Capital Gains Tax for NRIs on Property: The Post-2024 Regime

An NRI selling Indian property held for more than 24 months pays long-term capital gains tax at 12.5% without indexation, plus surcharge and cess, for transfers on or after 23 July 2024. Property held 24 months or less produces short-term gains taxed at slab rates. The Income-tax Act, 2025, in force from 1 April 2026, keeps these rates and renumbers the exemption sections: 54 became 82, 54EC became 85, 54F became 86.

What changed in July 2024, and what stuck

The Finance (No. 2) Act, 2024 rewrote property gains from 23 July 2024:

• Old regime: 20% on the gain after indexation (inflation adjustment of cost).
• New regime: 12.5% on the gain, no indexation.

For resident individuals and HUFs holding property bought before 23 July 2024, the law allows a comparison: pay the lower of 12.5% without indexation or 20% with indexation. NRIs do not get that comparison. An NRI pays 12.5% without indexation, full stop. For old properties bought cheap decades ago, the loss of indexation raises the taxable gain, and the flat 12.5% does not always compensate. Model the number before you commit to a price.

The Income-tax Act, 2025 carried the regime forward for tax year 2026-27 with new section numbers and no rate change as of the Finance Act, 2026.

The rates in one table

Surcharge on long-term capital gains is capped at 15% regardless of income. Cess is 4% on tax plus surcharge. So the long-term effective rate runs 13% (income up to Rs 50 lakh), 14.3% (Rs 50 lakh to Rs 1 crore), 14.95% (above Rs 1 crore).

Computing the gain

1. Full value of consideration: the sale price, or the stamp duty value if it exceeds the price beyond the permitted tolerance.
2. Less cost of acquisition: what you (or, for inherited property, the previous owner) paid. For property acquired before 1 April 2001, the fair market value on that date can substitute. No indexation on top.
3. Less cost of improvement: documented capital improvements.
4. Less transfer expenses: brokerage, legal fees on the sale.
5. Result: the capital gain, long-term or short-term by holding period.

For inherited property, the holding period includes the previous owner's holding period, and the cost steps from the previous owner. Inheritance itself is not a taxable transfer; the later sale is.

The exemptions: sections 54, 54EC, 54F (now 82, 85, 86)

All three remain available to NRIs. All three require reinvestment in India.

Section 54 (now 82): sell a house, buy a house. Sell a residential property held long-term, reinvest the gain in one residential house in India within one year before or two years after the sale (three years if constructing). Exemption capped at Rs 10 crore. Sell the new house within three years and the exemption unwinds.

Section 54EC (now 85): bonds. Invest the gain, up to Rs 50 lakh per financial year, in notified bonds (REC, PFC, IRFC) within six months of the sale. Five-year lock-in. Works for gains from land or buildings held long-term. The interest is taxable.

Section 54F (now 86): sell any asset, buy a house. For long-term assets other than a residential house (a plot, for instance), reinvest the entire net sale consideration in one residential house in India. Partial reinvestment gives proportionate exemption. Same Rs 10 crore ceiling, and you must not own more than one other residential house on the sale date.

Capital Gains Account Scheme (CGAS). Cannot reinvest before your return filing deadline? Park the unutilised amount in a CGAS deposit with a public sector bank and claim the exemption now, then spend it within the section's window. Miss the window and the gain comes back into tax in the year the window closes.

One catch for NRIs planning to repatriate: every exemption above ties money up in India. An exemption saves tax; it does not move dollars. Decide first whether you want the money out or reinvested. Doing both is arithmetic, not magic.

How TDS interacts with the actual liability

TDS on an NRI sale is deducted on the gross sale price at 13 to 14.95% unless a lower-TDS certificate caps it. Your actual liability is 12.5% plus surcharge and cess on the gain after exemptions. The two numbers almost never match.

1. Before the sale: apply for a lower or nil TDS certificate (Form 128, the old Form 13) reflecting your computed gain and planned exemptions. The officer can factor in a section 54 reinvestment you commit to. Details: TDS on sale of property by NRI.
2. After the sale: file the Indian return for the year. Report the gain, claim the exemptions, take credit for the TDS in your 26AS.
3. Excess TDS returns as a refund with interest. Shortfall (rare) is payable as self-assessment tax.
4. The refund itself then needs repatriation paperwork: repatriating proceeds from NRO.

Filing the return is not optional housekeeping. No return, no refund, and the withheld lakhs stay with the government.

Where this goes wrong

• Sellers assume indexation still exists and price the deal off a stale tax model. For pre-2010 purchases the post-2024 math can hurt; for recent purchases it tends to help.
• An NRI claims the 20%-with-indexation option seen in a resident-focused blog. That option does not extend to NRIs. The return gets processed with a demand.
• Section 54 money goes into a property abroad. The reinvestment must be in India. Exemption denied.
• The 54EC investment happens in month seven. The six-month clock is hard.
• CGAS deposit made, then forgotten. The window lapses and the exemption reverses with interest.
• TDS was deducted but the buyer's return mapped it wrong, so the credit never appears and the refund claim stalls. Chase the Form 16A.

FAQ

What is the capital gains tax rate for NRIs selling property in 2026? 12.5% plus surcharge and cess on long-term gains (held over 24 months), without indexation. Short-term gains are taxed at slab rates.

Can NRIs still use indexation? No. The 12.5%-without-indexation regime applies to NRIs for transfers on or after 23 July 2024. The lower-of-two-computations relief is limited to resident individuals and HUFs.

Which exemptions can an NRI claim? Sections 54, 54EC, and 54F of the old Act, now sections 82, 85, and 86 of the Income-tax Act, 2025. Reinvestment must be in India.

How much can I put in 54EC bonds? Up to Rs 50 lakh of the gain per financial year, within six months of transfer, locked for five years.

Is there a cap on the section 54 exemption? Yes, Rs 10 crore. The same ceiling applies under section 54F.

Is tax payable on inherited property I sell? Inheritance is not taxed. The sale is, computed with the previous owner's cost and holding period.

If TDS was deducted, do I still file a return? Yes. The return is how exemptions get claimed and excess TDS comes back. Skip it and you donate the difference.

Run the numbers before you sign

66 MG Road models the gain, secures the lower-TDS certificate, executes the sale, and repatriates the proceeds, with itemized billing at every step. Teams in Mumbai, Pune, Bangalore, Hyderabad, Chennai, and Gurgaon. Start with tax and repatriation services or sale and purchase services.

Saurabh Garg, founder, 66 MG Road

Sources

• Income Tax Department, Capital Gains: https://www.incometaxindia.gov.in/w/capital-gain
• Income Tax Department, Exemptions from Capital Gains: https://www.incometaxindia.gov.in/w/exemptions-from-capital-gains-1
• Income Tax Department, Form 128 (earlier Form 13): https://www.incometaxindia.gov.in/documents/d/guest/fn-128
• Income Tax e-filing portal: https://www.incometax.gov.in