Selling property in India as an NRI involves three layers of complexity: capital gains tax, mandatory TDS by the buyer, FEMA compliance for repatriation, and potentially Section 54 exemption planning. Each layer has strict timelines and documentation requirements.
TDS on Property Purchase from NRI (Section 195)
| Capital Gains Type | TDS Rate on Sale Value |
|---|---|
| Long-term capital gains (held > 24 months) | 20% + surcharge + cess (effective ~20.8% to 23.92%) |
| Short-term capital gains (held ≤ 24 months) | 30% + surcharge + cess (slab rate TDS) |
| Agricultural land (rural) | No TDS — rural agricultural land not a capital asset |
Note: The buyer of the property must deduct TDS under Section 195 before paying the NRI. Non-deduction makes the buyer liable for interest and penalty. The NRI must provide PAN and bank details. TDS is deposited using Form 27Q.
Applying for Lower TDS Certificate
If your actual capital gains tax is lower than the TDS amount being deducted (which is on the full sale value, not just the gain), you can apply for a Lower Deduction Certificate under Section 197. This requires filing Form 13 online at the Income Tax portal with: purchase deed, sale agreement, capital gains computation, and CA-certified working. Once approved, the buyer deducts TDS at the certified lower rate instead of 20-30%.
Capital Gains Tax and Section 54 Exemption
- LTCG rate: 12.5% without indexation (Budget 2024 change from July 23, 2024)
- Properties purchased before July 23, 2024: Can choose 20% with indexation or 12.5% without — whichever is lower
- Section 54: LTCG exempt if you invest sale proceeds in another residential property in India (1 year before or 2 years after sale)
- Section 54EC: LTCG exempt if invested in NHAI/REC bonds within 6 months (max ₹50 lakh)
- Section 54F: If NRI doesn't own more than one other house — full LTCG exempt if entire sale consideration reinvested in residential property
FEMA: Repatriating Property Sale Proceeds
| Proceeds Type | Repatriation Limit | Account to Use |
|---|---|---|
| Sale of property inherited from Indian resident | USD 1 million per FY (LRS limit) | NRO account → FEMA declaration to bank |
| Sale of property bought from NRE/FCNR funds | Up to the original acquisition cost + LTCG (after tax) | NRE account — fully repatriable |
| Sale of property bought from NRO funds | USD 1 million per FY with CA certificate | NRO account → Form 15CA/15CB required |