Introduction
Rahul, an NRI living in London, recently decided to sell his two‑bedroom flat in Hyderabad. As the sale process unfolded, he discovered that understanding Indian tax rules—capital gains, indexation, TDS, penalties and exemptions—felt like learning a new language. If you’re an NRI about to part with your Indian property, you need more than mere definitions; you need a step‑by‑step roadmap that turns complexity into confidence. This post walks you through every stage, from classifying your asset to repatriating the net proceeds, with real‑world numbers and smart planning tips.
Before diving into tax mechanics, it helps to place your property on the right tier. This anchors expectations around stamp duties, legal costs and even negotiation tactics.
Category
Sale Value Range
Typical Examples
Budget
Up to ₹50 lakh
Small 1BHK in tier‑2 cities
Mid‑Range
₹50 lakh – ₹1 crore
2–3BHK flats in fast‑growing suburbs
Premium
₹1 crore – ₹5 crore
Villas or high‑end apartments in metros
Luxury/High‑Value
Above ₹5 crore
Luxury villas, penthouses
Recognizing your property’s bracket guides you on likely stamp duties (5–7%), legal fees (1–2%) and even buyer profiles. Once you know whether you’re in “budget” or “luxury,” you can plan tax strategies accordingly.
Every profit from selling property is a capital gain, but the tax treatment hinges on the holding period.
Short‑Term Capital Gains (STCG)
Example:
Example:
Indexed Cost of Acquisition = ₹30,00,000 × (348 ÷ 280) = ₹37,28,571
Taxable Profit = ₹60,00,000 − ₹37,28,571 = ₹22,71,429
Tax @ 20% = ₹4,54,286
Cess @ 4% = ₹18,171
Total Tax Payable = ₹4,72,457
✅ Indexation benefit shrinks your taxable gain from ₹30 lakh profit (without indexation) to just ₹22.71 lakh. That’s ₹7.29 lakh of tax-free profit, thanks to inflation adjustment!
Why No Indexation?
Indexation adjusts purchase cost for inflation, but for STCG the law taxes your full paper gain—so always aim to hold beyond two years if possible.
Hold a property beyond two years and you qualify for Long‑Term Capital Gains (LTCG) at 20% post‑indexation. Indexation applies the Government’s Cost Inflation Index (CII) to your purchase price, shrinking your taxable gain.
Financial Year
CII
2018–19 (Purchase)
280
2023–24 (Sale)
348
Indexed Cost Formula:
Indexed Cost=Original Cost×CIISale YearCIIPurchase Year\text{Indexed Cost} = \text{Original Cost} \times \frac{\text{CII}_{\text{Sale Year}}}{\text{CII}_{\text{Purchase Year}}}
Worked Example:
Key Benefits of Indexation:
When an NRI sells Indian property, the buyer must deduct TDS under Section 195 before releasing your money.
Gain Type
TDS Rate on Sale Value
Plus Surcharge & 4% Cess
STCG
30%
Yes
LTCG
20%
Yes
Why TDS Often Exceeds Your Actual Liability
Failing to deduct or deposit TDS on time can trigger serious penalties under the Income Tax Act:
a. Penalty under Section 201(1A)
b. Disallowance of Expenses (Section 40(a)(i)/(ia))
c. Penalty for Late Filing of TDS Returns
Including these checks in your process ensures you avoid extra costs and headaches down the line.
Beyond the base rate, high‑income NRIs face surcharge. Cess is flat 4% on the total tax.
Total Income (Incl. Gains)
Surcharge on LTCG
Surcharge on STCG
Up to ₹50 lakh
Nil
Nil
₹50 lakh – ₹1 crore
10%
10%
₹1 crore – ₹2 crore
15%
15%
₹2 crore – ₹5 crore
15% (LTCG) / 25% (STCG)
Same brackets
Above ₹5 crore
15% (LTCG) / 37% (STCG)
Same brackets
Remember: cess of 4% applies on top of tax + surcharge.
Even if you hold property long enough, you can eliminate or reduce LTCG tax by reinvesting under various sections.
Once your sale proceeds land in your NRO account, you’ll need Form 15CA (self‑declaration) and Form 15CB (CA certification) to remit funds abroad.
Arun, an NRI in Australia, sold a Hyderabad villa for ₹80 lakh. He’d bought it five years earlier for ₹35 lakh.
Detail
Value
Purchase Price (2018–19)
₹35 lakh
CII (2018–19)
280
Sale Price (2023–24)
₹80 lakh
CII (2023–24)
348
Indexed Cost
35 lakh × 348/280 = ₹43.5 lakh
LTCG
80 lakh – 43.5 lakh = ₹36.5 lakh
20% Tax on LTCG
₹7.3 lakh
TDS Deducted
₹7.3 lakh
With Reinvestment
Without Reinvestment
With clarity on classification, gains calculation, penalties, exemptions and repatriation, you can turn an intimidating tax maze into a clear path—so you keep more of your hard‑earned money and sleep better at night.
