When an NRI sells property, redeems mutual funds, or books profits on Indian shares, the gain is taxable in India. That's true regardless of where the money lands afterward. This guide covers how NRI capital gains tax works in 2026, including the rates that apply after the July 2024 reforms, how TDS is calculated and withheld, which exemptions you can still use, and what's changed under the Income Tax Act, 2025.

Quick summary before we get into the detail:

• Short-term gains on listed equity and equity mutual funds are taxed at 20%; long-term gains at 12.5%, with the first ₹1.25 lakh of LTCG on listed equity exempt each year.
• Property and most other assets held over 24 months qualify as long-term and are taxed at 12.5% with no indexation.
• TDS applies to every NRI capital gains transaction with no minimum threshold.
• The new Income Tax Act, 2025 renumbers key sections and forms but keeps the core tax treatment largely the same.

What Counts as a Capital Gain for an NRI?

Any profit from selling an Indian capital asset is taxable in India, full stop. It doesn't matter that you live abroad, and it doesn't matter where the sale proceeds. If the asset is located in India, the gain is accessible here. This covers listed shares, equity and debt mutual funds, unlisted shares, real estate, gold, and bonds.

NRIs fall under special provisions in Chapter XII-A of the Income Tax Act (Sections 115C–115I). That's why the compliance mechanics, especially around TDS, work differently for NRIs than they do for resident Indians selling the same asset.

Example: An NRI in Singapore bought 500 shares of an Indian listed company in 2021 for ₹5 lakh and sold them in 2026 for ₹9 lakh. The ₹4 lakh profit is taxable in India, regardless of which account the proceeds go into.

Short-Term vs Long-Term: Holding Periods by Asset Type

The rate you pay depends entirely on how long you held the asset. Here's how the holding period test works by asset class:

One thing many NRIs miss: if you inherited an asset or received it as a gift, you can add the previous owner's holding period to your own. Your cost is also the previous owner's cost. This often converts what looks like a short-term sale into a long-term one, with a meaningfully lower tax rate.

NRI Capital Gains Tax Rates in 2026

The Union Budget 2024 reforms, effective from 23 July 2024, remain the operative framework. Indexation was removed for most asset classes, and rates were adjusted upward.

Long-Term Capital Gains (LTCG) Tax for NRIs

A flat 12.5% applies across most long-term asset categories, including property. No indexation benefit is available. For listed equity shares and equity mutual fund units specifically, the first ₹1.25 lakh of long-term gains in a financial year is exempt. Everything above that is taxed at 12.5%.

Short-Term Capital Gains (STCG) Tax for NRIs

• Listed shares, bonds, and equity mutual fund units: 20% flat
• Property, unlisted shares, gold, and debt-oriented mutual funds: taxed at your applicable slab rate, up to 30%

Add 4% health and education cess on whatever tax is calculated. Surcharge applies for higher incomes. At the top end, the effective LTCG rate on equity works out to roughly 14.95%, and STCG to around 23.9%.

Worked example: An NRI holds equity mutual funds bought in March 2023 and sells in June 2026 for a ₹6 lakh gain (held over 12 months, so long-term). After the ₹1.25 lakh exemption, ₹4.75 lakh is taxable at 12.5%, which gives ₹59,375. Adding 4% cess brings the total to ₹61,750, before any surcharge.

One other change worth knowing: when a company buys back its own shares, the proceeds are now taxed as capital gains in the shareholder's hands rather than as a dividend.

NRI TDS on Capital Gains: How Much Gets Withheld

This is where NRI capital gains tax diverges sharply from the resident experience. There is no minimum threshold. TDS applies to every capital gains transaction for an NRI, deducted by whoever pays you: the broker, the fund house, or the buyer.

For property sales, TDS is now governed by Section 393(2) of the Income Tax Act, 2025 (formerly Section 195 of the 1961 Act).

A critical point for NRI property sale TDS: the deduction is calculated on the full sale consideration, not your net gain. In most property transactions, the seller's actual tax liability is lower than the standard TDS amount. That gap is exactly why getting a Lower/NIL TDS Certificate before the sale matters so much (covered in the section below).

PAN is not optional. Without a valid PAN, TDS can be pushed to 20% or higher regardless of the standard rate. If you don't have one, applying for a PAN should happen before any planned sale.

The Foreign Currency Computation Benefit

This is a relief many NRIs and even some advisors overlook. If you bought shares or debentures of an Indian company using foreign currency, you can calculate your capital gain in that original foreign currency rather than in rupees.

Here's how it works: convert the purchase price and sale price into the same foreign currency, work out the gain in that currency, then convert just the gain back to INR for tax purposes.

Why it matters: if the rupee has depreciated between your purchase and sale dates, this method can produce a noticeably lower taxable gain than a straight INR calculation.

Example: An NRI buys Indian shares for $10,000 when USD/INR is 60 (cost = ₹6,00,000) and sells for ₹10,00,000 when USD/INR is 80. In rupees, the gain looks like ₹4,00,000. In dollars, the sale value is $12,500, the cost is $10,000, the gain is $2,500, and converting back at ₹80 gives a taxable gain of only ₹2,00,000.

This benefit is narrow. It applies only to shares or debentures of an Indian company purchased in foreign currency by a non-resident. It doesn't cover property, mutual funds, or most other asset classes. But where it applies, it's worth knowing about before you structure the sale.

NRI Capital Gains Exemptions: The Three Reinvestment Routes

Higher rates and the removal of indexation don't leave NRIs without options. Three reinvestment exemptions remain fully available, now renumbered under the Income Tax Act, 2025.

Section 82: Reinvest in Residential Property (Formerly Section 54)

Sell a residential property, reinvest the long-term capital gain into another residential property, and claim exemption. You must either purchase a residential house within one year before or two years after the sale, or construct one within three years after the sale. The amount of the gain you reinvest is exempt from tax.

Section 86: Reinvest Proceeds from Any Other Long-Term Asset (Formerly Section 54F)

Sold land, gold, or shares rather than a house? You can still claim exemption by purchasing a residential property in India within one year before or two years after the transfer, or constructing one within three years. The purchased property must not be sold within three years. Unlike Section 82, this route requires you to invest the entire sale receipt for full exemption. Investing only part of it makes the exemption proportionate.

Section 85: Invest in Specified Bonds (Formerly Section 54EC)

If reinvesting in property doesn't suit your situation, you can invest your capital gains in bonds issued by NHAI, REC, or PFC within six months of the sale. These bonds carry a five-year lock-in and must not be sold before that period. The amount invested is exempt from tax.

Caps on the Reinvestment Exemptions

These three routes aren't unlimited. Missing the statutory ceilings is one of the more expensive mistakes an NRI can make when planning a large sale.

Section 82 and Section 86: capped at ₹10 crore. If your long-term gain exceeds ₹10 crore, the exemption still applies, but only up to ₹10 crore. Anything above that is taxed normally, regardless of how much you reinvest. The cap applies per person, per financial year.

Section 85: capped at ₹50 lakh. Bond investment under this section is capped at ₹50 lakh in aggregate across the financial year of transfer and the following year combined. Investing ₹50 lakh just before 31 March and another ₹50 lakh just after, to claim ₹1 crore of exemption on a single sale, was specifically closed by amendment. Both tranches together are still capped at ₹50 lakh against one transfer.

The two-property option under Section 82. Normally this exemption covers reinvestment in one residential property. There is a narrow exception: if the long-term gain itself doesn't exceed ₹2 crore, you may split the reinvestment across two residential properties in India. This option can only be used once in your lifetime.

Worked example: An NRI sells an inherited property in Delhi with a long-term gain of ₹14 crore and reinvests the full amount under Section 82. Despite reinvesting everything, only ₹10 crore is exempt. The remaining ₹4 crore is taxed at 12.5% plus cess and surcharge, creating a tax liability of roughly ₹50 lakh (before surcharge) that a simple reading of the exemption would miss entirely.

For very large sales, it's worth modelling whether splitting the exemption across Section 82 and Section 85, or accepting tax on the excess and planning with DTAA relief, produces a better outcome than full reinvestment alone. This calculation should happen before the sale agreement is signed.

How to Reduce or Recover TDS

Most NRIs end up with more TDS withheld than their actual liability, because the deduction is calculated on gross sale value rather than net gain. There are two ways to address this.

Before the sale: apply for a Lower/NIL TDS Certificate. Under Section 395(1) of the Income Tax Act, 2025 (formerly Section 197), you can apply for a certificate that instructs the buyer or broker to deduct TDS at a rate closer to your actual expected liability. The application is filed online using Form No. 128 (formerly Form 13) with the jurisdictional officer, along with the required documents, before the transaction closes. This matters most for property sales, where standard TDS otherwise applies to the full sale consideration.

After the sale: file your ITR and claim a refund. If you couldn't get the certificate in time, file your Indian income tax return (ITR-2, or ITR-3 if you also have business income). Your actual liability is computed, and a refund is issued for the excess TDS. Keep your TDS certificate as supporting documentation and file before 31 July of the relevant assessment year for smoother processing.

DTAA Relief and Repatriation

India has Double Taxation Avoidance Agreements with over 90 countries, including the US, UK, UAE, Canada, and Singapore. If your country of residence taxes the same gain, DTAA relief keeps you from paying twice. To use it, obtain a Tax Residency Certificate (TRC) from your country of residence, submit Form 10F with your Indian ITR, and claim a foreign tax credit in your home country for tax already paid in India.

Repatriating sale proceeds involves its own compliance layer. Before remitting funds outside India, two certificates are typically required:

• Form 145 (formerly Form 15CA): a remittance declaration filed by the remitter with the authorised dealer bank before payment, covering the details of both parties, the purpose and amount, and any TDS deducted.
• Form 146 (formerly Form 15CB): a Chartered Accountant's certificate confirming that tax has been deducted at the appropriate rate and that the remittance complies with the Income Tax Act and applicable DTAA.

NRIs and PIOs selling immovable property in India (other than agricultural land, farmhouses, or plantation property) can generally repatriate sale proceeds through an Authorised Dealer, provided the property was originally acquired in line with the foreign exchange regulations in force at the time.

What's Changed Under the Income Tax Act, 2025

From Tax Year 2026-27, India's tax law runs under the new Income Tax Act, 2025, replacing the 1961 Act. For NRI capital gains tax, the rates, holding periods, and reinvestment logic carry over largely unchanged. What's different is the vocabulary, the section numbers, and the forms.

Common Mistakes NRIs Make on Capital Gains

It's easy to get one of these details wrong, especially if you're working from outdated guidance or resident-focused tax advice.

• Assuming there's a TDS threshold when there isn't. Every rupee of NRI capital gains attracts TDS, unlike the exemption thresholds that apply to residents.
• Letting TDS get deducted on the full sale value of a property without first applying for a Lower/NIL TDS Certificate under Section 395(1), which ties up cash for a year or more while you wait for a refund.
• Missing the Section 82, 85, or 86 reinvestment window because property searches or repatriation formalities take longer than expected. The clock starts from the date of transfer, not when funds reach your overseas account.
• Filing without a TRC and Form 10F, and losing DTAA relief that was otherwise available.
• Overlooking Form 145 and Form 146 before repatriation, which can delay or block the transfer even after tax has been paid correctly.
• Not maintaining a valid PAN, which triggers a higher TDS rate on every transaction type.

How Dinesh Aarjav & Associates Can Help?

Getting capital gains tax for NRIs right isn't a single calculation. It's a sequence of decisions: classifying the holding period, structuring TDS before the sale rather than chasing a refund afterward, timing reinvestment exemptions within their statutory windows, and coordinating repatriation and DTAA relief across two jurisdictions. Getting one step wrong is what turns a routine sale into a year-long refund process.

At Dinesh Aarjav & Associates, we specialise in NRI, OCI, and cross-border taxation, with presence across 15+ states in India. Our team helps clients with:

• Computing NRI capital gains tax accurately across shares, mutual funds, property, and unlisted assets
• Applying for a Lower/NIL TDS Certificate under Section 395(1) using Form No. 128 before a sale closes
• Structuring Section 82, 85, and 86 reinvestment to reduce tax on property and other asset sales
• Filing ITR-2 or ITR-3 to claim refunds of excess TDS
• DTAA and foreign tax credit planning so the same gain isn't taxed twice
• Preparing Form 145 and Form 146 for repatriation of sale proceeds
• Acting as authorised representative for property registration, documentation, and account setup
• Ongoing tax planning and advisory for NRIs actively investing in Indian markets

Whether you're planning a single sale or restructuring a broader portfolio before repatriation, our advisors can review your specific holding pattern and residency position before you transact.

Conclusion

For NRIs, capital gains tax in India involves more than simply calculating the profit on a sale. Holding periods, TDS, reinvestment exemptions, DTAA relief, and repatriation requirements all need careful planning. With the Income Tax Act, 2025 introducing new section numbers and forms, using current guidance is essential. Proper planning before a transaction can help reduce excess TDS, claim available exemptions, and avoid costly compliance issues.