In this guide
Consider an NRI living in New Jersey who bought a Pune flat for ₹1 crore in 2008, spent ₹20 lakh on improvements in 2015 and sells it in 2026 for ₹5 crore. Brokerage and legal expenses are ₹5 lakh.
At first glance, the seller appears to receive ₹5 crore. In reality, capital-gains tax, TDS, repatriation documentation and foreign-exchange conversion determine how much finally reaches the US bank account.
Step 1: Calculate the Long-Term Capital Gain
Immovable property held for more than 24 months is a long-term capital asset. The Income Tax Department confirms that transfer expenses, acquisition cost and eligible improvement cost are deducted while computing capital gains.
The calculation is:
| Particulars | Amount |
|---|---|
| Sale price | ₹5.00 crore |
| Less: brokerage/legal expenses | ₹5 lakh |
| Net consideration | ₹4.95 crore |
| Less: purchase cost | ₹1.00 crore |
| Less: improvement cost | ₹20 lakh |
| Long-term capital gain | ₹3.75 crore |
One arithmetic error worth avoiding: ₹5 crore minus ₹5 lakh is ₹4.95 crore, not ₹5.95 crore.
Step 2: Does an NRI Get Indexation in 2026?
Generally, no.
Long-term capital gains on land or buildings transferred after 23 July 2024 are taxed at 12.5% without indexation. The special grandfathering mechanism allowing comparison with 20% tax using indexed cost for property acquired before 23 July 2024 is restricted to resident individuals and resident HUFs.
That means an NRI selling the 2008 property cannot simply calculate both methods and choose whichever produces lower tax.
Under the Income Tax Act, 2025, applicable from 1 April 2026, the general 12.5% LTCG provision is Section 197, while the old-law equivalent was Section 112. The resident-only grandfathering principle continues.
Step 3: Approximate Tax on ₹3.75 Crore Gain
Assuming the seller has no other income affecting the surcharge computation:
Capital gain: ₹3.75 crore
Tax at 12.5%: ₹46.875 lakh
For capital gains of this nature, surcharge is capped at 15%, and health and education cess is 4%.
Using a 15% surcharge:
- Base tax: ₹46.875 lakh
- Surcharge: about ₹7.031 lakh
- Cess: about ₹2.156 lakh
- Approximate total tax: ₹56.06 lakh
So the effective rate on this worked example is approximately 14.95% of the ₹3.75 crore gain.
The Bigger Problem: NRI Property TDS
When a resident sells property, the familiar 1% property-TDS provision may apply. That provision does not govern a sale by a non-resident seller.
For an NRI seller, tax is deducted under the non-resident withholding framework. Under the old Act this was Section 195; under the Income Tax Act, 2025, non-resident payments are consolidated under Section 393(2).
The law concerns the sum chargeable to tax, rather than creating a universal rule that 12.5% must always be deducted from the entire property price. The framework also allows the taxable proportion to be determined by the Assessing Officer.
In practice, where the buyer does not have an appropriate tax determination or lower-deduction certificate, over-withholding can become a major cash-flow problem.
Lower TDS Certificate Can Prevent a Large Refund
For transactions governed by the Income Tax Act, 2025, Form 13 is used to seek a lower or nil deduction certificate under Section 395(1). The payer can also use Form 15E for determination of the appropriate chargeable proportion under the specified provisions.
This certificate does not magically reduce the seller’s final capital-gains tax.
Its purpose is to bring TDS closer to the expected actual liability, preventing unnecessarily large amounts from remaining blocked until the NRI files a tax return and claims a refund.
For lower-TDS assistance:
Important Change From 1 October 2026
Currently, buying property from a non-resident involves a more complicated TDS reporting process than an ordinary resident property purchase.
Budget 2026 introduced a major simplification scheduled from 1 October 2026: a resident individual or HUF buying immovable property from a non-resident will no longer need to obtain TAN merely for that transaction and will instead use a PAN-based mechanism.
This changes the buyer’s compliance process—not the NRI seller’s capital-gains rate.
How Much Cash Is Left?
If withholding is successfully aligned with the approximate ₹56.06 lakh final tax liability:
Sale price: ₹5,00,00,000
Less approximate tax: ₹56,06,250
Less brokerage/legal costs: ₹5,00,000
Net economic amount: ₹4,38,93,750
At an illustrative bank conversion rate of ₹97 per USD, that equals approximately:
USD 452,500
The actual dollar amount will depend on the bank’s exchange rate and charges on the remittance date.
Can the Entire Amount Be Sent to the US?
If the property was purchased using rupee funds or while the seller was resident, eligible sale proceeds can generally be remitted through the NRO route under the USD 1 million per financial year facility, subject to taxes, documentation and authorised-dealer-bank requirements.
For post-1 April 2026 remittances, old Forms 15CA and 15CB have been replaced by:
- Form 145 — information for payment/remittance to a non-resident; and
- Form 146 — accountant’s certificate where applicable.
Can the ₹56 Lakh Tax Be Reduced?
Potentially.
Reinvestment exemptions for eligible capital gains continue to exist. Depending on the facts, investment in another qualifying residential house or specified assets may reduce taxable capital gains, subject to the relevant conditions, investment limits and timelines.
This planning should happen before the transaction is completed, particularly because it may also affect the lower-TDS certificate application.
Frequently Asked Questions
What is the LTCG rate when an NRI sells Indian property in 2026?
The general rate for qualifying long-term property gains is 12.5% without indexation, plus applicable surcharge and cess.
Can an NRI use the old 20% indexed-cost method?
The special grandfathering comparison for pre-23 July 2024 land/buildings is restricted to resident individuals and HUFs.
Is TDS always calculated on the full property sale price?
Not as a universal statutory rule. The non-resident withholding provisions concern the amount chargeable to tax and provide mechanisms for determining the appropriate taxable proportion.
Should an NRI apply for lower TDS before selling?
Where normal withholding could substantially exceed expected tax liability, a lower-deduction certificate can materially improve cash flow. It should be considered before payment and registration.
Can ₹4.39 crore be sent to a US bank in one financial year?
₹4.39 crore would ordinarily be below the USD 1 million annual ceiling at normal exchange-rate ranges, but the authorised dealer must still verify the applicable FEMA route, taxes and documentation.
Are Forms 15CA and 15CB still used in 2026?
For remittances on or after 1 April 2026, the Income Tax Department requires the new Forms 145 and 146 under the Income Tax Act, 2025 framework.
