Should you be an NRI (Non-Resident Indian) with property or investments in India, you could be curious about the tax you would pay upon sale. Knowing the clear guidelines the Indian government has regarding capital gains tax for non-residents will help you save money and stay out of legal hotlines.
Capital Gain: What is it?
Selling a capital asset—such as shares, mutual funds, real estate, gold, etc.—for more than what you paid for results in a profit known as capital gain.
In particular:
For ₹50 lakh, you purchased a flat in India, then sold it for ₹80 lakh.
Your capital gain, at ₹30 lakh, is taxable.
Calculated Capital Gains Tax for Non-Residents
NRIs pay taxes depending on the length of ownership, much like native Indians:
- Short-Term Capital Gains (STCG)
Shares/Equity Mutual Funds owned for 12 months: taxed at 15%.
Added to total income, property or other assets held for 24/36 months are taxed according to the slab rate. - Long-Term Capital Gains (LTCG)
Shares or Equity Mutual Funds kept for more than a year:
10% on increases over ₹1 lakh (not indexed).
Property, gold, or unlisted shares kept for more than 24/36 months:
20% with indexation benefit.
Indexing lowers your taxable gain by adjusting the purchase price for inflation.
TDS among NRIs
For NRIs, one main distinction is that TDS (Tax Deducted at Source) is applied straight at the payment time:
- LTCG from real estate: TDS @ 20%
- TDS @ 30% for STCG on land
- TDS relates as per holding period for mutual funds and shares.
TDS is deducted even if your overall income is less than the taxable limit; you must then file a return to seek a refund.
Can NRIs Save Capital Gains Tax?
Indeed! NRIs can claim exemptions under the same sections as residents:
- Section 54: If you sell a residential property and invest the gains in another residential property in India.
- Section 54EC: Within six months, invest up to ₹50 lakh in particular bonds, such as NHAI or REC.
- Section 115F: Designed for NRIs selling foreign exchange assets (should they reinvest some of their assets in India).
Essential Advice for NRIs
- File Income Tax Return (ITR-2) to demand a refund or exemption.
- Submit Form 13 to lower TDS if your final tax is less.
- Maintain purchase and sale documents, and proof of reinvestment if claiming exemptions.
- If you have many transactions or significant assets, work with a chartered accountant (CA).
Last Thoughts
If you follow the guidelines and apply the available exemptions, non-resident Indians have simple capital gains tax. Plan your sale always, keep your records, and timely file your tax return. Smart planning will help you save a reasonable sum legally.
