Selling a flat in Pune, shares in Bengaluru or a mutual fund in Mumbai can trigger Indian tax even if you live in the United States. Capital gains tax for NRI in India depends on what you sold, how long you held it and the date of sale; the rate is set by law and TDS is usually taken from the sale price. The 2024 changes removed the old inflation-indexation benefit for most sales and moved the long-term rate to 12.5%, and NRIs, unlike residents, do not get a choice between the two. This page explains holding periods, the rates in force for FY 2025-26 and tax year 2026-27, the reinvestment exemptions and what you must file.
How is capital gains tax for NRI in India calculated?
Under section 72 of the Income-tax Act, 2025 the gain equals the sale consideration less the cost of acquisition, the cost of improvement and the expenses of the sale, such as brokerage. For land and buildings, section 78 substitutes the stamp duty value for a lower sale price, but if the stamp duty value is within 110% of the actual price, the price is accepted. If you inherited the asset, section 73 uses the previous owner's cost, and the period the previous owner held it counts toward your holding period.
A non-resident who sells shares or debentures of an Indian company (other than listed equity covered by section 198) can compute the gain in the foreign currency used to buy them and reconvert it, which removes the rupee exchange effect. Section 197(4) says this method is not available for long-term gains on unlisted securities. Check with your CA which treatment fits.
What are the holding periods and rates?
| Asset | Short-term if held | Short-term rate | Long-term rate |
|---|---|---|---|
| Listed shares and equity-oriented fund units (STT paid) | 12 months or less | 20% (section 196) | 12.5% on gains above ₹1,25,000 (section 198) |
| Land and buildings | 24 months or less | Slab rates | 12.5%, no indexation for NRIs (section 197) |
| Unlisted shares | 24 months or less | Slab rates | 12.5% (section 197) |
| Other capital assets | 24 months or less | Slab rates | 12.5% (section 197) |
For FY 2025-26 the 1961 Act gives the same results: 20% under section 111A, 12.5% under section 112A for listed equity above ₹1.25 lakh and 12.5% under section 112 on other long-term gains, as shown in the Income Tax Department's guide for non-residents. Gains on debt-oriented funds, bonds, gold and similar assets have separate rules; ask your CA. The special NRI regime in sections 212 to 217 also taxes long-term gains on specified assets bought with foreign exchange at 12.5%.
Surcharge on tax starts at 10% when total income exceeds ₹50 lakh, and 4% health and education cess is added. TDS usually applies, as explained in TDS on property sale by an NRI.
Why does the indexation option not help NRIs?
For land or buildings acquired before July 23, 2024, section 197(3) limits the tax of an individual or HUF who is a resident to the lower of two computations: 12.5% on the plain gain, or 20% on a gain computed with indexed cost. The words "being a resident" shut NRIs out. They pay 12.5% on the unindexed gain. For a flat bought long ago in Chennai or Ahmedabad, the difference can be large, so decide whether to sell before or after becoming a resident, taking the full picture, including RNOR status, to your CA. See India residency rules.
How can you reduce or defer the tax?
| Relief | Who and what | Key conditions |
|---|---|---|
| Section 82 (section 54 of the 1961 Act) | Individual or HUF selling a long-term residential house | Buy a house in India within one year before or two years after, or construct within three; two houses allowed if the gain is up to ₹2 crore; ₹10 crore cap |
| Section 86 (section 54F of the 1961 Act) | Individual or HUF selling another long-term asset | Invest the net consideration in a residential house in India within the same windows |
| Section 85 | Long-term gains on land or buildings | Invest within six months in specified NHAI or REC bonds, up to ₹50 lakh, with a five-year lock-in |
| Section 215 | NRI selling a foreign exchange asset | Reinvest the net consideration within six months in specified assets; three-year lock-in |
If you cannot reinvest before filing, the unutilised gain goes into a notified capital gains deposit scheme account. Missing the reinvestment deadline or selling the new asset early makes the gain taxable again.
Documents to assemble
- Sale deed, purchase deed and registered improvement receipts
- Stamp duty value on the date of agreement and registration
- Brokerage, legal and transfer cost receipts
- Broker or fund-house capital gains statement for securities
- Lower deduction certificate and TDS certificates
- NRO or NRE account statements, if proceeds will be remitted; see Form 15CA and 15CB
Filing, advance tax and repatriation
Capital gains go into the return even when TDS was taken. If the TDS falls short of the tax, advance tax or self-assessment tax covers the difference, and interest applies if tax is paid late. A refund arises if TDS exceeds tax. NRIs and PIOs may remit up to USD 1 million per financial year from NRO balances and sale proceeds, subject to RBI conditions and tax payment, as set out in RBI's FAQ; see NRI property ownership and FEMA rules.
Worked examples
Property. Ravi, who lives in Aurora, bought a Pune flat in 2015 for ₹50 lakh and sells it in October 2026 for ₹1.2 crore, paying ₹1.2 lakh in brokerage. Gain = ₹1,20,00,000 minus ₹1,20,000 minus ₹50,00,000 = ₹68,80,000. At 12.5%, the base tax is ₹8,60,000, before surcharge and cess. The buyer withholds on the full price unless a lower certificate is issued; with one, the deduction approximates the actual tax.
Shares. Asha sells Bengaluru-listed shares held for 18 months at a gain of ₹5,00,000. The tax is 12.5% on ₹3,75,000 (the gain above ₹1,25,000), or ₹46,875 before cess. If she had held them for 8 months, the same gain would attract 20%, or ₹1,00,000.
Mistakes to avoid
- Using the 20% with indexation rate that residents use.
- Miscounting the holding period; your CA confirms the date from which it runs, including any period held by the previous owner.
- Forgetting that a gain is reported even if TDS covers it.
- Reinvesting without opening the capital gains deposit account when the funds are not used before the return.
U.S. side
The United States taxes U.S. citizens and residents on worldwide gains in U.S. dollars, so basis and proceeds are converted at the rates on purchase and sale dates and a currency effect can appear in the gain. Article 13 of the US-India treaty leaves each country free to tax capital gains under its domestic law, so you usually claim a U.S. credit for Indian tax within the U.S. tax on the same gain. Indian mutual funds raise passive foreign investment company issues; see Form 8621 PFIC, capital gains compared and foreign tax credits across three countries.
How we can help
Our CPA firm in Aurora, Illinois computes the U.S. gain, the foreign tax credit and the reporting forms, and coordinates with your Indian CA so both countries see the same facts. We do not file Indian returns. See real estate investor tax and cross-border tax for India, Canada and USA. Browse the full series from the India hub.
Frequently asked questions
What is the long-term capital gains rate for NRIs on property?
It is 12.5% without indexation, plus surcharge and cess, for a property held more than 24 months.
Do NRIs get the Rs 1.25 lakh exemption on shares?
Yes. The first ₹1,25,000 of long-term gains on listed equity in the year is outside the 12.5% rate under section 198 (a stock-exchange transaction with securities transaction tax is required).
Can I save tax by buying another house in India?
Yes, under the reinvestment relief, if the conditions on timing, number of houses and lock-in are met.
Is the capital gain taxed in both India and the United States?
Possibly, yes. The foreign tax credit relieves the overlap up to the U.S. tax on that income.
Which return form reports capital gains?
ITR-2 for individuals without business income; see NRI ITR filing step by step.
Official sources
- Income Tax Department: Income-tax Act, 2025, sections 70, 72, 73, 78, 82, 85, 86, 196-198, 215 (as amended by the Finance Act, 2026)
- Income Tax Department: Benefits available to non-residents, AY 2026-27 (rates under the 1961 Act)
- CBDT: FAQs on Interplay and Transition (NRI provisions and capital gains exemptions)
- RBI: FAQs on remittance of assets
- IRS: United States-India income tax convention (Article 13, Gains)
This page summarizes public guidance in plain language. If anything here differs from the official source, the official source controls.
General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.