There is lot of confusion about tax implications for NRIs who want to sell any property in India. Many questions come to the mind of both Buyer & Seller about taxation aspect. Doubts mainly arise related to TDS rates, filing of TDS Return, claiming Tax Refund, Capital Gain calculation, exemption from tax and remittance of Funds abroad from sale of Property in India. Various queries have been analysed and presented with examples for the easy understanding.
This article is mainly applicable on the following situation:-
1. Buyer of Property: Resident in India
2. Seller of Property: Non Resident Indian (NRIs)
3. Property Type: Sale of Plot, Land, Building, Flat, House Property, Commercial Shop/Complex etc. situated in India
Note: Rural Agricultural Land is not a Capital Asset, hence Capital Gain not chargeable. However Urban Agriculture Land is chargeable under Capital Gains Tax.
Page Contents
- Long/Short Term Capital Gain on Sale of Property by NRI
- TDS Rates Chart for NRI
- Computation of Tax/Refund on Long Term Capital Assets of NRI
- Computation of Tax/Refund on Short Term Capital Assets of NRI
- How to save Tax on Capital Gains by NRI?
- NRI want to get TDS deducted at Lower Rate/NIL Rate i.e. Zero Rate?
- TDS Return to be filed by Buyer of Property from NRI
- Remittance of Funds abroad/Transfer from NRO account to NRE account
Long/Short Term Capital Gain on Sale of Property by NRI
NRIs have to pay tax on the Capital Gains. The tax that is payable on the gains depends on whether it’s a short term or a long term capital gains. When a property is sold, after a period of 2 years from the date it was owned – there is a long term capital gain. In case it held for 2 years or less – there is a short term capital gain. Example:-
| Case | Date of Purchase | Date of Sales | Long/Short Term |
| 1 | 15-04-2019 | 10-05-2020 | Short Term |
| 2 | 15-04-2019 | 15-10-2019 | Short Term |
| 3 | 15-04-2018 | 10-05-2020 | Long Term |
| 4 | 15-04-2002 | 10-05-2020 | Long Term |
| 5 | 15-04-2000 | 10-05-2020 | Long Term |
| 6 | 15-04-1985 | 10-05-2020 | Long Term |
| 7 | 15-04-1945 | 10-05-2020 | Long Term |
Inherited/Gifted Property
Tax implications for NRIs are also applicable in the case of inheritance. In case the property has been inherited, remember to consider the date of purchase of the original owner for calculating whether it’s a long term or a short term capital gain. Example:-
| Particulars | Date |
| Date of Purchase of Property by Father | 15-04-2010 |
| Date of Gift of Property by Father to Son | 25-06-2019 |
| Date of Sale of Property by NRI Son | 17-04-2020 |
| Asset Long Term/Short Term for NRI Son | Long Term |
TDS Rates Chart for NRI
Rate of TDS Depends on Two Factors-
1. Long Term / Short Term Property
2. Value of Property Sold (Because Different Surcharge Rates for Different Income Levels)
TDS has to be deducted on entire Sales Consideration & not on the Capital Gains only (Whether Long Term/Short Term)
| Long Term Property held by NRI | A.Y. 2021-22 (F.Y. 2020-21) | ||||
| Property Value | Income Tax | Surcharge | Sub Total | Cess | TDS Rate |
| A | B | C= (% of B) | D =
B + (B*C%) |
E =
(% of D) |
F =
D + (D*E%) |
| Up to 50 Lacs | 20.00 | – | 20.00 | 4.00 | 20.80 |
| 50 Lacs to 1 Crore | 20.00 | 10.00 | 22.00 | 4.00 | 22.88 |
| 1 Crore to 2 Crore | 20.00 | 15.00 | 23.00 | 4.00 | 23.92 |
| Short Term Property held by NRI | A.Y. 2021-22 (F.Y. 2020-21) | ||||
| Property Value | Income Tax | Surcharge | Sub Total | Cess | TDS Rate |
| A | B | C= (% of B) | D =
B + (B*C%) |
E =
(% of D) |
F =
D + (D*E%) |
| Upto 50 Lacs | 30.00 | – | 30.00 | 4.00 | 31.20 |
| 50 Lacs to 1 Crore | 30.00 | 10.00 | 33.00 | 4.00 | 34.32 |
| 1 Crore to 2 Crore | 30.00 | 15.00 | 34.50 | 4.00 | 35.88 |
Let’s understand the above chart with following examples-
| Long Term Property (i.e. Property held for 2 years or more) | ||||
| Case | Sales Value | TDS Rate | TDS Amount | Net Payment |
| 1 | 15,00,000 | 20.80 | 3,12,000 | 11,88,000 |
| 2 | 30,00,000 | 20.80 | 6,24,000 | 23,76,000 |
| 3 | 60,00,000 | 22.88 | 13,72,800 | 46,27,200 |
| 4 | 1,20,00,000 | 23.92 | 28,70,400 | 91,29,600 |
| Short Term Property (i.e. Property held for less than 2 years) | ||||
| Case | Sales Value | TDS Rate | TDS Amount | Net Payment |
| 1 | 15,00,000 | 31.20 | 4,68,000 | 10,32,000 |
| 2 | 30,00,000 | 31.20 | 9,36,000 | 20,64,000 |
| 3 | 60,00,000 | 34.32 | 20,59,200 | 39,40,800 |
| 4 | 1,20,00,000 | 35.88 | 43,05,600 | 76,94,400 |
Computation of Tax/Refund on Long Term Capital Assets of NRI
TDS to be deducted on entire Sales Consideration & not on the Capital Gains Portion only (Whether Long Term/Short Term). But at the time of filing of Income Tax Return, Tax is computed on the basis of Cost of Acquisition, Cost Inflation Index (CII), cost of Improvement & Exemptions available. Hence most of the times, Income Tax Refund is given to assessee after filing Income Tax Return in India on the basis of computation of tax in ITR. Tax Payable @20% Plus Surcharge (applicable rates given above in TDS Chart) Plus Cess (@4%) Example:-
| Sale Date | 10-04-2019 |
| Sale Value | 60,00,000 |
| TDS Rate | 22.88 |
| TDS Deducted | 13,72,800 |
| Purchase Date | 10-05-2001 |
| Purchase Value | 17,00,000 |
| Cost Inflation Index | 100 (F Y 2001-2002) |
| Cost Inflation Index | 289 (FY 2019-2020) |
| Indexed Cost | 49,13,000 |
| Capital Gains | 10,87,000 |
| Tax Rate* | 20.80 |
| Tax Payable | 2,26,096 |
| Income Tax Refund | 11,46,704 |
*Surcharge not applicable in case of Taxable Income below 50 Lakhs.
Note: In case Property was purchased before 01/04/2001, then Circle Rate Value adopted by Stamp Duty Authority can be considered as cost of acquisition as on 01/04/2001. (In case original purchase cost is lower than stamp duty value as on 01/04/2001)
Computation of Tax/Refund on Short Term Capital Assets of NRI
Benefit of Cost Inflation Index is not available in Short Term Capital Gains. This Gain is added to other Incomes of NRI in India & taxed as per slab rates.
| Sale Date | 10-04-2019 |
| Sale Value | 60,00,000 |
| TDS Rate | 34.32 |
| TDS Deducted | 20,59,200 |
| Purchase Date | 01-05-2017 |
| Purchase Value | 49,50,000 |
| Indexed Cost | Benefit not available |
| Capital Gains | 10,50,000 |
| Tax Rate | As per Slab |
| 0 To 2.50 Lakh | NIL |
| 2.50 Lakh to 5 Lakh | 5% |
| 5.00 Lakh to 10 Lakh | 20% |
| Above 10.00 Lakh | 30% |
| Cess | 4% |
| Tax Payable | 1,32,600 |
| Income Tax Refund | 19,26,600 |
In case NRI is also having some other incomes in India (other than this Capital Gain’s), then Refund would be adjusted for their Tax Liability as well.
How to save Tax on Capital Gains by NRI?
NRIs are allowed to claim exemptions (for long term capital gains) under section 54 (by purchase of another House Property) and Section 54EC (Investing in specified Bonds).
Exemption under Section 54
It is available when there is a long term capital gain on the sale of house property of the NRI. The house property may be self-occupied or let out. Please note – you do not have to invest the entire sale receipt, but the amount of capital gains. Of course, your purchase price of the new property may be higher than the amount of capital gains.
Exemption is under Section 54EC
You can save the tax on your long term capital gains by investing them in certain bonds. Bonds issued by the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC) have been specified for this purpose. These are redeemable after 5 years and must not be sold before the lapse of 5 years (Prior to 2018, it was 3 years) from the date of sale of the house property. You are allowed to invest a maximum of Rs 50 lakhs in a financial year in these bonds.
NRI want to get TDS deducted at Lower Rate/NIL Rate i.e. Zero Rate?
NRI can apply u/s.197 to Income Tax Department in the Form 13 online on Traces portal that Capital Gains Tax is taxable at effective lower/Nil rate of tax due to indexed cost of acquisition /cost of improvement/Exemption benefit availed etc. Then Buyer of property would deduct TDS at such lower rate/Nil rate. Thus NRI can repatriate higher amount of funds to his/her NRE Account/remittance abroad.
TDS Return to be filed by Buyer of Property from NRI
Form 27Q (with the TAN of Buyer)
Section of TDS Deduction: 195
Buyer should first obtain TAN under section 203A of the Income Tax Act, 1961 before deducting TDS. TAN can be obtained by filling up the Form 49B.
TDS must be deducted at the time of making the Sales consideration payment to the NRI. The information about the TDS being deducted and the rate at which it was deducted should be mentioned in the sale deed between the NRI seller and the buyer.
The TDS deducted by the buyer should be deposited through Challan No. ITNS-281 for TDS payment on or before the 7th of next month in which the TDS is deducted.
In case of more than One Buyer, Separate TDS Return has to be filed by another buyer for his/her proportion of Purchase Value.
Note: Form 26QB is applicable in case of Seller of Property is Resident in India. (TDS @1% in case of Sales Consideration exceeding 50 Lakhs)
Remittance of Funds abroad/Transfer from NRO account to NRE account
In the case of repatriation of sale proceeds of immovable property by NRIs/PIOs, ADs can allow repatriation thereof even if the immovable property was held by the NRIs/PIOs for less than 10 years provided the cumulative period of holding of the immovable property in India and retention of the sale proceeds of the property in the NRO Account is not less than 10 years. Refer following article published by author on Taxguru.in for detailed discussion on this matter.
https://taxguru.in/rbi/transfer-funds-nro-account-nre-account-remittance.html
Disclaimer: Please refer all the relevant section, rules, notifications and amendments as applicable. The Author is not responsible for any losses incurred. Content is merely for sharing knowledge & Educational Purpose only. Author can be reached at casagargambhir@gmail.com for any queries, issues & recommendations relating to article.
Author Bio
I recently became NRI. A plot purchased for residence in 2010 at 21 lacs could now be sold for 40 lac, It happened in a hurry without referring to CA or IT dept, and no TDS paid since as per indexation no capital gains tax may be admissible.
I read elsewhere that only 1% of sale amount needs be paid as TDS, but from your site it is 20.8%? Do I pay one of these or need I apply for lower TDS now?
Ntifications for oversees remittances by NRI out Indian inheritted property
In April 2022 I travelled by Air from Canada to India to specifically to sell a plot of land in Noida including attending to registration process and meeting with bank to facilitate the transfer of proceeds to Canada. Can I claim the air travel ticket as an expense for filing income tax return in India?
NRI paid money to builder from his overseas Bank account.
Property purchase price is Rs.1.50Cr
NRI got the Sale deed executed by builder on 04.10.2021.
The NRI selling said property to prospective buyer in Nov.2021 at Rs.1.54 lacs
LTCG will not apply.
Since, the NRI has no income in India and has not stayed in India during last 25 years – as such has not filed ITR in India. Thus we can say his income in India is Zero.
The profit from the sale of property is Rs.4 lacs.
What should be the TDS rate. At what rate the buyer should deduct the TDS and on what value.
Pl reply with relevant Tax laws.
Thanks
Sanjay
In this case , since only 4 lacs profit, apply for Lower Deduction Certificate to deduct Tax at very low rate e.g. 0.01% only. Since this is a case of short term capital gains, it is to be taxed as per slab of income tax.
Good article
Good article Sir. Please clarify me If both buyer and seller are NRI and property in India what are the tax implications to be followed.
Is TDS to be deducted on Sale Consideration a rule or a conservative approach?
What if the buyer discloses that the Capital gains on a sale of 1 Crore is 40 lakhs, the rates can be applied on 40 lakhs to compute Income Tax and TDS be deducted for the exact amount instead of calculating the same on the gross sale value of 1 Crore.
Hello sir
I have agricuture plot before becoming oci holder. I want to sell it. i bought land 10 years back.
What document I need for selling property in India and and how much tax I need to pay if selling cost is below 50laks
Rural Agriculture land is exempt from tax. Kindly get Fard document from Patwari regarding situation of property outside 8 km from any municipal corporation limit
Hi Sir,
Please help e with below query.
i am buying flat from some one ( DAD & SON), Dad is Main applicant and son is co applicant, Dad is Residing in India and having power of attorney, Son is NRI and Not residing in India.
Flat Amount is 75 Lacs
Flat Purchased by them in 2016 & selling in 2021.
How TDS will be calculated?
Power of attorney plays any role to save the TDS?
after buying flat will i be liable to pay TDS or any fine if not paid?
1. TDS to be deposited on Sale Amount paid by you.
2.How TDS will be calculated?
Father Share – Sec 194-IA 1% TDS (0.75% upto 31/03/2021)
Son Share – TDS U/s. 195 @ 20% Plus surcharge & education cess
3. Power of attorney plays any role to save the TDS?
No
4. after buying flat will i be liable to pay TDS or any fine if not paid?
Yes, liable for interest & penalty for non deduction.
Hi Sagar,
What if i am buying property from PIO. Is PIO treated similarly as NRI and deduct TDS before payment.
Thanks,
Srinath
NRI selling plot ( residential plot ) purchased in 2008 for 35 lakhs selling at 1crore now and re investigation in flat 85 lakhs how to get tax rebate
Sir…i m working in merchant navy…..i m having NRE account in SBI…recently i have sale by flat which was gift deed to me by my father in year 27.11.2017 …..i have sale the flat for rs 95 lakhs to a buyer. In year 11.11.2020…..AND also i have purchased another flat of worth rs.63 lakhs in same year that is 2020 and registration of the same is done..so please let me know how
TAX WILL BE CALCULATED and how much TAX I HAVE TO PAY….?
And also let me know HOW I CAN SAVE THE TAX ?
AND ALSO PLEASE LET ME KNOW WHETHER I CAN GO FOR SAILING In current month Nov.2020 ?
Dear sir pls help
i want to buy a flat from NRI
property owner both husband & wife
there is a GPA in favour of wife’s brother
sale amount is 50 lacs
circle rate in 50000 per sqm for 89 sq.mtr
pls suggest
Hello, I am a PIO from Canada planning to buy Apartment in HYD either from builder or resale. Do I have to pay TDS when buying? Please advise.
Thank You
sir, what about Sec 54 F
TDS Return to be filed by Buyer: Typing error for filing TDS Return as Form 26 Q is written in place of 27 Q, which may be corrected please
Any CA Certificate required for remittance abroad?