NRIs selling property in India: tax, TDS and getting the money out

Selling a flat or a plot in India while you live abroad is common, and the tax rules for NRIs are different from those for residents. The biggest surprise is usually the TDS: the buyer has to deduct tax before paying you, often on the whole price. Plan it a few months ahead and you can keep more of your money, and get it out of India smoothly.

How the gain is taxed

Surcharge and 4% cess are added. Residents who bought before 23 July 2024 can choose 20% with indexation instead; NRIs don't have that choice.

The gain is the sale price minus what you paid, the cost of any improvements, and expenses of the sale such as brokerage.

Why the buyer deducts TDS, and why it's often too much

When an NRI sells property, the buyer must deduct tax at source and deposit it with the government before paying the seller. For a long-term gain this works out to about 13% to 15% once surcharge and cess are added, and about 30% or more for a short-term gain.

In practice, buyers deduct on the full sale price, not just your gain, because they can't confirm your gain. If you sell for ₹1 crore a flat you bought for ₹70 lakh, your gain is ₹30 lakh, but the buyer may deduct about ₹13 lakh or more, far more than the tax on ₹30 lakh.

How to avoid this: apply to the Income Tax Department for a lower or nil deduction certificate before the sale. The department works out the tax on your actual gain, and the buyer deducts only that. Apply well before the sale date, as it takes a few weeks. If too much was deducted anyway, you can claim it back by filing your Indian tax return.

Ways to save tax on a long-term gain

• Buy another house in India. If you invest the gain in a residential house in India, bought within a year before or two years after the sale, or built within three years, the gain can be exempt, up to a limit.
• Capital gain bonds. Investing up to ₹50 lakh of the gain in specified bonds (issued by bodies such as NHAI and REC) within six months of the sale can save the tax. They are locked in for five years.
• Credit abroad. India has tax treaties with most countries. If your country of residence also taxes the gain, you can usually claim credit there for the tax paid in India.

Getting the money out of India

• The sale price is paid into your NRO account.
• From NRO balances, NRIs can send up to USD 1 million abroad in a financial year, including property sale proceeds, after paying the tax due.
• Your bank will need Form 15CA, and usually Form 15CB from a chartered accountant confirming the tax has been paid.
• If you originally bought the property with money sent from abroad or from your NRE or FCNR account, there may be a separate route to repatriate that amount. Ask your bank.

Other things to know

• Who you can sell to. NRIs can sell a house or commercial property to a resident Indian, an NRI or an OCI. Agricultural land, plantations and farmhouses can be sold only to a resident Indian.
• Selling from abroad. If you can't travel, you can authorise someone in India through a power of attorney. Sign it before an Indian embassy or consulate, then have it stamped in India within the time allowed.
• Keep the paperwork. Keep the purchase deed, payment proofs, improvement bills and the TDS certificate the buyer gives you. You'll need them for the tax return and the bank.
• File your Indian tax return for the year of sale, especially to claim back any excess TDS.

Every sale is different, so involve a chartered accountant early, ideally before you agree the sale. We help NRI clients plan where the money goes next, whether that's investing in India or sending it abroad.