NRI Property Tax Guide 2026: Rules, Rates & Exemptions in India
NRIs, or non-resident Indians, see Indian real estate as an opportunity to secure their post-retirement life. After years away from home, buying or selling in India helps them build a place of their own. However, NRI property tax implications remain the biggest question that shapes the decision to buy or sell in India. This Star Estate blog is a complete guide to NRI property tax in India, covering TDS on NRI property sales, NRI capital gains tax, and DTAA property benefits under Section 195.
Introduction
The Income-tax Act, 2025 replaced the six-decade-old Income-tax Act, 1961, from 1 April 2026. Section 195 is now Section 393, and Sections 54/54EC/54F have become Sections 82/85/86. If you're transacting from financial Year 2026-27, know that despite the changes, the underlying rules and rates haven't changed.
Understanding NRI property tax implications under both the old and new numbering is essential before you sign any sale or purchase deed. This guide mentions the old, still-familiar section numbers and includes the necessary references where required.
Types of Property NRIs can buy in India
FEMA (Foreign Exchange Management Act) under the RBI (Reserve Bank of India) sanctions property-buying rights for NRIs in India. Non-resident Indians can buy designated immovable assets in India in 2026. Explore Star Estate's NRI Investment page for RERA-verified residential and commercial options curated for NRI buyers.
Residential property — It can be an apartment, a villa, an independent house, and residential plot in approved layouts. They can be purchased under the FEMA Act, and no direct approval from the RBI is required to carry out the deal.
Commercial property — It includes workspaces, such as offices, retail shops, or warehouses. These properties are more popular amongst NRIs, as the expected ROI potential is higher than that of residential properties in India.
Property received by inheritance — An NRI can inherit agricultural land, farmhouses, or plantation property from a resident Indian or another NRI. However, the person can’t directly buy it as a fresh real estate transaction in India.
Property received as a gift — An NRI can receive an immovable asset as a gift from a resident Indian relative. However, it does not include agricultural land, plantation property, or farmhouses.
The rules are similar for OCIs (Overseas Citizens of India) and POIs (Persons of Indian Origin). They also cannot buy any property other than residential and commercial units in India.
NRI Property Tax Implications for Buyers in India in 2026
If you are an NRI planning to buy an immovable asset in India, understanding the NRI property tax implications on the purchase side is the first step. Here are the three mandatory fee charges NRI is liable to pay, irrespective of the seller's residency status:
Stamp duty — Typically, it is 5–7% of the property's circle rate or agreement value, depending on the state. Some states offer a stamp duty rebate for female buyers.
Registration fee — It is 1% of the property value, capped in some states, payable at the sub-registrar's office at the time of registration.
Service/brokerage charges — It's 1–2% of the transaction value if a broker or consultancy is involved in the deal. GST is a subject matter if the property is under construction or ready to move in.
If you are purchasing a property from a resident Indian seller, then you, as the NRI buyer, deduct 1% TDS under Section 194-IA when the sale value crosses ₹50 lakh. However, if you are buying from another NRI seller, then taxation is applicable under Section 195.
What is Section 195 in the Income Tax Act? Why does it matter to NRIs?
Section 195 of the Income Tax Act governs TDS on NRI property sales, i.e., the Tax Deduction at Source on the payment made to a non-resident in India. Unlike Section 194-IA, it carries no ₹50 lakh threshold. In fact, TDS applies to every rupee of a property transaction where the seller is an NRI, however small the deal is. The TDS obligation is on the buyer, resident or NRI, to deduct tax before the money reaches the seller.
If you assume that a flat 1% deduction applies to every property sale, then know that it doesn’t. Section 195 replaces Section 194-IA if the seller is an NRI. The TDS is calculated on the seller's actual NRI capital gains tax liability, not a fixed percentage of the sale price.
TDS Implication for NRI Buyers in India
The TDS is 1% when an NRI buys property in India, similar to any other buyer.
TDS is deductible under Section 195 at the applicable rate for an NRI seller in case both the buyer and seller are non-resident Indians. The residential status of NRI buyers in this case doesn’t matter for completing the deal.
TDS Applicable for NRI Sellers in India | Long-Term vs Short-Term
Long-term Capital Gains (property held over 24 months):
TDS rate: 12.5% of the total sale price
Applies since Budget 2024 — the old 20% rate (with indexation) was removed and replaced with this flat, lower rate
Short-term Property Gains (property held 24 months or less):
TDS is deducted at the seller's income tax slab rate, plus surcharge and cess
No flat percentage — it depends on the seller's total taxable income
In the Union Budget 2026-27, Nirmala Sitharaman, the Union Finance Minister of the Government of India, announced amendments. From now on, an individual or HUF buyer purchasing property from an NRI seller will no longer be required to have a TAN.
What is TAN?
TAN is a 10-digit alphanumeric Tax Deduction and Collection Account Number issued by the Income Tax Department. It is issued to any person who is required to deduct or collect TDS and deposit it with the Government.
Capital Gains for NRI Sellers in India
After TDS deduction, the actual NRI capital gains tax liability is calculated separately when the NRI files an Indian income tax return. It is usually lower than the flat TDS already withheld. NRIs can lower their liability via reinvestment provisions built into the law:
Section 54 — Reinvest long-term gains by purchasing another residential property in India. However, the purchase must be made within one year before or two years after the sale, or constructed within three years. The exemption cap stands at ₹10 crore.
Section 54EC — Invest up to ₹50 lakh of the gain in specified capital-gains bonds (NHAI, REC) within six months of the sale, as they have a five-year lock-in period.
Section 54F — If the sold asset is anything other than a residential property, then reinvest the entire net sale into residential property within the minimum duration.
Capital Gains Account Scheme (CGAS) — In case you didn’t find any property worth investing in before the tax deadline, then invest in some other quality asset temporarily to reduce the chance of losing profitability.
A non-resident Indian can divide it between a Section 54EC bond investment and Section 54. However, an NRI seller in India must meet the legal requirements for the same. A fresh purchase makes you eligible to claim this exemption. Star Estate's guide to the best Indian cities for NRI property investment in 2026 can help you shortlist the right market.
What is DTAA? How it benefits NRIs in Indian real estate?
DTAA, i.e., the Double Taxation Avoidance Agreement, is a bilateral treaty that India has with more than 90 countries. For any DTAA property sale or rental transaction, it aims to avoid the dual tax burden on NRIs on the same income, once in India and then in their country of residence.
India has active DTAA agreements with the US, UK, UAE, Canada, Australia, Singapore, and most of the Gulf and Western Europe, which is why DTAA property rules matter to NRIs living in these regions. These countries have a vast majority of the NRI population. DTAA benefits can’t be availed by default; however, NRIs require a TRC (Tax Residency Certificate) from their country of residence. Also, the respective country must have a DTAA treaty with India.
Entities which fall under the DTAA property bracket for NRI real estate transactions:
Capital gains on the sale of Indian property. If the NRI has paid tax in India for the same purpose, then the NRI is obligated to pay tax on the same in the country of residence. It is also known as a foreign tax credit in the country of residence.
Rental income earned from a property let out in India while the owner resides abroad.
Lower withholding in some cases, where the treaty rate is more favourable than the domestic TDS rate, provided the NRI submits a Tax Residency Certificate (TRC) and Form 10F to claim it.
Step-Wise Guide – How NRIs can apply for a Lower TDS Certificate
A Lower Deduction Certificate (under Section 197) helps NRI sellers avoid extra TDS. Without it, the buyer deducts tax on the full sale price. With it, tax is deducted only on your actual profit.
Estimate your capital gain — Factor in the purchase cost, any improvement costs, and exemptions you can claim under Section 54/54EC/54F.
File Form 13 on the TRACES portal. Complete this process 60–90 days before the sale, since it can take a few weeks to process.
Attach your documents — Sale agreement, original purchase deed, valuation report (if needed), and your capital gains calculation.
Wait for approval — The Assessing Officer reviews all factors and then issues a certificate stating the lower TDS rate the buyer should use.
Give the certificate to the buyer before the deal closes. They deduct TDS at the certified rate, not the default 12.5% (or slab rate), from the full amount.
Step-Wise Guide – How NRIs Can Claim TDS on NRI Property Sale in India
Missed the lower TDS Certificate window, or TDS was deducted on the full sale cost. The excess loss will be refunded once you file your return.
Obtain a Permanent Account Number (PAN) if you don't already have one. It is a compulsory requirement to file an Income Tax return in India.
Collect Form 16A / Form 26QB acknowledgment from the buyer; it confirms that the TDS is deposited against your PAN.
Calculate your actual capital gains tax liability using the applicable rate and any Section 54/54EC/54F exemptions you're claiming.
File your Indian income tax return (ITR-2 for most NRIs) before the due date, declaring the sale, the TDS deducted, and the exemptions claimed.
Repatriation of Sales Proceeds for NRIs in India
After settling all applicable taxes on NRI property in India, the next thing is to route the sale proceeds out of India while abiding by FEMA rules. Here are the things NRI sellers in India must know –
The sale value is primarily credited to the NRI's NRO account.
Reserve Bank of India allows repatriation of up to USD 1 million per financial year from the NRO account. It is possible only after the settlement of applicable taxes.
If foreign inward remittance (NRE funds) was used for a property purchase, then the original principal amount can typically be repatriated freely, outside the USD 1 million limit. Any gain above that will be counted above it.
Form 15CA (a self-declaration) and Form 15CB (a Chartered Accountant's certificate confirming tax compliance) are mandatory for any NRO remittance above ₹5 lakh, and banks won't process the transfer without both.
NRIs can repatriate the sale value from up to two residential properties without separate RBI approval. However, it is subject to the annual USD 1 million cap. Also, the third property typically needs specific RBI clearance.
Sellers with sale values exceptionally above the annual ceiling typically choose to stagger the transfer across two or more financial years. Otherwise, they can apply for special RBI approval through their bank to transfer the full value in one go.
The Future Possibility – What NRI Property Tax Implications Look Like Beyond 2026
From October 2026, individual buyers can buy TDS via their PAN number. Despite the simplification of payment, rates and exemptions remain unchanged under the Income-tax Act, 2025.
In the next 12–24 months, digital command in processing sale value and other taxes is expected to grow. Including e-registration, virtual due diligence, and faster Form 13 processing. It makes buying, selling, and repatriation of funds easy for NRIs from anywhere without asking them to make a trip to India.
The Bottom Line
NRIs must stay updated on NRI property tax implications for both property sale and purchase in India. Lack of information can lead to losses and penalties. From the signed sale deed to TDS on NRI property sales, NRI capital gains tax, and repatriation of sale proceeds, know every clause before you step into the real estate market in India.
For an in-depth understanding of verified projects and services in India, explore our guide on essential considerations forNRIs buying property in India.