NRI Guide: Selling Your Property in India Under the New Tax Rules

Selling property in India as a Non-Resident Indian (NRI) comes with specific tax obligations. The Union Budget 2024 introduced changes to long-term capital gains (LTCG) from July 23, 2024, giving sellers of older properties a choice between the old and new tax methods. If your property was bought in the 2000s and is now worth ₹10 crore, these rules matter.

LTCG and the New Options

If you sell after holding property for more than 24 months, gains are treated as LTCG. For assets bought before July 23, 2024, you can choose between 20% tax with indexation (old method) or 12.5% without indexation (new method). Indexation adjusts your purchase price for inflation, often making the 20% option better for long-held properties.

Example Calculation

Suppose you bought in 2005 for ₹1 crore and sell in 2024-25 for ₹10 crore. With CII 2005 = 117 and CII 2024-25 = 348, the indexed cost is about ₹2.97 crore. Your taxable gain is ₹7.03 crore, and tax at 20% ≈ ₹1.41 crore. Under the 12.5% method, tax would be on almost the full ₹9 crore gain, which is usually higher.

TDS for NRIs

Buyers must deduct Tax Deducted at Source (TDS) before paying an NRI seller. For sales after July 23, 2024, the TDS rate is 12.5% on the total sale value. On a ₹10 crore sale, this means ₹1.25 crore deducted upfront, even if your actual tax is lower. You can claim a refund when filing your Indian return.

Tax-Saving Exemptions

You can reduce or avoid LTCG tax by reinvesting:

Section 54: Reinvest capital gains in a residential property in India within 2 years.

Section 54F: Use the full sale proceeds to buy a home (stricter rules).

Section 54EC: Invest up to ₹50 lakh of gains in NHAI or REC bonds within 6 months.

Key Takeaways

Work with a Chartered Accountant to choose the better tax method and ensure TDS is handled correctly. Keep all purchase and expense records. Check if your country has a Double Tax Avoidance Agreement (DTAA) with India to avoid double taxation. With planning, you can save significantly and ensure a smooth transaction.