NRI Selling Property in India — Tax Guide 2025

Section 195 Form 15CA/15CB DTAA Capital Gains

Selling property in India as a Non-Resident Indian involves a layer of tax complexity that resident sellers never encounter. The TDS rate is different, the applicable section is different, the repatriation of funds requires regulatory certificates, and the interplay between Indian tax law and the tax law of your country of residence demands careful planning. Having advised hundreds of NRIs across the United States, United Kingdom, Canada, UAE, and Australia on property disposals in India, I have seen the same costly errors repeat themselves. This guide covers every aspect of the transaction — from TDS deduction at the point of sale through to the final repatriation of funds to your overseas bank account.

1. TDS on Property Sale by NRI — Section 195

This is the single most misunderstood aspect of NRI property sales, and getting it wrong creates problems that take months to resolve. When an NRI sells property in India, TDS is governed by Section 195 of the Income Tax Act — not Section 194-IA. Section 194-IA applies only when the seller is a resident Indian, and the TDS rate there is a flat 1% of the sale consideration. For NRI sellers, the rates are dramatically higher:

• Long-Term Capital Gains (LTCG) — TDS at 20% of the capital gains amount (for properties acquired before 23 July 2024 where the old regime is more favourable) or 12.5% (for properties acquired after 23 July 2024 or where the new regime applies), plus applicable surcharge and 4% health and education cess.
• Short-Term Capital Gains (STCG) — TDS at 30% of the capital gains amount, plus applicable surcharge and 4% cess. The effective rate can reach approximately 31.2% to 34.32% depending on the surcharge slab.

The critical distinction is this: under Section 195, TDS must be deducted on the entire sale consideration at the applicable capital gains rate unless the NRI has obtained a Lower or Nil TDS Certificate under Section 197. In practice, many buyers — and even some advisors — incorrectly apply the 1% TDS rate meant for resident sellers. This leads to short-deduction notices from the Income Tax Department, interest under Section 201(1A), and penalties, all of which fall on the buyer. Meanwhile, the NRI seller faces difficulties at the time of repatriation because the correct TDS has not been deposited.

Surcharge rates depend on the total income of the NRI for the relevant assessment year. For income between Rs. 50 lakh and Rs. 1 crore, the surcharge is 10%. For income between Rs. 1 crore and Rs. 2 crore, it is 15%. The total effective TDS rate, therefore, is not a simple flat number — it must be computed based on the estimated capital gains.

2. Short-Term vs Long-Term Capital Gains

The classification of the gain as short-term or long-term depends entirely on the holding period of the property:

• Property held for more than 24 months from the date of acquisition — the gain is classified as Long-Term Capital Gain (LTCG).
• Property held for 24 months or less — the gain is classified as Short-Term Capital Gain (STCG).

The holding period is measured from the date of the purchase agreement (or allotment letter for under-construction properties) to the date of the sale agreement. For inherited property, the holding period of the previous owner is included. For property received as a gift, the period of holding by the donor is added to the recipient's holding period.

The distinction matters enormously because STCG is taxed at slab rates (effectively 30% for most NRIs with property income), while LTCG benefits from either the 20% rate with indexation (old regime) or 12.5% flat rate (new regime), and qualifies for exemptions under Sections 54 and 54EC.

3. Computation of Capital Gains

The method of computing capital gains depends on when the property was acquired and which computation method yields a lower tax liability.

For Properties Acquired Before 23 July 2024 — Old Method

Under the old method, long-term capital gains are computed as follows:

• Full value of consideration (sale price)
• Less: Expenses on transfer (brokerage, legal fees, stamp duty on sale)
• Less: Indexed cost of acquisition (purchase price multiplied by the Cost Inflation Index of the year of sale divided by the CII of the year of purchase)
• Less: Indexed cost of improvement (if any improvements were made, indexed similarly)
• Equals: Long-term capital gain, taxed at 20% plus surcharge and cess

Indexation adjusts the purchase price for inflation, significantly reducing the taxable gain for properties held over many years. For example, a property purchased in 2005-06 (CII 117) and sold in 2025-26 (CII 364) would have its cost indexed by a factor of approximately 3.11 — effectively tripling the cost base for tax purposes.

For Properties Acquired On or After 23 July 2024 — New Method

Under the new method introduced by Budget 2024, long-term capital gains are computed without indexation:

• Full value of consideration
• Less: Expenses on transfer
• Less: Actual cost of acquisition (without indexation)
• Less: Actual cost of improvement (without indexation)
• Equals: Long-term capital gain, taxed at 12.5% plus surcharge and cess

The lower rate of 12.5% is meant to compensate for the removal of indexation, but for properties held over a long duration, the old method with indexation at 20% may still yield a lower absolute tax. This is precisely why the grandfathering provision exists.

4. Grandfathering Provisions — Budget 2024 Changes

Recognising that the removal of indexation could adversely affect taxpayers who acquired property many years ago, the government introduced a grandfathering provision for properties acquired before 23 July 2024.

Under this provision, for properties purchased before 23 July 2024, the taxpayer may compute the capital gains tax under both methods and pay the lower of the two:

• Option A: 20% tax on gains computed with indexation (old method)
• Option B: 12.5% tax on gains computed without indexation (new method)

This is a meaningful safeguard. Consider a property bought in 2004 for Rs. 20 lakh and sold in 2025 for Rs. 1.20 crore. Under the old method, with indexation, the cost base might rise to approximately Rs. 65 lakh, yielding a taxable gain of Rs. 55 lakh and tax of Rs. 11 lakh (at 20%). Under the new method, without indexation, the gain would be Rs. 1 crore, and the tax Rs. 12.5 lakh (at 12.5%). In this case, the old method is clearly more favourable. However, for properties with shorter holding periods or purchased at already high prices, the new method at 12.5% may work out better. Always compute both before finalising your return.

5. Exemptions: Section 54 and Section 54EC

Section 54 — Reinvestment in Residential Property

An NRI can claim full exemption from LTCG tax by reinvesting the capital gains amount in a new residential property in India. The key conditions are:

• The new property must be purchased within 1 year before or 2 years after the date of sale, or constructed within 3 years of the sale.
• Only one residential property can be purchased (or two, if the capital gain does not exceed Rs. 10 crore — a provision introduced in Budget 2023).
• The new property must not be sold within 3 years of purchase, failing which the exemption is reversed.
• If the entire capital gain is not utilised for the new property, only the proportionate exemption is available.
• Until the new property is purchased, the unutilised gains must be deposited in a Capital Gains Account Scheme (CGAS) with an authorised bank before the due date of filing the return.

Section 54EC — Investment in Specified Bonds

Alternatively, the NRI can invest the capital gains (up to a maximum of Rs. 50 lakh) in bonds issued by NHAI (National Highways Authority of India) or REC (Rural Electrification Corporation). The conditions are:

• Investment must be made within 6 months of the date of sale.
• The bonds have a mandatory lock-in period of 5 years.
• Maximum investment is Rs. 50 lakh in a financial year.
• The bonds cannot be used as collateral or transferred during the lock-in period.

Section 54EC is particularly useful for NRIs who do not intend to buy another property in India. The bonds carry a modest interest rate (currently around 5% per annum), but the tax saving on the capital gains far outweighs the lower return.

6. Getting a Lower or Nil TDS Certificate — Section 197

This is arguably the most critical step in the entire NRI property sale process, and the one most frequently overlooked. Without this certificate, the buyer is legally required to deduct TDS at the full rate (20% or 30% plus surcharge and cess) on the entire sale consideration — not just the capital gains portion.

The Section 197 certificate is an order from the Assessing Officer directing the buyer to deduct TDS at a lower rate or at nil, based on the NRI's actual estimated tax liability for the transaction. To obtain it:

1. File Form 13 online on the TRACES portal.
2. Submit details of the property transaction: sale price, purchase price, holding period, estimated capital gains, and any exemptions being claimed (Section 54, 54EC).
3. Provide supporting documents: sale agreement, purchase deed, proof of investments in new property or 54EC bonds (if applicable), PAN, and passport.
4. The Assessing Officer reviews the application and issues a certificate specifying the rate at which TDS should be deducted.

The processing typically takes 2 to 4 weeks. It is essential to apply well before the sale is finalised. Without this certificate, even if the NRI's actual tax liability is zero (due to Section 54 or 54EC exemptions), TDS of 20-30% will still be deducted from the sale proceeds. Claiming a refund for excess TDS requires filing an income tax return and waiting for processing — a cycle that can take 6 to 18 months. A Lower TDS Certificate prevents this cash flow disruption entirely.

7. Role of the Buyer — TDS Obligations

The legal obligation to deduct and deposit TDS lies squarely with the buyer of the property. This is non-negotiable regardless of whether the buyer is an individual, company, or other entity. The buyer must:

• Obtain a TAN (Tax Deduction Account Number) — This is mandatory for any person deducting TDS under Section 195. Unlike Section 194-IA (resident transactions) where a TAN is not required, Section 195 transactions require the buyer to have a TAN.
• Deduct TDS at the applicable rate at the time of payment or credit, whichever is earlier.
• Deposit the TDS with the government using Challan 281 within 7 days from the end of the month in which TDS was deducted (30 days for TDS deducted in March).
• File Form 27Q (quarterly TDS return for payments to non-residents) within the prescribed due dates.
• Issue Form 16A (TDS certificate) to the NRI seller within 15 days from the due date of filing the TDS return.

If the buyer fails to deduct TDS or deducts at a lower rate without a Section 197 certificate, the buyer becomes an "assessee in default" under Section 201. This attracts interest at 1% per month for non-deduction and 1.5% per month for non-payment, plus a potential penalty equal to the TDS amount. Buyers of NRI property must take this obligation seriously.

8. Repatriation of Sale Proceeds: Form 15CA and 15CB

Once the property is sold and the proceeds are credited to the NRI's NRO account, the next step is repatriation — transferring the funds to the NRI's bank account abroad. This requires two critical documents under FEMA (Foreign Exchange Management Act) and Income Tax regulations:

Form 15CB — Chartered Accountant's Certificate

This is a certificate issued by a practising Chartered Accountant certifying that the remittance is in accordance with the provisions of the Income Tax Act, the applicable DTAA, and the nature of the remittance. The CA verifies that all taxes have been paid, TDS has been deducted and deposited, and the remittance is within the permissible limits. Form 15CB must be uploaded on the Income Tax portal by the CA.

Form 15CA — Online Declaration by the Remitter

This is an online undertaking filed by the NRI (or the authorised dealer bank on their behalf) on the Income Tax e-filing portal. Form 15CA has four parts, and the applicable part depends on the amount and nature of the remittance. For property sale proceeds, Part C (where a certificate under Section 195 has been obtained) or Part D is typically used. The form is submitted online, and the acknowledgement is presented to the bank to process the outward remittance.

The bank will not process the international transfer without both Form 15CA and 15CB. Plan for this: the CA certificate takes time to prepare, and the online filing must be completed before approaching the bank.

9. DTAA Benefits — Claiming Tax Credit Abroad

India has Double Taxation Avoidance Agreements with over 90 countries. For NRIs, DTAA provisions are essential to avoid being taxed twice on the same income — once in India and once in the country of residence. Here is how it works for major jurisdictions:

• United States: India-US DTAA allows tax paid in India to be claimed as a Foreign Tax Credit on the US federal return (Form 1116). The property sale must also be reported on Schedule D and Form 8949. The credit is limited to the US tax attributable to that income.
• United Kingdom: Under the India-UK DTAA, capital gains on immovable property may be taxed in India (the source country). The NRI can claim credit for Indian taxes against UK tax liability on the same gain.
• Canada: The India-Canada DTAA provides for relief through the foreign tax credit mechanism. Canadian residents report worldwide income and claim Indian taxes paid as a credit against Canadian tax.
• UAE: The UAE does not levy income tax on individuals. The India-UAE DTAA ensures that income taxed in India is not taxed again, though in practice, UAE residents pay only Indian tax on the property gains. Importantly, holding a UAE residence does not automatically make you a non-resident under Indian tax law — residential status must be determined based on the number of days spent in India.
• Australia: The India-Australia DTAA permits Australia to tax the gain but provides credit for taxes paid in India. NRIs must report the transaction in their Australian tax return and claim the offset.

To claim DTAA benefits, the NRI must obtain a Tax Residency Certificate (TRC) from the country of residence and furnish Form 10F to the Indian tax authorities. Without TRC and Form 10F, DTAA relief may be denied.

10. NRO Account and Repatriation Limits

When an NRI sells property in India, the sale proceeds (after TDS) are credited to the NRI's NRO (Non-Resident Ordinary) account. This is a regulatory requirement — sale proceeds from immovable property cannot be directly credited to an NRE account or an overseas account.

From the NRO account, the NRI can repatriate up to USD 1 million per financial year (approximately Rs. 8.3 crore at current exchange rates) after payment of applicable taxes. This limit covers all types of repatriations from the NRO account, including rent, dividends, interest, and sale proceeds — not just property transactions. If the sale proceeds exceed USD 1 million, the repatriation must be spread across multiple financial years.

The repatriation is subject to RBI guidelines and requires the bank to be satisfied that all tax obligations have been met. This is where Form 15CA and 15CB become essential documentation.

11. Power of Attorney — Selling While Abroad

Many NRIs cannot travel to India for the sale transaction. In such cases, the sale can be executed through a Power of Attorney (POA) granted to a trusted family member or representative in India. Key considerations:

• The POA must be a specific power of attorney — not a general POA. It should specifically authorise the attorney to sell the identified property, receive sale proceeds, execute the sale deed, and handle related documentation.
• If executed abroad, the POA must be notarised by a Notary Public, apostilled (for countries that are party to the Hague Apostille Convention) or attested by the Indian Consulate/Embassy, and then adjudicated (stamped) in the relevant Indian state after arrival.
• The sale proceeds must still be credited to the NRI's NRO account, not the POA holder's personal account.
• The POA holder signs the sale deed and appears before the Sub-Registrar on behalf of the NRI. The original POA must be presented at the time of registration.
• TDS obligations remain unchanged — the buyer deducts TDS based on the NRI seller's PAN and the Section 197 certificate (if obtained).

12. Common Mistakes NRIs Must Avoid

From years of advising NRI clients, these are the errors that cause the most financial damage and procedural delays:

• Buyer deducting only 1% TDS under Section 194-IA. This is the most frequent and most expensive mistake. Section 194-IA applies to resident sellers only. For NRI sellers, Section 195 applies, and the TDS rate is 20% or 30% (plus surcharge and cess). When the buyer deducts only 1%, the Department raises a demand on the buyer for the shortfall plus interest — and the NRI seller's TDS credit reflects only the amount actually deposited.
• Not applying for a Lower TDS Certificate under Section 197. Without this certificate, TDS is deducted on the gross sale consideration at the full rate. If the NRI is reinvesting in another property (Section 54) or bonds (Section 54EC), the actual tax liability may be zero — but the TDS is still deducted. Getting the certificate before the sale avoids locking up 20-30% of the sale proceeds for over a year.
• Not claiming DTAA tax credits in the country of residence. Many NRIs pay tax in India but fail to claim the foreign tax credit in the US, UK, Canada, or Australia. This results in genuine double taxation — paying full tax in both jurisdictions.
• Missing the 6-month window for Section 54EC bonds. The investment in NHAI/REC bonds must be made within 6 months of the sale. Once this window closes, the exemption is lost permanently for that transaction.
• Not filing an Indian income tax return. NRIs are required to file an Indian return if their Indian income exceeds the basic exemption limit, or if they wish to claim a refund for excess TDS. Without filing, the TDS paid cannot be claimed back.
• Attempting to repatriate without Form 15CA/15CB. Banks will not process the remittance without these forms. Starting the CA certification process after the sale is completed often causes unnecessary delays.
• Incorrect residential status determination. An Indian citizen who has spent more than 182 days in India during the financial year, or more than 60 days in India and 365 days in the preceding four years, is treated as a resident — not an NRI — for tax purposes. The rules for "deemed resident" status have also been tightened. Incorrect classification changes the entire tax treatment.

13. Step-by-Step Process: Listing to Repatriation

Here is the chronological workflow for an NRI selling property in India:

1. Engage a CA early. Before listing the property, consult a Chartered Accountant who specialises in NRI taxation. The CA will estimate capital gains, advise on exemptions, and plan the TDS certificate application timeline.
2. Prepare documents. Gather the original purchase deed, payment receipts, bank statements showing the purchase transaction, improvement bills (if any), and your PAN card. If using a POA, get it prepared, notarised, apostilled, and sent to India.
3. List and negotiate. Work with a real estate agent or broker. Ensure the buyer understands the TDS obligations under Section 195 before signing any agreement.
4. Apply for a Lower TDS Certificate (Form 13). File the application on TRACES as soon as the sale terms are finalised. Processing takes 2-4 weeks. This step is time-sensitive — do not wait until registration day.
5. Execute the sale deed. The buyer deducts TDS at the rate specified in the Section 197 certificate (or full rate if no certificate). The sale deed is registered at the Sub-Registrar's office.
6. Buyer deposits TDS and files Form 27Q. The buyer deposits TDS via Challan 281 and files the quarterly TDS return (Form 27Q). Verify that TDS appears in your Form 26AS.
7. Invest in Section 54EC bonds (if applicable). If claiming this exemption, invest within 6 months of the sale date. Apply through your bank or directly from NHAI/REC.
8. Deposit in Capital Gains Account Scheme (if applicable). If claiming Section 54 exemption but have not yet purchased the new property, deposit the unutilised gains in a CGAS account before the ITR filing due date.
9. File your Indian income tax return. Report the capital gains, claim exemptions, and claim credit for TDS deducted. If excess TDS was deducted, the refund will be processed after assessment.
10. Obtain Form 15CB from your CA. The CA verifies the transaction, tax payments, and DTAA applicability, and uploads the certificate on the Income Tax portal.
11. File Form 15CA online. Submit the online declaration on the Income Tax portal and generate the acknowledgement.
12. Approach your bank for repatriation. Present Form 15CA acknowledgement, Form 15CB, sale deed, TDS certificates, and the ITR acknowledgement to the bank. The bank processes the outward remittance to your overseas account.
13. Claim foreign tax credit in your country of residence. Report the transaction and claim credit for Indian taxes paid in your US, UK, Canadian, or Australian tax return, as applicable.

14. Practical Tips

• Start early. The entire process — from Section 197 application to final repatriation — can take 3 to 6 months. Begin planning at least 2 months before you intend to list the property.
• Educate the buyer. Many Indian resident buyers have never purchased from an NRI before. Provide them with clear written instructions (or have your CA send a note) explaining their TDS obligations under Section 195, the requirement to obtain a TAN, and the Form 27Q filing process.
• Maintain a complete paper trail. Keep copies of every document: the original purchase deed, all payment evidence, improvement receipts, sale deed, TDS challans, Section 197 certificate, Form 15CA/15CB, ITR acknowledgement, and bank remittance confirmation. Indian tax records should be preserved for at least 8 years from the end of the relevant assessment year.
• Use the correct PAN status. Ensure your PAN is updated to reflect your NRI status. If your PAN still shows resident status, update it by filing a correction request through NSDL or UTIITSL. An incorrect PAN status can lead to processing the transaction under the wrong provisions.
• Consider the financial year timing. If the sale happens close to 31 March, the Section 54EC bond investment window and CGAS deposit deadline may fall in the next financial year. Plan the sale date to maximise the time available for availing exemptions.
• Do not skip the ITR. Even if TDS covers your full tax liability, filing the return is essential for repatriation documentation and to maintain a clean compliance record with Indian tax authorities.
• Get both Indian and overseas tax advice. NRI property transactions involve two tax jurisdictions. A CA in India handles the Indian side, but you also need a tax advisor in your country of residence to ensure proper reporting and DTAA credit claims. The cost of dual advice is negligible compared to the cost of double taxation.

The NRI property sale is not a single transaction — it is a multi-step, multi-jurisdiction process that demands coordination between the seller, the buyer, two tax systems, and the banking regulator. Every step has a deadline, and missing even one can cost lakhs in unnecessary tax, interest, or blocked funds. Work with a professional who understands all the moving parts, and start early.