If you sell a residential property and reinvest the long-term capital gains into another residential property in India, those gains are exempt from tax. The new property must be purchased within one year before or two years after the sale date (or constructed within three years). The exemption is capped at the actual capital gain, and the new property must be in India.
Section 54EC — Invest in Capital Gains Bonds
If you don’t want to buy another property, invest your LTCG into specified bonds — issued by entities like NHAI or REC — within six months of the sale. The maximum you can invest is ₹50 lakh per financial year. These bonds have a five-year lock-in period, and the interest (~5.25% annually) is taxable. But the principal investment gets you the full LTCG exemption.
Section 54F — Sell Any Asset, Buy a House
If you sell a non-property asset — gold, unlisted shares, commercial property — and reinvest the entire sale proceeds (not just the gain) into one residential property in India, you can claim LTCG exemption. The purchase must happen within two years (or construction within three years). You cannot own more than one other house at the time of sale.
These exemptions are powerful but come with paperwork requirements. Mis-timing them or missing documentation can result in the exemption being disallowed.
DTAA: Avoiding Double Taxation on the Same Gain
If your country of residence also taxes Indian capital gains, you risk paying tax twice. India has Double Taxation Avoidance Agreements (DTAA) with over 90 countries — including the UK, UAE, USA, Australia, Canada, and Singapore — which can reduce or eliminate this overlap.
To claim DTAA benefits, you’ll need:
- A Tax Residency Certificate (TRC) from your country of residence
- Form 10F submitted to the Indian tax authority
This documentation must be in place before you file your ITR. Countries like the UAE have a 0% DTAA rate on certain income types, which can significantly reduce your Indian tax liability.”pre-investment checklist for NRIs” covers DTAA preparation in detail.
For account structure and repatriation of sale proceeds after tax, see “NRE vs NRO account structure“.
We coordinate DTAA documentation and ITR filing for our NRI clients — so nothing slips through the cracks between two tax systems.
ITR Filing Is Not Optional for NRIs with Capital Gains
If you’ve made any capital gain in India during a financial year, you’re required to file an ITR — even if TDS was fully deducted. This is the only way to:
- Claim a refund if TDS was deducted in excess of your actual liability
- Claim exemptions under Sections 54, 54EC, or 54F
- Carry forward capital losses to offset future gains (losses can be carried forward for up to 8 years)
- Claim DTAA benefits
NRIs must file ITR-2 (if no business income) or ITR-3 (if business income is also involved). The deadline is typically July 31 of the assessment year, with extensions available.
The filing itself can be done online through the Income Tax e-filing portal. If you’re managing this from abroad alongside DTAA claims and multiple asset types, having professional support makes a real difference.
Our team handles ITR-2 filing for NRI clients across the UK, UAE, USA, Canada, and Australia — including DTAA coordination, TDS credit claims, and capital gains scheduling.
A Quick Reference: Capital Gains Tax for NRIs at a Glance
*Property acquired before July 23, 2024: choice of 12.5% without indexation OR 20% with indexation — whichever is lower.
Add 4% cess to all rates. Surcharge applies at higher income levels.
Ready to Get Your Capital Gains Strategy Right?
Capital gains tax for NRIs is manageable — but the timing of sales, the TDS process, exemption elections, and DTAA claims all need to work together. A missed window or incorrect TDS can cost you months of delays and thousands in unnecessary tax.
Whether you’re planning to sell a property, rebalance your equity portfolio, or simply want to understand your liability before you act — our team is here to help you plan it properly.
Get in touch with us today for a no-obligation review of your capital gains position.
Frequently Asked Questions
What is the capital gains tax rate for NRIs selling property in India in 2026?
For property held more than 24 months, long-term capital gains are taxed at 12.5% without indexation (for property acquired after July 23, 2024). If you acquired the property before that date, you can choose 12.5% without indexation or 20% with indexation — whichever gives a lower tax bill. For property held under 24 months, gains are taxed at your applicable income slab rate (up to 30%). Plus 4% cess and applicable surcharge in both cases.
How much TDS is deducted when an NRI sells property in India?
Under Section 195, the buyer must deduct TDS on the full sale consideration — not just the capital gain. For long-term gains (property held 24+ months), TDS is 20% plus surcharge and cess (effective rate around 20.8–23.92%). For short-term gains (held under 24 months), TDS is 30% plus applicable charges. NRIs can apply for a Lower Deduction Certificate (Form 13 under Section 197) before the sale to reduce this deduction to their actual tax liability.
Can NRIs save capital gains tax in India?
Yes. Three main exemptions apply: Section 54 (reinvest LTCG from property sale into another residential property in India within two years), Section 54EC (invest up to ₹50 lakh of LTCG in specified government bonds within six months), and Section 54F (reinvest entire sale proceeds from any asset into one residential property). Each has strict conditions on timing and documentation, so planning ahead is essential.
Do NRIs pay capital gains tax on Indian shares and mutual funds?
Yes. STCG on listed equity shares and equity mutual funds is taxed at 20% (held under 12 months). LTCG above ₹1.25 lakh per financial year is taxed at 12.5% (held 12 months+). The AMC or broker deducts TDS automatically at the time of sale. NRIs should file an ITR-2 to claim any TDS refund if the basic ₹1.25 lakh exemption reduces the actual liability. For full mutual fund tax details, see our mutual fund tax guide.
What ITR form do NRIs use to report capital gains in India?
NRIs with capital gains income (but no business income) file ITR-2. Those with both capital gains and business income file ITR-3. Capital gains are reported under “Schedule Capital Gains” in the return. Filing is mandatory even if TDS was fully deducted at source — it’s the only way to claim refunds, exemptions, carry forward losses, and DTAA relief.
Disclaimer: This blog is for informational purposes only and does not constitute financial, tax, or legal advice. Capital gains tax rules are subject to change; all rates and thresholds referenced are based on the Income Tax Act as amended by the Finance Act 2024 and Finance Act 2025, applicable for FY 2025-26. NRIs should consult a qualified tax advisor in both India and their country of residence before making any investment or divestment decisions. Mutual fund investments are subject to market risks. Past returns are not indicative of future performance.
