Selling Indian Property as an NRI in 2026: Tax, Rules & Process

For many NRIs, the decision to sell property in India carries more than financial weight. It is often the last physical connection to home – an ancestral house, a flat purchased before moving abroad, a plot inherited from parents but when the emotional decision is made, the tax and compliance reality arrives quickly and for NRIs, that reality is significantly more complex than for resident sellers.

The buyer has obligations most people do not expect. The TDS rates are dramatically higher than what applies to resident sellers. The actual tax liability is often far lower than what gets deducted at source. Repatriating the money involves a separate regulatory framework entirely and a form that most NRIs have never heard of – Form 13 – can save waiting months for refund and lakhs of rupees in blocked cash flow.

This guide covers everything you need to know about selling Indian property as an NRI in 2026, including changes brought in by the Income Tax Act, 2025 and Budget 2026.

A Critical Point Most NRI Sellers Miss

When an NRI sells property in India, it is the buyer – not the NRI seller – who is legally responsible for deducting TDS before making any payment.

When a resident sells property above ₹50 lakh, the buyer deducts just 1% under Section 194IA. When an NRI sells property, the buyer deducts TDS at a substantially higher rate under Section 393(2) of the Income Tax Act, 2025 – the successor to Section 195 of the old Income Tax Act, 1961.

The rates are higher. There is no ₹50 lakh threshold – TDS applies to every NRI property sale regardless of value and if the buyer fails to deduct, deposit or report TDS correctly, the consequences – interest and penalties – fall on the buyer. This is why buyers often over-deduct: The safer path for them is to withhold at the maximum rate, even if it means the NRI receives far less than expected at closing.

Part 1: TDS Rates on NRI Property Sales in 2026

The TDS rate depends entirely on whether the property is a long-term or short-term capital asset in the hands of the NRI seller.

Long-Term Capital Asset: Property held for more than 24 months from the date of acquisition.

Short-Term Capital Asset: Property held for 24 months or less.

TDS Rates – Effective from 23 July 2024, Unchanged in 2026

Nature of Gain	Base TDS Rate	Effective Rate (10% SC + 4% cess)	Effective Rate (15% SC + 4% cess)
Long-Term Capital Gain (LTCG)	12.5%	14.30%	14.95%
Short-Term Capital Gain (STCG)	30%	34.32%	35.88%

Surcharge: 10% where total income is ₹50 lakh–₹1 crore; 15% where income exceeds ₹1 crore.

Critical: TDS is deducted on the full sale consideration – not on the capital gains amount. This creates the gap that makes the Form 13 option so important.

Budget 2026: TAN Abolished for Property Buyers from 1 October 2026

Budget 2026 amends Section 397(1)(c) of the Income Tax Act, 2025 so that a resident individual or HUF buyer purchasing property from an NRI no longer needs a TAN (Tax Deduction and Collection Account Number) from 1 October 2026.

The TDS deposit and filing process will be replaced with a PAN-based challan-cum-statement similar to Form 141 (equivalent to old Form 26QB), eliminating the Form 27Q / Form 144 quarterly return requirement for this specific transaction. This reduces friction for buyers and makes them more comfortable proceeding without TAN registration delays.

Part 2: Capital Gains Tax – What the NRI Actually Owes

TDS is what the buyer deducts upfront. Capital gains tax is what the NRI owes. These are two different numbers and for most NRI property sales, the actual tax liability is significantly lower than the TDS deducted.

Long-Term Capital Gains (LTCG) – Property Held More Than 24 Months

Tax rate: 12.5% without indexation (plus applicable surcharge and cess). Applies to all property transfers on or after 23 July 2024 under the Finance Act 2024.

How capital gains are computed:

Capital Gain = Sale Consideration − Cost of Acquisition − Cost of Improvement − Transfer Expenses

For inherited property, the original owner’s cost of acquisition and date of purchase are used to determine both the holding period and the cost base.

Capital Gains Exemptions Available to NRIs

Section 54/Section 82 (As per Income Tax Act, 2025) – Reinvestment in Residential Property: If LTCG arises from the sale of a residential property, reinvest the gain amount in one new residential property purchased within 1 year before or 2 years after the sale, or constructed within 3 years. Exemption limited to one property. The NRI must not own more than two residential properties on the date of sale.

Section 54EC/Section 85 (As per Income Tax Act, 2025) – Capital Gains Bonds: Invest up to ₹50 lakh per financial year in NHAI/REC bonds within 6 months of the sale. Bonds carry a 5-year lock-in. A clean alternative for NRIs who do not want to reinvest in property.

Section 54F/Section 86 (As per Income Tax Act, 2025) – Non-Residential Property Sale: If the property sold is not residential, reinvest the net sale proceeds (not just the gain) in a new residential property within the same timelines as Section 54.

Short-Term Capital Gains (STCG) – Property Held 24 Months or Less

Tax rate: Applicable income tax slab rate – which for most NRIs with income above ₹15 lakh amounts to 30% (plus surcharge and cess). Section 54 exemptions and Section 54EC bonds are not available for STCG. This is why the holding period determination is commercially important – a property sold even one month before the 24-month mark faces tax at 30% vs 12.5%.

Part 3: The Form 13 Option – The Most Important Tool NRIs Don’t Use

The Problem in Plain Numbers

Example: An NRI sells a property for ₹1.50 crore, purchased for ₹1.10 crore.

Capital gain = ₹40 lakh. Actual LTCG tax (12.5% + cess, no surcharge) = approximately ₹5.20 lakh.

But without Form 13, the buyer deducts TDS at 14.95% on the full ₹1.50 crore = ₹22.43 lakh.

The difference of over ₹17 lakh is refundable via ITR – but the refund process takes months, sometimes over a year. The NRI’s money is locked with the Income Tax Department during that period.

Form 13 is the solution. Under Section 197 / Section 395(1) of the IT Act 2025, an NRI seller can apply to the Jurisdictional Assessing Officer for a lower or nil deduction certificate.

This is submitted in Form 13 – now renumbered as Form 128 under the IT Act 2025 / IT Rules 2026. Once the certificate is issued, the buyer is legally authorized to deduct TDS only at the approved reduced rate – typically on the actual capital gains rather than the gross sale value.

Documents Required for Form 128 (old Form 13)

Draft Agreement for Sale or registered MOU with gross consideration, property schedule and party identities
PAN of both buyer and NRI seller
Capital gains computation – sale price, cost of acquisition, improvement costs, transfer expenses
Proof of holding period (original purchase deed, registered sale deed)
NRI seller’s passport, OCI/PIO card or visa documentation establishing non-resident status
Last 3 years’ Indian ITR filings (if any)
Evidence of any planned exemption claim (new property booking, bond investment)
Bank account details for advance tax payment (if any tax computed as payable)

How Long Does It Take?

The Form 128 application is filed online on the Income Tax Department portal. Processing time typically ranges from 4 to 8 weeks from complete submission. The NRI should initiate the application as soon as a buyer is identified and a draft agreement is in place – well before registration.

Important: Once the certificate is received, the NRI provides a copy to the buyer. The buyer deducts TDS at the rate specified in the certificate. If the certificate is not obtained in time, the buyer must deduct at standard rates, and the NRI must claim the excess via ITR refund.

Part 4: FEMA Repatriation – Getting the Money Out of India

Selling the property and receiving the sale proceeds is only half the transaction. For NRIs, the second half – moving the money to an overseas account – is governed by FEMA (Foreign Exchange Management Act, 1999) and requires its own documentation.

Where Do the Sale Proceeds Go First?

Sale proceeds from an NRI property sale must first be credited to the NRI’s NRO (Non-Resident Ordinary) account in India. They cannot be directly credited to an NRE account or transferred overseas without following the FEMA repatriation process.

The USD 1 Million Per Financial Year Rule

Under the RBI’s framework for NRO accounts, an NRI can repatriate up to USD 1 million (approximately ₹8.3 crore) per financial year (April to March) from their NRO account, subject to compliance requirements. For property sales involving larger amounts or multiple repatriations in the same year, advance planning with the bank and CA is essential.

The NRE/FCNR Exception

If the property was originally purchased using funds remitted through NRE or FCNR accounts (in foreign exchange), the NRI can repatriate sale proceeds to the extent of the original foreign currency investment – outside the USD 1 million limit – subject to a maximum of two residential properties. Amounts exceeding the original foreign exchange investment must flow through the NRO route.

Properties That Cannot Be Repatriated

Restriction: Proceeds from the sale of agricultural land, plantation property, or farmhouses in India cannot be repatriated abroad. These must remain in India. NRIs who have inherited such properties must be aware of this restriction before planning the sale.

Documents Required for Repatriation

Form 145 (equivalent to old Form 15CA) – filed online by the NRI on the income tax e-filing portal
Form 146 (equivalent to old Form 15CB) – CA certificate confirming applicable Indian taxes have been paid
Registered sale deed
TDS certificate from buyer (per Section 395(4) / Rule 132 of IT Act 2025)
Proof that NRO account received the sale proceeds
ITR acknowledgement (if filed)
Bank’s own KYC/FEMA declaration forms

Note: The Budget 2026 TAN simplification does not remove the Form 145/146 obligation when moving funds abroad. Repatriation documentation requirements remain unchanged.

Part 5: IT Act 2025 – Section Number Reference Table

The Income Tax Act, 2025 came into force on 1 April 2026, replacing the Income Tax Act, 1961. The substantive rules are unchanged, but the section references have changed. Any checklist or document citing old section numbers is now referencing repealed provisions.

Provision	Old Reference (IT Act 1961)	New Reference (IT Act 2025)
TDS on NRI property sale	Section 195	Section 393(2) [Table: Sl. No. 17]
Lower/nil deduction certificate	Section 197	Section 395(1)
Lower deduction application form	Form 13	Form 128
TDS return for NRI payments	Form 27Q	Form 144
TDS certificate to seller	Form 16A	Per Section 395(4) / Rule 132
Remittance reporting	Form 15CA	Form 145
CA certificate for remittance	Form 15CB	Form 146
Buyer’s TDS challan (post Oct 2026)	Form 26QB (adapted)	Form 141
Capital gains provisions	Section 45 onwards	Section 67 onwards
Exemption – residential property	Section 54	Section 82
Exemption – capital gains bonds	Section 54EC	Section 85

Part 6: Five Mistakes NRIs Make When Selling Property in India

Mistake 1: Not Applying for Form 128 (old Form 13) Early Enough

The Form 128 application must be filed and approved before the sale deed is registered. Many NRIs discover it after the deed is signed and the buyer has already deducted TDS at the maximum rate. At that point, the only recourse is a refund through ITR – which can take 6–18 months.

Mistake 2: Assuming the Buyer Will Handle Everything Correctly

The buyer’s obligation is to deduct. It is not to deduct correctly. Many buyers’ CAs apply the wrong surcharge slab, calculate TDS on an incorrect base, or use outdated rate tables. The NRI must verify the TDS computation before registration – because correcting errors after the fact is far more complicated.

Mistake 3: Using the Wrong Cost of Acquisition for Inherited Property

For inherited properties, the cost of acquisition is the original owner’s cost – not the property’s market value at the time of inheritance. NRIs frequently underestimate their capital gains by using the wrong cost base. The correct figure dramatically affects the Form 128 computation and the eventual tax liability.

Mistake 4: Crediting Sale Proceeds Directly to an NRE Account

Sale proceeds from an Indian property sale must first go into the NRO account. Attempting to credit directly to NRE bypasses FEMA requirements and creates complications with the bank and the repatriation process.

Mistake 5: Missing the Section 54EC Bond Investment Window

The 6-month window to invest in capital gains bonds runs from the date of transfer (typically the registration date). NRIs living overseas often delay, assuming the window is longer. Once 6 months pass, the exemption is permanently lost.

DTAA – Does It Help With Indian Property Sales?

Under most DTAAs that India has signed, capital gains from the sale of immovable property are taxable in the country where the property is located. This means India retains the right to tax the NRI on the gain from Indian property – regardless of where the NRI is resident.

The DTAA does not typically reduce the Indian tax rate on property sale gains. It does, however, provide the NRI with a foreign tax credit in their country of residence for the Indian tax paid – so the same gain is not taxed twice globally.

How FinPracto Helps NRIs Through the Property Sale Process

At FinPracto, we provide end-to-end support for NRIs selling property in India – from pre-sale planning through repatriation of proceeds to your overseas account.

Form 128 (old Form 13) Application – Preparation and filing of the lower/nil TDS certificate application with full capital gains computation, sale documents and tax projections
Capital Gains Planning – Assessment of Section 54, 54EC and 54F exemption options to minimise or eliminate tax liability before the sale
Buyer Coordination – Review of buyer’s TDS computation and guidance on correct deduction rates and forms under IT Act 2025
ITR Filing – Income tax return for the year of sale, including capital gains disclosure and TDS credit / refund claim
Form 145 / Form 146 (old 15CA/15CB) – Preparation and filing for repatriation of sale proceeds to your overseas bank account
FEMA Advisory – Structuring repatriation within RBI limits, NRE/NRO source planning, and multi-year repatriation strategies for higher-value properties
DTAA Credit Planning – Guidance on claiming Indian tax credits in your country of residence

Final Thought

Selling Indian property as an NRI is not difficult, but it is different, and those differences have real financial consequences if not managed proactively.

The TDS gap – the difference between what the buyer deducts and what you actually owe – is often measured in lakhs. The Form 13 process exists precisely to close that gap. The repatriation process exists to ensure your money reaches you legally and without delays.

The NRIs who navigate this smoothly are the ones who start the process three months before the sale is registered – not three weeks after.

Selling Indian Property as an NRI in 2026 – TDS, Capital Gains, FEMA Repatriation and the Form 13 Option