Capital Gains Tax for NRIs: How It Works, Rates, and Key Rules in India

Quick Answer

• Property (LTCG):5% flat, no indexation for NRIs regardless of when you bought it
• Property (STCG): Taxed at your income tax slab rate
• Listed equity/equity mutual funds (LTCG): 5% on gains above ₹1.25 lakh/year
• Listed equity/equity mutual funds (STCG): 20%
• TDS on property sale: Deducted on the full sale value, often 12.5–30%+ with surcharge and cess refundable only by filing a return
• NRIs cannot use the 20%-with-indexation option that resident Indians get for property bought before 23 July 2024

You sell the family flat in Pune. The buyer transfers the money and ₹9 lakh of it disappears into TDS before it ever reaches your account. No warning, no negotiation. Just the rule.

This is the single most common shock NRIs face when they exit an Indian investment. Not the tax itself most people expect to pay tax but the timing and size of what gets deducted upfront, and how different the rules are for NRIs compared to resident Indians selling the same asset.

If you’re an NRI holding property, shares, or mutual funds in India, here’s what actually applies in 2026, including one rule that catches almost everyone off guard.

What Are Capital Gains?

Capital gains are the profit you make when you sell a capital asset for more than you paid for it. For NRIs, this typically includes:

• Residential or commercial property in India
• Equity shares and mutual funds
• Bonds and debentures
• Land and other specified assets

Capital gains are taxed in the financial year the asset is sold not when the money is transferred out of India.

Asset Type	Short-Term Holding Period	Long-Term Holding Period
Property	Less than 24 months	24 months or more
Listed equity shares	Less than 12 months	12 months or more
Equity mutual funds	Less than 12 months	12 months or more
Debt mutual funds	Depends on purchase date (see note below)	Depends on the purchase date

 

Note: Debt mutual fund units bought on or after 1 April 2023 are always taxed at your income slab rate, regardless of holding period; there is no LTCG benefit for these.

 

Capital Gains Tax Rates for NRIs (Updated Post–Budget 2024)

The Union Budget 2024 (effective 23 July 2024) rewrote capital gains taxation across every asset class. If you’ve read an older article, calculator, or PDF on this the numbers have very likely changed. Here’s what applies now, for sales made in FY 2025-26 (AY 2026-27).

Property

• Short-term (STCG): Taxed at your applicable income tax slab rate
• Long-term (LTCG):5%, without indexation

The One Rule Most NRIs Miss After the 2024 Budget: resident Indians and resident HUFs got a “grandfathering” option for property bought before 23 July 2024: they can choose between 12.5% without indexation or 20% with indexation, whichever works out cheaper.

This option is not available to NRIs. If you’re a non-resident, you pay 12.5% without indexation on all property sold after 23 July 2024, no matter how long ago you bought it. For property held 15–20+ years, where inflation would have meaningfully reduced your taxable gain under the old indexed method, this can mean a noticeably higher tax bill than a resident sibling selling an identical property would pay.

There’s no way around this rule but knowing it in advance means no unpleasant surprise at settlement, and it’s worth running the numbers with a CA before you list the property.

Listed Equity Shares and Equity Mutual Funds

• STCG:20% (raised from 15% in July 2024)
• LTCG:5% on gains above ₹1.25 lakh per financial year(raised from ₹1 lakh), no indexation

Other Assets (gold, unlisted shares, bonds)

• Rates vary by asset type and holding period; unlisted equity shares generally follow the same 12.5%/24-month LTCG framework as property, without the resident-only indexation option

Source: Income Tax Department – Capital Gains

 

TDS on Capital Gains for NRIs

This is where most of the cash-flow pain actually happens.

For NRIs selling property in India:

• The buyer deducts TDS at source; it’s their legal obligation, under Section 195 of the Income Tax Act
• TDS is calculated on the entire sale value by default, not just your profit, unless you’ve proactively applied for relief
• On long-term gains: TDS is typically deducted at around 5% plus surcharge and cess (roughly 13–15% effectively, depending on income level)
• On short-term gains: TDS follows your income tax slab rate, which can run up to ~30% plus surcharge and cess for higher income brackets
• Either way, it’s calculated on the full sale price, not your actual profit, which is exactly why the gap between TDS deducted and tax actually owed can run into lakhs

The good news: you’re not stuck with this by default.

• Apply for a Lower or Nil Deduction Certificate (Form 13)under Section 197 before the sale closes, through the TRACES portal. If approved, the buyer deducts TDS only on your actual estimated gain, not the full sale value — this alone can be the difference between a smooth settlement and months of your money sitting with the tax department. Apply well before the transaction; approval typically takes a few weeks.
• If TDS was still deducted on the full value, you can claim the excess back as a refund by filing an Indian income tax return.

For the full mechanics of how TDS thresholds, certificates, and refunds work for NRIs specifically — including how rental income and interest are treated differently from a one-off property sale, see our detailed guide: TDS for NRIs Explained: Rates, Rules, and How to Avoid Excess Deduction. And if you want to understand exactly why the rate isn’t a fixed percentage the way it is for residents, Section 195 of the Income Tax Act Explained breaks down the legal mechanism behind it.

 

Exemptions Available to NRIs

NRIs can legitimately reduce capital gains tax through reinvestment, subject to strict conditions and timelines:

• Section 54:Reinvest property gains into another residential property in India
• Section 54EC: Invest gains (up to ₹50 lakh) in specified capital gains bonds (e.g., NHAI, REC) within 6 months
• Section 54F: Reinvest proceeds from selling a non-residential asset into a residential property

A commonly missed step: if you plan to claim Section 54 but haven’t identified a new property before your tax return deadline, deposit the gains in a Capital Gains Account Scheme (CGAS) account. Without this, the exemption is lost even if you genuinely intended to reinvest.

Each exemption has its own deadlines and reinvestment caps missing them by even a few days can forfeit the benefit entirely.

 

Double Taxation Avoidance Agreement (DTAA)

India has active DTAA agreements with every major country where the Indian diaspora in Europe is based — Germany, France, the Netherlands, Ireland, Spain, Italy, Belgium, Austria, and Portugal among them. These agreements generally help you:

• Avoid being taxed twice on the same capital gain, once in India, once in your country of residence
• Claim a foreign tax credit for tax already paid in India when filing in your resident country

To claim DTAA relief, you’ll typically need a Tax Residency Certificate (TRC) from your country of residence. Without it, both the Indian tax department and your home country’s authority may decline to apply treaty benefits. Note also that your DTAA and TRC eligibility flows directly from your residential status under Indian tax law, not your passport or OCI card. If you’re unsure whether you currently qualify as an NRI for a given financial year, see NRI Meaning: What Is NRI Status and Why It Matters Financially.

 

After the Tax Is Settled: Getting Your Money Back to Europe

Paying the right tax is only step one. Once TDS is settled and your return is filed, the sale proceeds usually land in your NRO account in India and moving that money out to Germany, France, Ireland, or wherever you’re based is a separate, regulated step of its own.

A few things worth knowing in advance:

• Outward transfers from an NRO account are capped at USD 1 million per financial year and require tax clearance documentation (Form 15CA, and in many cases, Form 15CB certified by a chartered accountant) before the bank will process them
• This cap applies to your total repatriation for the year, combined across income, sale proceeds, and any inherited funds it isn’t a per-transaction limit, and unused headroom doesn’t carry over to the next financial year
• Missing this paperwork is one of the most common reasons NRI fund transfers get delayed or rejected outright not the underlying tax

If you’re planning a sale, these guides go deeper on exactly this stage of the process:

• NRO Account Transfer: Rules, Limits and Tax Compliance for NRIs – The mechanics of moving money out of an NRO account specifically
• Repatriation of Funds for NRIs: Rules and Limits – The broader FEMA framework covering NRE, FCNR, and NRO repatriation
• International Money Transfer Limits for NRIs Explained – How the USD 1 million cap interacts with country-specific limits on the receiving end in Europe

Once the funds are cleared for transfer, getting a fair exchange rate is where a lot of NRIs quietly lose money banks and some apps build a 1–3% markup into the exchange rate itself rather than charging a visible fee, so the real cost is easy to miss. It’s worth understanding how the EUR to INR rate actually works before you transfer a large, one-off sum like sale proceeds and to know the red flags worth checking on any provider before you trust them with a large transfer.

You can also run your numbers ahead of time using ScopeX’s Income Tax Calculator to estimate what you’ll actually owe before you commit to a sale.

 

Common Mistakes NRIs Make

• Not planning for high upfront TDS on the full sale value, not just the gain
• Missing Section 54/54EC/54F reinvestment deadlines
• Miscalculating the holding period (24 months for property, not calendar years)
• Assuming the resident-Indian indexation option applies to them, it doesn’t
• Not filing an Indian tax return, and therefore never claiming back excess TDS
• Waiting until after the sale to think about NRO repatriation limits and documentation

Early planning, ideally before you list the asset for sale, avoids most of these entirely.

 

FAQs: Capital Gains Tax for NRIs

Do NRIs pay higher capital gains tax than residents?
The tax rates are largely the same. The real difference is upfront TDS NRIs face significantly higher deduction at source, refundable only after filing a return. On property specifically, NRIs also lose access to the indexation option that resident Indians get for pre-July 2024 purchases.

Is indexation available to NRIs on property sales?
No. Since the 2024 Budget, the 20%-with-indexation option is available only to resident individuals and HUFs for property bought before 23 July 2024. NRIs pay a flat 12.5% without indexation, regardless of purchase date.

Is filing a tax return mandatory for NRIs after selling property?
Yes, particularly to reconcile TDS deducted on the full sale value and claim back any refund or exemption you’re entitled to.

Can NRIs claim DTAA benefits on capital gains?
In many cases, yes, with a valid Tax Residency Certificate. Relief depends on the specific asset and your country of residence.

What happens if the TDS deducted is higher than the actual tax owed?
You claim the difference as a refund by filing an Indian income tax return for that financial year.

Can I apply to reduce TDS before I sell, instead of waiting for a refund?
Yes, apply for a Lower or Nil Deduction Certificate (Form 13) under Section 197 before the sale. If approved, TDS is deducted only on your estimated actual gain, not the full sale value.

Once the tax is paid, how do I get the money to my bank account in Europe?
Sale proceeds are typically credited to an NRO account first. From there, outward transfer is capped at USD 1 million per financial year and needs tax clearance forms (15CA/15CB) before the bank releases it. See our NRO account transfer guide for the full process.

Does selling property affect other Indian accounts I hold, like EPF?
No, capital gains from a property or securities sale are a separate tax event from your EPF balance. If you’re also planning an EPF withdrawal around the same time as a property sale, it’s worth reading how EPF taxation works for NRIs separately, since the 5-year contribution rule and TDS treatment there are distinct from capital gains rules.

 

Final Thoughts

Capital gains taxation is one of the more consequential financial events in an NRI’s relationship with India, not because the rules are unfair, but because they’re structured differently enough from resident taxation that assumptions carry real cost. Understanding your holding period, the current rates (not the pre-2024 ones), your TDS exposure, and the exemptions actually available to you lets you plan an exit instead of just reacting to one.

With the right planning and a clear-eyed view of what NRIs specifically can and can’t claim, you can navigate a sale in India with far fewer surprises and far more of your money reaching your account, wherever in Europe that account happens to be.

 

Sources & Disclaimer

The information in this article is based on publicly available provider disclosures, marketing materials, industry reports, and general practices in the remittance market at the time of writing. Exchange rates, fees, transfer speeds, and availability may vary by country, payment method, bank, and time period.

Company names mentioned are included for illustrative and comparative purposes only. Any performance metrics, pricing examples, or user experiences referenced reflect advertised claims or individual reports and should not be treated as guarantees. Readers are encouraged to verify live rates, fees, and terms directly with the service provider before initiating a transfer.

This content is intended for informational purposes only and does not constitute financial advice, investment advice, or a recommendation of any specific service.