Selling a Dubai property: the capital gains tax India charges, and how it is computed

Short answer: a resident and ordinarily resident individual who sells property in Dubai pays capital gains tax in India on the whole gain. Held for more than 24 months, it is long-term: 12.5% without indexation, or for property acquired before 23 July 2024 the lower of that and 20% with indexation. The UAE does not tax the gain, so there is no foreign tax credit. The only exemptions run through India: a new residential house in India (s.54 or s.54F; s.82 or s.86 of the 2025 Act) or notified bonds. The property and the account the proceeds land in go in Schedule FA, and FEMA decides how long the money can stay abroad.

This note is for resident Indians, and returning NRIs, who own property in the UAE and are selling or have sold. It does not deal with whether or when to sell, only with the Indian tax and reporting that follow.

Which Act and which sections

A sale up to 31 March 2026 (FY 2025-26) is computed under the 1961 Act; a sale from 1 April 2026 falls in tax year 2026-27 under the Income-tax Act 2025. The mechanics did not change.

The wider capital-gains renumbering is in capital gains under the Income-tax Act 2025.

Long-term or short-term

Immovable property is long-term if held for more than 24 months before the transfer. A short-term gain is added to your income and taxed at slab rates.

The holding period runs from the date of acquisition. For a ready property that is normally the date title was registered in your name. For a property bought off-plan and paid for in instalments, the date of acquisition is less obvious: the date of the purchase agreement, of registration of the interest, or of handover can each be argued. Settle it before relying on the property being long-term.

Turning dirhams into rupees

The tax is on a rupee gain, and the rules only partly say how to get there.

The sale price. Rule 206 of the Income-tax Rules 2026, carrying forward Rule 115 of the 1962 Rules, fixes the rate for income under the head capital gains: the State Bank of India telegraphic transfer (TT) buying rate on the last day of the month before the month of transfer. A sale registered in August 2026 is converted at the rate on 31 July 2026.

The cost. Here practice divides.

The second view reads the rule literally, since it converts "income", and the gain is the income. The first reflects what a resident who paid in rupees actually gained, and it is the only basis on which indexation can be computed. No ruling on foreign immovable property settling the point has been found. The rupee-cost basis is the more conservative filing position. If you take the other view, disclose it, and do not combine it with indexation.

What counts as cost

12.5%, or 20% with indexation

For a long-term gain the rate is 12.5% without indexation (s.112, now s.197). For land or a building acquired before 23 July 2024, a resident individual or HUF may instead compute 20% on the indexed gain and pay whichever is lower (the proviso to s.112; s.197(3) of the 2025 Act). Neither provision limits the option to property in India. The seller must be resident in the year of sale, so a non-resident does not get it.

Worked example. Illustrative figures only. A resident and ordinarily resident individual bought a completed Dubai flat in November 2019 (FY 2019-20) for AED 850,000 plus AED 40,000 of transfer fee, registration and agent's commission, paid by LRS remittances that cost ₹1,72,66,000 in all (AED 890,000 at ₹19.40). The flat is sold in August 2026 for AED 1,300,000, with AED 30,000 of agent's commission and transfer costs on the sale. The TT buying rate on 31 July 2026 is taken as ₹23.50 for illustration. Cost inflation index: 289 for FY 2019-20 and 384 for tax year 2026-27.

Option B is lower here, so it is the one taken. That will not always be so; it depends on how far the rupee cost has risen against inflation, so compute both every time. On the gain-in-dirhams view the gain would be AED 380,000 × ₹23.50 = ₹89,30,000, and 12.5% of it ₹11,16,250. The gap between the approaches is the currency movement, which is why the choice should be made deliberately.

Exemptions: only by reinvesting in India

The reinvestment exemptions do not care where the property sold was. They care where the new one is.

Since the Finance Act 2023, cost of a new house above ₹10 crore is ignored for s.54 and s.54F, and the 2025 Act keeps the ceiling. Unspent amounts must be deposited under the Capital Gains Account Scheme before the return due date. How these routes work in practice, and why they are set up before the sale rather than at the return, is in selling property and the exemptions that reduce the gain.

Buying another property abroad with the proceeds does not reduce the Indian tax.

No UAE tax, so no credit

Article 13 of the India–UAE DTAA says a gain on immovable property may be taxed where the property is situated. India still taxes its resident, and under Article 25 gives credit only for income tax actually paid in the UAE. An individual's gain on Dubai property is not taxed there, and the transfer fee is a registration charge, not income tax. So there is no Form 67 (Form 44 from tax year 2026-27) and the whole gain is taxed in India.

Advance tax on the gain

Nobody deducts Indian tax from the sale, so the gain usually creates advance tax (s.208 of the 1961 Act, s.404 of the 2025 Act). A capital gain is treated as unforeseeable income: no interest for deferment arises if the tax on it is paid in the instalment falling due after the sale, or by 31 March for a sale late in the year. A sale in August means the tax goes in with the 15 September instalment. The mechanics are in advance tax: who owes it and how much.

Schedule FA in the year of sale, and the year after

Schedule FA is filled for the calendar year ending in the financial year, not for April to March. The sale does not end the reporting.

• The property goes in Table C (immovable property) for every calendar year in which you held it at any time, including the year of sale.
• A sale between January and March is in two calendar years' worth of returns. A flat sold in February 2027 belongs to tax year 2026-27 for capital gains, but it was also held during calendar year 2027, so it appears in Schedule FA of the following year's return as well.
• The UAE account the proceeds are paid into goes in Table A1, with its peak balance. A large credit for a few weeks still sets the peak.

Rent before the sale, and how the flat and account are reported while held, are covered in rent from a Dubai flat. Where the property was never in Schedule FA at all, read an unreported Dubai property and FAST-DS before the sale is reported, while the scheme is open until 31 December 2026.

Bringing the proceeds home: FEMA

Proceeds brought to India arrive as an inward remittance; no tax is collected on the way in. Tax collected when the money went out under LRS has already been credited in the year it was collected.

Bought as an NRI, sold as a resident, and the reverse

Two cautions. Residential status is for the whole financial year, so the timing of a move can decide which row you are in. And proceeds paid straight into an Indian bank account are received in India, which can bring the gain into tax even for an RNOR or NRI. For a returning NRI, the RNOR window sets out how long the transition lasts.

This note sets out how India taxes a resident individual's gain on property in the UAE, under the Income-tax Act 1961 for sales up to 31 March 2026 and the Income-tax Act 2025 from tax year 2026-27, with the India–UAE DTAA and the RBI's LRS Master Direction as last updated. It is not advice on any individual's sale, and the practice does not broker property, recommend purchases or sales or take commissions. How the cost of a foreign property is converted into rupees, and the acquisition date of an off-plan purchase, are not settled by any ruling found; confirm your residential status for the year of sale, the current FEMA directions and the computation on your own documents before filing or moving the money.