By Arosh John | Founder – John Real Estate (MahaRERA Reg. No. A51700001835) | Editor-in-Chief – Thane Real Estate News
One of the biggest concerns for NRIs selling property in India is double taxation. You may pay tax in India on capital gains and again in your country of residence. Fortunately, India has signed Double Taxation Avoidance Agreements (DTAAs) with over 85 countries, including the US, UK, UAE, and Singapore. These treaties prevent the same income from being taxed twice and offer a way to claim credit or exemption.
Here’s a practical guide for NRIs on how DTAA relief works and how to claim it.
1. What is DTAA?
A Double Taxation Avoidance Agreement (DTAA) is a bilateral treaty between India and another country to ensure the same income is not taxed twice.
- In most DTAAs, India retains the right to tax property income and capital gains, since the property is situated in India.
- Your country of residence may also seek to tax the same income. DTAA then allows you to claim credit for taxes paid in India while filing your tax return abroad.
2. Treaty Position on Indian Property Gains
Across major DTAAs, the principle is consistent: India taxes capital gains on Indian immovable property, and the resident country grants relief.
- United States: India taxes the gain; US residents must report the same income but can claim foreign tax credit for taxes paid in India.
- United Kingdom: India has primary taxing rights; UK residents can claim relief under the UK–India DTAA through tax credit.
- United Arab Emirates (UAE): India taxes the gain; UAE does not levy personal income tax, so no double taxation arises. DTAA ensures recognition of Indian tax.
- Singapore: India taxes the gain; Singapore generally does not tax capital gains, so Indian tax is final.
3. Documents Required to Claim DTAA Benefits
- Tax Residency Certificate (TRC): Issued by your home country’s tax authority. Mandatory under Section 90(4) of the Income-tax Act.
- Form 10F: A self-declaration form with basic identity, residency, and tax details.
- PAN: Valid PAN linked to your Indian transaction.
- Supporting Documents: Passport, overseas address proof, and sale deed.
Important: Without TRC and Form 10F, DTAA relief cannot be claimed. TDS will be deducted at full rates.
4. Relief Mechanisms Under DTAA
- Credit Method: Taxes paid in India are allowed as a credit against your home country tax liability (common in US, UK).
- Exemption Method: If your country exempts Indian-sourced capital gains (as in Singapore and UAE).
- Withholding Relief: While property gains are usually taxed at full Indian rates, some DTAAs reduce withholding on other incomes like interest or dividends.
5. Practical Process to Claim DTAA
- Before Sale
- Secure a valid TRC for the financial year of sale.
- Prepare Form 10F and ensure PAN is active.
- During Sale
- Provide TRC and Form 10F to the buyer/bank.
- Apply for a Lower/Nil Deduction Certificate (Form 13) if you want TDS restricted to actual capital gains.
- After Sale
- File Indian ITR to declare gains and tax paid.
- File your home country tax return and claim tax credit or exemption under the DTAA.
6. Example: US Resident Selling Indian Property
- Sale value: ₹2 crore
- LTCG (computed): ₹1.2 crore
- Indian tax (12.5% + surcharge/cess): ~₹18 lakh TDS deducted by buyer.
- In the US: Seller declares $ equivalent of ₹1.2 crore as foreign income.
- Relief: Claim foreign tax credit of ₹18 lakh (converted to USD) against US tax liability.
Key Takeaways
- India taxes gains on Indian property, but DTAA ensures you don’t pay twice.
- TRC and Form 10F are mandatory for claiming relief.
- Relief mechanism depends on your country (credit vs exemption).
- Always coordinate with a Chartered Accountant in India and a tax professional abroad.
Related Guides:
- [Repatriation of Funds Abroad: Process & Documents]
- [Capital Gains Computation Rules for NRIs: Updated Framework in 2025]
- [Buyer’s Step-by-Step TDS Compliance Checklist (NRI Seller – Section 195)]
Frequently Asked Questions
1. What is DTAA in simple terms?
DTAA (Double Taxation Avoidance Agreement) is a treaty between India and another country to prevent NRIs from being taxed twice on the same income.
2. Does DTAA stop India from taxing property sale gains?
No. All DTAAs give India the right to tax gains from property located in India. Relief is claimed in your country of residence by credit or exemption.
3. What documents are required to claim DTAA benefits?
A Tax Residency Certificate (TRC) from your country, Form 10F, and a valid PAN are mandatory. Without these, TDS applies at full rates.
4. How does the US–India DTAA work for NRIs?
India taxes the property gain first. In the US, you declare the income but can claim a foreign tax credit for Indian taxes paid, reducing your US tax liability.
5. What about UAE and Singapore residents?
Both countries do not levy capital gains tax. India taxes the gain, and DTAA ensures there’s no further taxation abroad.
6. Can I get a lower TDS rate under DTAA itself?
Not directly. For property sales, TDS is deducted at full Indian rates unless you obtain a Lower/Nil Deduction Certificate (Form 13). DTAA relief usually applies at the return-filing stage.
7. Who should I consult for DTAA claims?
A qualified Chartered Accountant in India for capital gains and a tax professional in your country of residence to correctly claim credit or exemption.
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, relevant DTAAs, and official CBDT/RBI guidelines. It is for informational purposes only and should not be construed as professional tax advice. Tax treaties may differ in detail and are subject to renegotiation. Readers should consult a qualified Chartered Accountant in India and a tax advisor in their country of residence before relying on DTAA provisions. Neither the author nor Thane Real Estate News accepts liability for consequences arising from reliance on this content.
