Tax on Capital Gains for NRIs – Rates, TDS & Exemptions 2026

The capital gains tax framework for many Indian assets changed significantly starting 23 July 2024, and these rules continue to apply in 2026. Both short-term and long-term tax rates have gone up, and the indexation benefit that once reduced your taxable gains is now gone.

If you’re an NRI investing in Indian property, mutual funds, or shares, these updates can have a direct impact on your returns. Understanding how the post-July 2024 capital gains rules work - and which exemptions still apply - can help you plan your exits smartly, claim refunds where eligible, and avoid unnecessary tax leakage.

Whether you’re selling an apartment in India or redeeming mutual funds from abroad, this guide explains the latest capital gain tax NRI rules, TDS rates, and exemption options to help you make informed choices in 2026.

What is Capital Gains Tax for NRIs?

Whenever you sell an asset in India (property, mutual funds, or shares) for more than what you paid, the profit you earn is called a capital gain. The tax you pay on that profit is known as capital gains tax.

For Non-Resident Indians (NRIs), this tax applies even if you live abroad or the money never enters India. As long as the asset is located in India, it’s taxable under the Income Tax Act.

💡 Example

If you bought a flat in Pune for ₹80 lakh and sold it later for ₹1.2 crore, the ₹40 lakh profit is your capital gain. The moment you transfer ownership, it becomes taxable.

Assets That Attract Capital Gain Tax for NRIs

You’re liable to pay capital gain tax NRI on profits from these Indian investments:

• 🏠 Real estate (residential or commercial property)
• 📈 Shares of Indian companies
• 💰 Mutual funds and Exchange-Traded Funds (ETFs)
• 🧾 Debt instruments and unlisted shares

Indian tax law doesn’t consider where you live or which account receives the sale proceeds - it only looks at where the asset is based.

In short: If the asset is in India, the gain is taxable in India, even if you’re an NRI living overseas.

Short-Term vs Long-Term Capital Gains for NRIs

Your tax rate depends first on how long you held the asset. This “holding period” is different by asset class. For NRIs, getting this right unlocks the right capital gain tax for NRI in India rules and TDS treatment.

Holding period rules at a glance

Inherited or gifted assets: for holding period, you can include the previous owner’s holding period; cost is the previous owner’s cost. This often tips a sale into long-term treatment.

Why this matters: Getting the clock right decides whether your capital gain for NRI falls into the higher short-term bucket or the 12.5% long-term bucket (for eligible assets). It also drives the capital gain tax NRI TDS that a buyer or broker will withhold at sale.

Quick example

You bought equity mutual funds on 10 Sep 2024 and redeem on 1 Jun 2025 → held < 12 months → short-term.

You sell a flat held since May 2022 on 30 Aug 2025 → held > 24 months → long-term.

Why NRIs face different tax treatment

You're subject to special rules that don't apply to resident Indians. Chapter XII-A (Sections 115C-115I) of the Income Tax Act specifically targets NRIs.

TDS applies immediately:

Unlike residents, you face Tax Deducted at Source on all capital gains, regardless of the amount. Rates vary by asset type and holding period.

Foreign Currency Conversion Rule for NRIs (Section 48):

In certain cases, NRIs can calculate capital gains using the foreign currency used to purchase the asset, instead of converting everything directly into Indian rupees.

This rule exists under Section 48 of the Income Tax Act.

How it works:

If an NRI purchases shares or debentures of an Indian company using foreign currency, the capital gain can be calculated by:

1. Converting the purchase price into the original foreign currency
2. Converting the sale price into the same foreign currency
3. Calculating the gain in that foreign currency
4. Converting the final gain back into INR

Why this matters:

If the Indian rupee depreciates over time, the taxable gain calculated in foreign currency terms may be lower than the gain calculated purely in INR.

Example:

An NRI buys shares of an Indian company with $10,000 when USD/INR = 83, so the cost in INR is ₹8,30,000. Ten months later the shares are sold for ₹10,00,000 when USD/INR = 86.

If calculated in INR, the gain is ₹1,70,000.

If calculated in foreign currency under Section 48, the sale value is about $11,628 against a cost of $10,000. The gain of about $1,628, converted back at 86, is about ₹1,40,000.

The taxable gain falls by about ₹30,000 because the rupee weakened while the shares were held.

Important limitation:

This rule applies only to shares or debentures of an Indian company bought in foreign currency by a non-resident. It does not apply to property or mutual funds. It also does not apply to long-term gains on listed equity shares taxed under Section 112A, or to long-term gains on unlisted shares taxed at 12.5% for non-residents, so in practice it helps mainly with short-term gains.

Limited deductions available:

NRIs can claim certain deductions under Chapter VI-A of the Income Tax Act, although eligibility depends on the specific deduction and the type of income. However, you can still use capital gains exemptions by reinvesting in qualifying assets.

These rules exist because the tax department treats your Indian investments differently from your global portfolio. Understanding these differences helps you plan better and avoid paying excess tax.

Capital Gains Tax Rates and TDS for NRIs (Post-23 July 2024 Rules)

From 23 July 2024, India changed how capital gain tax for NRI in India works. Rates are higher and indexation is gone on long-term gains for most assets. If you hold Indian property, equity, or funds from abroad, your after-tax return now depends on holding period, asset type, and how you handle TDS.

Section references: The section numbers in this guide come from the Income-tax Act, 1961, which governs transfers up to 31 March 2026. For transfers from 1 April 2026, the Income-tax Act, 2025 applies. It keeps the same capital gains rates but renumbers the sections: for example, Section 111A is now Section 196, Section 112A is Section 198, Section 54 is Section 82, Section 54F is Section 86, Section 195 is Section 393 and Section 197 is Section 395.

Updated tax rates in plain English

Listed equity and equity mutual funds

• Short-term, held for 12 months or less: tax at 20%
• Long-term, held for more than 12 months: tax at 12.5% without indexation
• Equity exemption threshold is now ₹1.25 lakh for long-term gains

Real estate

• Short-term, held for 24 months or less: taxed at your income slab rate, up to 30%
• Long-term, held for more than 24 months: flat 12.5% without indexation

Unlisted shares

• Short-term, held for 24 months or less: taxed at your slab rate
• Long-term, held for more than 24 months: 12.5% without indexation

Debt mutual funds and unlisted bonds

• Debt mutual fund units bought on or after 1 April 2023, and unlisted bonds or debentures sold or redeemed on or after 23 July 2024, are always treated as short-term and taxed at your slab rate

Add 4% health and education cess to all of the above. Surcharge applies based on total income. That lifts the effective rates at higher income levels.

NRIs cannot use any unused basic exemption limit to reduce equity gains taxed at 20% or 12.5%. That adjustment is available only to resident individuals and HUFs.

Why this matters for capital gain for NRI

If you used to rely on indexation for property or certain funds, your taxable gain may now be higher even if the headline rate looks lower. Timing matters. So do exemptions.

TDS on capital gains for NRIs

NRIs face Tax Deducted at Source at the time of sale. This is withheld before money hits your account.

Equity

• Long-term equity gains above ₹1.25 lakh: TDS at 12.5%
• Short-term equity gains: TDS at 20%
• The broker or AMC deducts it, plus applicable surcharge and 4% cess

Property

• The buyer deducts tax under Section 195 of the Income-tax Act, 1961 (Section 393 of the Income-tax Act, 2025 for payments from 1 April 2026).
• Long-term property sale (held more than 24 months): TDS at 12.5%
• Short-term property sale (held 24 months or less): TDS at 30%, even though your final tax is worked out at slab rates
• Surcharge and 4% cess are added to these rates
• The rule is that tax is deducted from the capital gain. A buyer who cannot confirm your purchase cost may deduct on a higher amount, so if your actual liability is lower, apply for a lower deduction certificate (Form 13 under Section 197, now Form 128 under Section 395) before the sale.

For a step-by-step view of timing, exemptions and paperwork on a property sale, see our guide on how US-based NRIs can plan taxes before selling property in India.

Debt funds and unlisted shares

• Long-term gains on unlisted shares: TDS at 12.5%
• Short-term gains, including all gains on debt mutual funds bought on or after 1 April 2023: TDS at 30%

If you do not quote a valid PAN, Section 206AA requires TDS at the higher of the normal rate or 20%. A non-resident without a PAN can avoid this higher rate on capital gains only by giving the deductor specified details, such as a Tax Residency Certificate and their tax identification number in their country of residence. Providing your PAN is the simpler route.

Capital gains on shares: worked example for an NRI

Priya, a US resident NRI, sells listed Indian shares through her broker for ₹9,00,000. She bought them for ₹6,00,000, so her gain is ₹3,00,000. Assume surcharge does not apply.

• Held 10 months (short-term): tax at 20% on ₹3,00,000 is ₹60,000, or ₹62,400 with 4% cess. The broker deducts TDS at this rate before paying her.
• Held 14 months (long-term): the first ₹1,25,000 of long-term equity gains in the year is exempt, so 12.5% applies to ₹1,75,000. Tax is ₹21,875, or ₹22,750 with 4% cess.

Waiting four more months cuts her Indian tax by ₹39,650 in this example. As an NRI, she cannot use any unused basic exemption limit to reduce these gains, because that adjustment is available only to resident individuals and HUFs.

The gain is also reportable on her US return. Under the India–US tax treaty, each country may tax capital gains under its own law, so the treaty does not exempt the gain in India. She can generally claim a US foreign tax credit for the Indian tax on Form 1116, within the US credit limit. To compare scenarios with your own numbers, try our NRI capital gains tax calculator.

How to reduce or recover TDS

1. Apply for a lower deduction certificate (Form 13, now Form 128)
2. Do this before the sale. The tax office can authorize a lower TDS aligned to your expected tax. This helps a lot on property deals where TDS is otherwise taken on full consideration.
3. Claim refunds through your ITR
4. If TDS exceeds your actual liability, file ITR-2 or ITR-3 and claim a refund. Keep the TDS certificate from the buyer or broker (Form 16A, now Form 131) as proof.
5. Use DTAA relief where eligible
6. Check your country’s treaty with India. For property, most of India’s treaties let India tax the gain under its own law, and the India–US treaty does the same for all capital gains, so the treaty usually does not lower Indian TDS on these gains. Its main use is a foreign tax credit in your country of residence so you are not taxed twice. Keep your Tax Residency Certificate and Form 10F (Form 41 from 1 April 2026) ready if you claim any treaty benefit.

Know your holding period, expect TDS at source, and plan ahead. Combine a lower deduction certificate, exemptions, and treaty relief to keep more of your proceeds.

Exemptions You Can Still Use

Even with higher tax rates and the removal of indexation, NRIs can still save significantly through capital gains exemptions. These are the legal ways to reduce your capital gain tax in India, provided you follow the timelines and reinvestment conditions correctly.

Section 54 – Sale of Residential Property

If you sell a residential property in India, you can save tax by reinvesting the gains in another property.

Conditions:

• You must buy a new house within one year before or two years after the sale.
• If you’re constructing, finish construction within three years of sale.
• Maximum exemption: ₹10 crore (from Assessment Year 2024–25).
• For gains below ₹2 crore, you can buy two houses once in a lifetime instead of one.

Example:

If you sold your Bengaluru flat for ₹1.5 crore and made ₹40 lakh in long-term gains, buying another property within the allowed window can exempt that entire ₹40 lakh from capital gain tax for NRI in India.

Section 54F – Sale of Any Other Long-Term Asset

If you sold an asset other than a house - say, land, gold, or shares - and reinvested the entire sale proceeds in one residential house in India, you can claim exemption under Section 54F.

Points to remember:

• The new house must be purchased within 1 year before or 2 years after the sale.
• Construction must finish within 3 years.
• You must invest the entire sale value, not just the profit.
• If you invest partially, exemption is allowed proportionately.
• You cannot own more than one other house at the time of sale.

Section 54EC – Investment in Specified Bonds

If you sell land or a building held for more than 24 months and don’t want to reinvest in real estate, you can still save tax by investing your gains in government-specified bonds.

Eligible investments include specified bonds notified under Section 54EC of the Income Tax Act.

• National Highways Authority of India (NHAI)
• Rural Electrification Corporation (REC)
• Other bonds notified by the Central Government, such as Housing and Urban Development Corporation (HUDCO) bonds notified in April 2025

Rules:

• Invest within 6 months of the sale.
• Maximum exemption: ₹50 lakh.
• Lock-in period: 5 years.
• Interest on the bonds is taxable.

Example:

If you made ₹30 lakh in long-term gains from selling property, investing that amount in REC bonds within 6 months makes you eligible for full exemption from capital gain tax NRI obligations on that sale.

Capital Gains Account Scheme (CGAS)

If you need more time before reinvesting, you can temporarily park your gains in a Capital Gains Account at a public sector bank in India.

Why it helps:

• Keeps your exemption eligibility intact until you reinvest.
• Choose Type A (Savings) for flexibility or Type B (Fixed Deposit) for better interest.
• The amount must be used for property purchase or construction before the exemption deadline.

Important:

If you miss the reinvestment deadline, the unused balance in this account becomes taxable as capital gains in the year the deadline ends.

Quick Summary

Even with higher rates, these sections give NRIs meaningful ways to lower tax:

• Section 54: Reinvest in property you sell.
• Section 54F: Reinvest proceeds from other assets into a house.
• Section 54EC: Invest in bonds instead of property.
• CGAS: Park funds temporarily to preserve exemption benefits.

Plan ahead: all these require action within a fixed window after the sale. Missing the deadline means losing the exemption entirely.

How to Reduce or Reclaim Capital Gains Tax

Most NRIs end up paying more tax than they should - often because of excess TDS, missed deductions, or poor timing of sales. The good news: the law gives you several ways to legally reduce or recover that money.

1. File Your ITR and Claim TDS Refunds

TDS often ends up higher than your final tax, for example when a buyer deducts on more than your actual gain, or when TDS at 30% was deducted on short-term gains that are finally taxed at your lower slab rate. That’s why many NRIs are eligible for refunds when they file their Indian tax return.

What to do:

• File ITR-2 (for investment income) or ITR-3 (if you also have business income).
• Check that the TDS on your certificate from the buyer or broker (Form 16A, now Form 131) matches what you claim in the return.
• File by the due date, which stays 31 July for ITR-2 filers; from tax year 2026-27, ITR-3 filers without an audit have until 31 August.

Example:

If your property buyer deducted ₹8 lakh TDS on a ₹1 crore sale, but your real tax liability after exemptions is ₹4 lakh, you can claim a ₹4 lakh refund through your ITR.

2. Apply for a Lower Deduction Certificate (Form 13, now Form 128)

Instead of waiting for a refund, you can reduce TDS before the sale happens. By applying for a Lower Deduction Certificate from the Income Tax Department, the buyer or broker deducts tax at a lower rate, closer to your actual liability.

Why it matters:

• Avoids cash-flow lockup and long refund waits.
• Especially useful for property sales, where a buyer who cannot confirm your cost may deduct 12.5% plus surcharge and cess on a much larger amount than your gain.

Apply online on the TRACES portal or through a tax consultant before the transaction date.

Learn more about - Form 13 for NRIs

3. Use DTAA to Avoid Double Taxation

India has Double Taxation Avoidance Agreements (DTAA) with many countries, including the US, UK, UAE, and Canada. These treaties make sure you’re not taxed twice on the same income.

Steps to claim DTAA relief:

• Obtain a Tax Residency Certificate (TRC) from your country of residence.
• File Form 10F (Form 41 from 1 April 2026) on the income tax e-filing portal if you are claiming a treaty benefit.
• If your home country taxes capital gains too, claim a foreign tax credit for tax already paid in India (US residents use Form 1116).

This is one of the most overlooked ways for NRIs to cut down their capital gain tax in India.

4. Time Your Sales Strategically

The timing of a sale can change how much tax you owe. Selling an asset a few months later can convert it from short-term to long-term, cutting your rate from 20% or your slab rate to 12.5%.

Plan smart:

• Check holding period cut-offs before deciding to sell.
• If you’re close to the long-term threshold, waiting could save you several lakhs.
• Use the Capital Gains Account Scheme if you need time to reinvest but don’t want to lose exemption eligibility.

5. Maintain Clear Documentation

Good records are your best defence if you ever need to justify cost or exemptions. Keep copies of:

• Purchase and sale deeds or contract notes
• Expense receipts for renovations or brokerage
• Proof of reinvestment in property or 54EC bonds
• Form 16A and PAN of buyer or broker

Having this ready makes filing, refunds, and DTAA claims much smoother.

Smart Planning Tips for NRIs

Taxes can’t be avoided, but they can be managed. The difference between paying too much and paying just enough usually comes down to timing, structure, and paperwork.

Here are a few habits that help you stay ahead of capital gain tax for NRI in India.

1. Review Your Portfolio Before Every Financial Year-End

Each year, look at which investments are nearing long-term status. Selling just before the threshold can cost you a higher tax rate, while waiting a few months may cut it nearly in half.

NRIs often forget that the Indian financial year ends on March 31, so align your portfolio reviews accordingly.

2. Plan Property Sales Around Reinvestment Readiness

If you plan to use Section 54 or 54F benefits, line up your reinvestment or bond purchase before you sell. The exemption clocks start running the day you transfer ownership, not when you receive funds abroad.

Delays in repatriating money can cost you exemption eligibility if you miss the reinvestment window.

3. Use the Capital Gains Account Scheme Wisely

If your sale happens close to the filing deadline and you haven’t decided on a reinvestment, park the amount in a Capital Gains Account. It keeps your exemption alive until you finalize the next move.

Opt for Type A if you want flexibility or Type B if you prefer a fixed return while you decide.

4. Coordinate With Your Overseas Tax Filing

If you’re based in the US, UK, or Canada, capital gains earned in India might also appear in your home-country tax return. Use DTAA provisions and claim foreign tax credits to avoid paying double.

A tax advisor familiar with both jurisdictions can help you synchronize filing timelines and documents.

5. Keep Transactions Transparent

Always use banking channels for sales and repatriations. Record every cost (registration fees, brokerage, improvement expenses), as these can adjust your cost base when calculating capital gain for NRI.

Transparency reduces TDS disputes and makes refunds faster.

6. Monitor Rule Changes

Capital gains rules have changed twice in the past two years alone. Keep an eye on updates to indexation, TDS rates, and exemption limits. Even small rule tweaks can alter how your investments perform after tax.

7. Don’t Wait Till Filing Season

Many NRIs handle Indian taxation reactively, once the sale is done or TDS is deducted. The smarter route is to plan before the transaction: estimate your tax, apply for a lower deduction certificate early, and document costs properly.

Good planning avoids surprises and makes your capital gain tax NRI reporting straightforward.

Simple rule: Treat taxation as part of your investment strategy, not an afterthought. You can’t control the rates, but you can control when and how they apply to you.

Final Thoughts

The July 2024 capital gains reforms reshaped how NRIs are taxed on their Indian assets.

Short-term and long-term rates have gone up, indexation is gone, and TDS rates on equity gains have risen to match. Still, these updates don’t have to eat into your returns if you plan your moves carefully.

Here’s what to keep in mind:

• Know your rates: Short-term gains on listed equity are taxed at 20% (other short-term gains at slab rates), and long-term gains at 12.5% without indexation.
• Expect TDS upfront: Provide your PAN to avoid the higher 20% rate. Use a lower deduction certificate (Form 13, now Form 128) if your actual liability is less.
• Use exemptions wisely: Sections 54, 54F, and 54EC continue to help offset gains from property or other assets.
• Claim what’s yours: File your Indian tax return to recover excess TDS or apply DTAA relief if you pay tax in both countries.
• Think in timelines: A few months can change your tax category - plan sales strategically to qualify for long-term treatment.

Capital gains tax for NRIs has become less flexible but more predictable. Once you understand your asset type, holding period, and reinvestment options, managing your Indian tax obligations becomes straightforward.

If you’re unsure how the new structure affects your portfolio, it’s worth consulting an NRI-focused tax advisor. A quick review can often uncover refunds, exemptions, or planning opportunities that go unnoticed.

In the end, capital gain tax NRI planning isn’t just about compliance - it’s about keeping more of what you earn and letting your money grow efficiently across borders.