When selling property in India, the tax implications extend beyond Indian borders. While India taxes the capital gains from the sale, NRIs must also consider how these gains are treated in their country of residence, particularly in the United States, the United Kingdom, and Singapore, which have different rules on foreign income and double taxation relief
Pradeep Seth, 38, an NRI living in the US, sold a property in India for ₹1 crore that he had purchased in 2012 for ₹20 lakh. Treated as a long-term capital asset, its indexed cost of acquisition was ₹36.3 lakh. This led to a long-term capital gain of ₹63.7 lakh. The applicable capital gains tax in India, computed at 20% plus 4% cess, amounted to about ₹13.25 lakh. As the property value exceeded ₹50 lakh, the buyer was required to deduct TDS (Tax Deducted at Source) on the transaction, and an additional 1% TCS (Tax Collected at Source) was also collected at the time of sale.
After filing his Indian income tax return and claiming credit for the TDS and TCS, the NRI received a small refund, leaving net proceeds of approximately ₹86.76 lakh available for repatriation to his US account. For US tax purposes, the capital gain also had to be reported, as the US taxes the global income of its residents. The applicable long-term capital gains tax in the US could have been around 15% plus 3.8% Net Investment Income Tax (NIIT). However, the Foreign Tax Credit for taxes paid in India fully offset his US tax liability.
Ultimately, after accounting for capital gains tax, TDS, TCS, and double taxation relief, Pradeep’s effective global tax burden on the long-term capital gain remained around 20%.
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Capital gains and repatriation tax in the US, UK, and Singapore
When you sell a property in India, you have to pay the taxes here. “You file your income tax return, claim credit for that TDS, and pay or receive a refund based on your actual tax liability,” says Vivek Jalan, partner, Tax Connect Advisory Services.
Taxes also apply when you repatriate the amount you get after selling the property abroad.
“All citizens and green card holders of the United States must report their worldwide income, including income from the sale of properties located outside the US, in their tax returns filed with the IRS (Internal Revenue Service),” says Pallav Pradyumn Narang, Partner, CNK, a chartered accountancy firm.
The UK taxes residents on worldwide income. Until April 5, 2025, non-domiciled individuals could opt to pay tax only on income actually repatriated into the UK under the remittance basis. “From April 6, 2025, this regime has been replaced by the four-year Foreign Income & Gains (FIG) regime, under which qualifying new residents (who were non-resident for at least ten years) can receive relief on foreign income and gains for four tax years; thereafter, income is taxed on the arising basis,” says Narang.
Singapore generally does not tax capital gains from the sale of property. However, if the tax authorities view the individual as trading in properties (for example, frequent buying and selling with profit intent), such gains may be treated as business income and taxed accordingly.
NRIs must remember that they are allowed to repatriate up to $1 million per financial year, compared to the $250,000 limit applicable to residents under the Liberalised Remittance Scheme (LRS).
DTAA essentials every NRI should know before selling property in India
The role of the Double Taxation Avoidance Agreement (DTAA) is critical in this context. India has a DTAA agreement with the US, UK and Singapore.
“Under most DTAAs, gains from immovable property may be taxed in the country where the property is situated, while the resident country may also tax such gains but usually allows a foreign tax credit for the tax paid abroad. Therefore, it is essential to study the relevant DTAA between the two jurisdictions before any transaction for effective tax planning,” says Narang.
“For example, in case the country of residence imposes a tax of 15% on the capital gains accruing on the sale of immovable property, the fact that taxes have already been paid in India at the rate of 12.5% shall be taken into account, and the NRI shall have to pay tax only at the rate of 2.5%,” says SR Patnaik, Partner (head-taxation), Cyril Amarchand Mangaldas, a law firm.
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Repatriating property sale proceeds: key rules and compliance for NRIs
Repatriation of funds shall depend on the Indian foreign exchange regulations. Purely from a tax perspective, it is not necessary for the NRI to repatriate the entire proceeds. “However, in case the NRI intends to repatriate the sale proceeds, it would be advisable to do so in compliance with Indian foreign exchange and tax regulations,” says Patnaik.
For example, the buyer is required to withhold tax on the capital gains accruing to the non-resident NRI, and the remittance could take place on the basis of appropriate documentary evidence, including the sale deed of the immovable property and additional documents like Form 15CA (from the buyer) and 15CB (from a CA evidencing the taxes paid in India).
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The buyer may be asked to share a copy of the withholding tax certificate as soon as it becomes available. “These documents would help the NRI seller to substantiate the basis of capital gains and the capital gains tax paid by him/her in India,” says Patnaik.
Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics