Short answer: the buyer withholds against the sale consideration, not against your gain — so the amount deducted is routinely far more than the tax. The exemptions that reduce the gain are not closed to non-residents. What closes them is timing: almost every one has to be set up before the deed, not discovered when the return is prepared.
← All articles
NRI selling property in India: the capital gain, and the exemptions that reduce it
CA K Sanjay Bhargav, Chartered Accountant, Bengaluru
Membership No. 250054 · DISA (ICAI)
Published
The deduction is not the tax
A resident seller has tax deducted at a small percentage of the consideration. A non-resident seller does not: the buyer withholds against the whole sale value at rates set for a non-resident, and does so whether or not there is a gain at all.
On a property bought years ago and sold at a modest profit, the sum withheld can be several times the tax actually due. It is recoverable, but only by filing and waiting — and in the meantime it is the money you were probably intending to reinvest.
The remedy is a lower-deduction certificate obtained before the sale, which is set out in TDS on a property sale by an NRI. The point this page adds is that the certificate application is where your exemption position has to already exist — the officer is being asked to accept a lower deduction because the tax will be lower, and that argument is made out of the exemption you intend to claim.
What the gain actually is
The gain is computed under Section 48 of the 1961 Act — Section 72 of the Income-tax Act 2025 — as consideration less cost of acquisition, cost of improvement and expenses of transfer. Not sale value. Not the circle rate.
Where the property was inherited, the cost and holding period step back to the previous owner, which is dealt with in selling inherited property in India as an NRI.
One thing this page deliberately does not tell you is where the indexation position stands for immovable property. It moved recently, it is the single most consequential input into the number, and a stale answer here would be worse than no answer. Settle it for your year of transfer before relying on any computation.
The three routes out
| 1961 Act | 2025 Act | Broadly | |
|---|---|---|---|
| Sold a house, buying a house | s.54 | s.82 | Gain reinvested in a residential house |
| Sold something else, buying a house | s.54F | s.86 | Net consideration into a residential house, with conditions on other houses held |
| Not buying a house | s.54EC | s.85 | Gain into specified bonds |
Two things decide which column you are in, and neither is negotiable after the event. What you sold determines whether you are in s.54 or s.54F — the first requires the asset sold to have been a residential house, the second exists precisely for when it was not. And what you do next has to happen inside a statutory window.
For the bond route in particular: there is a monetary ceiling, a short window after the transfer in which the investment has to be made, and a lock-in on the bonds. All three figures have moved over the years — take them for your year of transfer rather than from any article, including this one. Plan on the window being short, because it is what catches people who decide late.
The provision people are usually thinking of, wrongly
There is a reinvestment relief inside the non-resident chapter itself: Section 115F, now Section 215 of the 2025 Act. It is genuinely NRI-specific, which is why it comes up.
It does not apply to your flat. Section 115F deals with a foreign exchange asset — broadly shares or debentures of an Indian company acquired in convertible foreign exchange — not immovable property. If you have been told there is a special NRI exemption available on a property sale, this is almost certainly the provision being misremembered.
When the timing does not fit
Reinvestment rarely completes neatly before a return falls due. The Capital Gains Account Scheme exists for that gap: the unutilised gain is deposited with a bank under the scheme before the return due date, and the claim survives while the purchase or construction completes within the statutory period.
It parks money; it does not extend the underlying time limit. Amounts that go unused come back into charge later.
The order that works
- Establish the gain before agreeing a price — cost, improvements, holding period, and the indexation position for your year
- Choose the exemption route on what you sold and what you will do next
- Apply for the lower-deduction certificate, with the exemption position built into it
- Sign the deed — everything above is harder or impossible after this point
- Complete the reinvestment inside the window, or park it under the scheme
- File, claim, and then deal with getting the money out
Steps one to three all sit before step four, and that is the whole point. An NRI who signs first and asks afterwards has usually lost the certificate, and sometimes the exemption with it.
Getting the proceeds abroad afterwards is a separate exercise with its own certificate requirement — see Form 15CA/15CB, now 145 and 146.
This is a working reference on the general framework, not advice on a particular sale. The exemption conditions, monetary ceilings, investment windows and the indexation position are set by the Act and the Finance Act for each year and change from time to time; residential status, the DTAA with your country of residence and the facts of the property can each change the answer. Confirm the position for your own transaction before signing anything.
Frequently asked questions
Can an NRI claim the capital gains exemptions at all?
Yes. This is the first thing people get wrong. The exemptions for reinvestment in a residential house and in specified bonds are not restricted to residents — nothing in those provisions turns on residential status. What an NRI faces is not a bar on the relief but a cash-flow problem in front of it: the buyer withholds on the whole sale value, so the money you intend to reinvest may be sitting with the department while the reinvestment window runs.
Is the TDS the tax?
No, and treating it as the tax is the most expensive misunderstanding in the area. The buyer deducts against the sale consideration, not against your gain — which means the deduction is routinely a large multiple of what you actually owe. The remedy is a lower-deduction certificate obtained before the sale, and the exemption you intend to claim is part of what that application has to establish.
Which exemption applies if I sell a house and buy another?
Section 54 of the 1961 Act — Section 82 of the Income-tax Act 2025 — deals with the sale of a residential house reinvested in a residential house. Section 54F, now Section 86, is the parallel relief where the asset sold was something other than a residential house and the proceeds go into one, and it carries its own conditions about how many other houses you hold. Which of the two you are in depends on what you sold, not on what you buy.
What about the bond route?
Section 54EC, now Section 85 of the 2025 Act, exempts the gain to the extent it is invested in specified bonds within a prescribed window after the transfer. It carries a monetary ceiling, a limited window in which the investment must be made, and a lock-in on the bonds. Those three figures have all moved over the years, so take them for the year of your transfer rather than from an article — but plan on the window being short, because it is the one that catches people who decide late.
Is Section 115F the same thing?
No, and it is frequently confused with the property exemptions. Section 115F — Section 215 of the 2025 Act — is the reinvestment relief in the non-resident chapter, and it applies to a foreign exchange asset, broadly shares or debentures of an Indian company acquired in convertible foreign exchange. It does not apply to immovable property. If someone has told you there is a special NRI exemption for your flat, this is probably the provision they have in mind, and it is the wrong one.
What if I cannot complete the reinvestment before the return is due?
The Capital Gains Account Scheme exists for exactly that gap. The unutilised amount is deposited with a bank under the scheme before the due date for the return, which preserves the claim while the purchase or construction is completed within the statutory period. It is a holding mechanism, not an extension of the underlying time limit, and money that ultimately goes unused comes back into charge.
Selling Indian property as an NRI?
Send the purchase and proposed sale details, the holding period and what you intend to do with the proceeds. The gain, the exemption that fits, and the lower-deduction position are worked out together — before the deed is signed, which is when they can still be shaped.
Related service: NRI Taxation