By Arosh John | Founder – John Real Estate (MahaRERA Reg. No. A51700001835) | Editor-in-Chief – Thane Real Estate News
When NRIs sell property in India, the taxable base is the capital gain—the difference between sale proceeds and cost of acquisition, improvements, and selling expenses. However, unless a Lower/Nil Deduction Certificate (Form 13) is obtained, buyers are required to deduct TDS on the entire sale value, not just the gain. This distinction is crucial: the computation of capital gains is central for filing your return and for certificate applications, but not for default TDS.
The Finance (No. 2) Act, 2024 simplified the long-term capital gains regime, effective from 23 July 2024. Here’s what NRIs need to know.
1. Short-Term vs. Long-Term Capital Gains
Short-Term Capital Gains (STCG):
- Property sold within 24 months of purchase.
- Taxed at the seller’s slab rates (usually 30% for most NRIs), plus surcharge and cess.
Long-Term Capital Gains (LTCG):
- Property sold after 24 months.
- For transfers on or after 23 July 2024 → taxed at 12.5% flat, without indexation.
- NRIs are not eligible for the old 20% with indexation option, which remains available for resident individuals/HUFs (for pre-23 July 2024 acquisitions).
2. What Counts in the Computation
Capital Gain = Sale Value – (Purchase Price + Cost of Improvements + Expenses on Transfer)
- Sale Value: Higher of actual price or stamp duty valuation (Section 50C).
- Purchase Price: What you paid (for inherited property, the previous owner’s cost).
- Cost of Improvements: Renovations, additions, and upgrades, supported by invoices.
- Expenses on Transfer: Brokerage, legal fees, stamp duty on sale, and other related costs.
3. Surcharge and Cess
- Health & Education Cess: 4% on tax + surcharge.
- Surcharge (applies to total income, including gains):
- ₹50 lakh–₹1 crore → 10%
- ₹1 crore–₹2 crore → 15%
- ₹2 crore–₹5 crore → 25%
- Above ₹5 crore → 37%
4. Worked Example
Case:
- Sale consideration: ₹1.80 crore (July 2025)
- Purchase price: ₹60 lakh (June 2015)
- Renovation: ₹10 lakh (2018)
- Selling expenses: ₹5 lakh
- Seller: NRI (transfer after July 2024 → LTCG @ 12.5%, no indexation)
Step 1: Net sale value
₹1.80 crore – ₹5 lakh = ₹1.75 crore
Step 2: Deduct cost of acquisition + improvements
₹60 lakh + ₹10 lakh = ₹70 lakh
Step 3: Long-term capital gain (LTCG)
₹1.75 crore – ₹70 lakh = ₹1.05 crore
Step 4: Tax @ 12.5%
12.5% of ₹1.05 crore = ₹13,12,500
Step 5: Add surcharge (15% since income > ₹1 crore)
₹13,12,500 × 15% = ₹1,96,875
Subtotal = ₹15,09,375
Step 6: Add cess (4%)
₹15,09,375 × 4% = ₹60,375
✅ Final tax liability = ~₹15.7 lakh
Note: If the seller had obtained a lower/nil deduction certificate, the buyer could deduct TDS on this computed gain. Otherwise, by default, the buyer deducts TDS on the full sale value of ₹1.80 crore.
5. Key Takeaways for NRIs
- Buyers deduct TDS on the sale value by default; capital gain computation applies only for return filing or Form 13 applications.
- LTCG (post-23 July 2024) is 12.5% without indexation.
- STCG remains at slab rates.
- Surcharge and cess apply, making the effective rate higher for HNIs.
- Maintain proper documentation (deeds, invoices, expense proofs).
- For repatriation abroad, banks will require Form 15CA/15CB along with tax clearance.
Related Guides:
- [Buyer’s Step-by-Step TDS Compliance Checklist (NRI Seller – Section 195)]
- [Documents You Need for a Lower or Nil TDS Certificate (Form 13)]
- [Penalties & Issues If You Don’t Disclose NRI Status or Follow TDS Rules]
Frequently Asked Questions
1. How are capital gains classified for NRIs?
If property is sold within 24 months, the gain is short-term (STCG) taxed at slab rates. Beyond 24 months, it is long-term (LTCG) taxed at 12.5% without indexation for transfers after 23 July 2024.
2. Can NRIs use indexation when calculating LTCG?
No. Under the revised rules, NRIs are not eligible for indexation benefits. The 20% with indexation option applies only to resident individuals/HUFs for older acquisitions.
3. Is TDS deducted on the capital gain or the sale value?
By default, buyers deduct TDS on the full sale value. Deduction on actual gains is possible only if the NRI seller obtains a Lower/Nil Deduction Certificate (Form 13).
4. Do surcharge and cess apply to NRI capital gains?
Yes. A 4% health and education cess applies on tax plus surcharge. Surcharge is 10–37% depending on total income.
5. What documents should NRIs keep for capital gains computation?
Purchase deed, invoices for improvements, proof of selling expenses, and sale agreement. These support accurate computation and certificate applications.
About the Author
Arosh John is a Thane-based real estate consultant and the Founder of John Real Estate (MahaRERA Reg. No. A51700001835). With more than a decade of expertise in property transactions, he is recognised for guiding NRIs and investors through resale, luxury villa projects, and compliance-heavy transactions. As Editor-in-Chief of Thane Real Estate News, he provides research-backed insights on property markets, taxation, and investment strategies across MMR.
Disclaimer
This article is based on the Income-tax Act, 1961, Finance (No. 2) Act 2024, and official Income Tax Department guidelines. It is intended for general informational purposes and does not constitute tax or legal advice. Tax laws are subject to change. Readers should consult a qualified Chartered Accountant for personalised guidance. Neither the author nor Thane Real Estate News accepts liability for decisions taken based on this article.
