Selling a flat in Mumbai, redeeming mutual funds, or booking profits on Indian shares from abroad? Every one of these triggers capital gains tax for NRIs in India and the buyer, broker, or fund house will usually withhold tax at source before the money even reaches your NRO account. Getting the holding period, the rate, and the TDS mechanics wrong is the single biggest reason NRIs either overpay or run into refund delays.

This guide walks through exactly how capital gains are taxed for NRIs after the July 2024 reforms, how TDS works under the new Income Tax Act, 2025, which exemptions are still available, and what's changed in the section numbers and forms you'll see this year.

Key Takeaways

• Short-term capital gains on listed shares and equity mutual funds are taxed at 20%; long-term gains (held 12+ months) are taxed at 12.5% without indexation, with the first ₹1.25 lakh of LTCG exempt on listed equity and equity mutual funds.
• Property and unlisted assets held over 24 months qualify as long-term and are taxed at 12.5% plus cess and surcharge, without indexation; short-term gains are taxed at your slab rate (up to 30%).
• TDS applies to every sale by an NRI, regardless of amount there's no minimum threshold as there is for residents. On property, this is now governed by Section 393(2) of the Income Tax Act, 2025 (formerly Section 195).
• You can reduce upfront TDS with a Lower/NIL TDS Certificate under Section 395(1) (formerly Section 197), applied for using Form No. 128 (formerly Form 13) or recover excess TDS by filing an ITR and claiming a refund.
• Reinvestment exemptions remain fully available: Section 82 (residential property reinvestment, formerly Section 54), Section 86 (reinvestment of proceeds from any other long-term asset, formerly Section 54F), and Section 85 (specified bonds, formerly Section 54EC).

From Tax Year 2026-27, filings run under the Income Tax Act, 2025  Form 26AS becomes Form 168, Form 16A becomes Form 131, and CA remittance certificates move from Form 15CA/15CB to Form 145/Form 146.

What Counts as a Capital Gain for an NRI

Any profit an NRI earns on selling an Indian capital asset listed shares, equity or debt mutual funds, unlisted shares, real estate, gold, or bonds is taxable in India under the Income Tax Act. Residence outside India doesn't change this; what matters is that the asset is located in India. Even if the sale proceeds are credited to a foreign bank account and never touch an Indian rupee account, the gain is still assessable here.

Example: An NRI in Singapore bought 500 shares of an Indian listed company in 2021 for ₹5 lakh and sells them in 2026 for ₹9 lakh. The ₹4 lakh profit is a capital gain taxable in India, regardless of where the sale proceeds are eventually held.

NRIs are governed by special provisions under Chapter XII-A of the Income Tax Act (Sections 115C–115I), which is why the compliance mechanics particularly around TDS differ meaningfully from what a resident Indian selling the same asset would experience.

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

The tax rate that applies depends entirely on how long you've held the asset before selling. Below is the holding-period test by asset class.

A practical nuance many NRIs miss: if you inherited or received an asset as a gift, you can add the previous owner's holding period to your own when testing for long-term status, and your cost is the previous owner's cost. This often converts what looks like a short-term sale into a long-term one with a materially lower tax rate.

 Capital Gains Tax Rates for NRIs in 2026

The Union Budget 2024 reforms, effective from 23 July 2024, remain the operative framework in 2026. Indexation was withdrawn on long-term gains for most asset classes, while headline rates were pushed up.

Long-Term Capital Gains (LTCG): A flat 12.5% applies across most asset categories including sale of property, where it is charged plus applicable cess and surcharge with no indexation benefit. For long-term gains on listed equity shares and equity mutual fund units specifically, the first ₹1.25 lakh in a financial year is exempt everything above that is taxed at 12.5%.

Short-Term Capital Gains (STCG):

• Listed shares, bonds, equity mutual fund units: taxed at a flat 20%.
• Property, unlisted shares, gold, debt-oriented mutual funds: taxed at your applicable slab rate (up to 30% for the highest bracket)

Add 4% health and education cess on the tax computed, and for higher incomes the applicable surcharge. At the top end, this can push the effective LTCG rate on equity to roughly 14.95% and STCG closer to 23.9%.

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

One more change worth flagging: proceeds from a company buying back its own shares are now taxed as capital gains in the hands of the shareholder (rather than as a dividend), which changes how such transactions should be reported.

TDS on Capital Gains: How Much Gets Withheld

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

For sale of property, TDS provisions are now specified under Section 393(2) of the Income Tax Act, 2025 (formerly Section 195 of the 1961 Act): the buyer deducts 12.5% plus applicable cess and surcharge of the sale consideration for long-term property, or 30% plus cess and surcharge for short-term property.

A crucial detail for property sales in particular: as this table shows, TDS is computed on the entire sale consideration, not your net gain, unless you've obtained a Lower/NIL TDS Certificate. Generally, on most property sale transactions, the seller's actual tax liability works out lower than this standard TDS amount which is exactly why the lower-deduction route (Section 7 below) matters so much for NRIs.

PAN matters. Without a valid PAN, TDS can be pushed up to 20% or higher, regardless of what the standard rate would otherwise be. If you don't already have one, applying for a PAN before any planned sale should be the first step.

The Section 48-Equivalent Foreign Currency Advantage

A provision many NRIs and even some advisors overlook: the Income Tax Act allows NRIs who buy shares or debentures of an Indian company using foreign currency to compute the capital gain in that original foreign currency rather than in rupees (this relief was earlier housed in Section 48 of the 1961 Act).

How it works: convert the purchase price and sale price into the same foreign currency, compute the gain in that currency, then convert 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 materially lower taxable gain than a straight INR calculation would.

Example: An NRI buys Indian shares for $10,000 when USD/INR is 60 (cost = ₹6,00,000) and sells them for ₹10,00,000 when USD/INR has moved to 80. Computed purely in rupees, the gain is ₹4,00,000. Computed in dollars sale value $12,500, cost $10,000, gain $2,500 and converted back at ₹80, the taxable gain is 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 extend to property, mutual funds, or most other asset classes but where it applies, it's worth structuring for.

Exemptions NRIs Can Still Claim

Higher rates and the loss of indexation don't mean NRIs are without relief. Three reinvestment routes remain fully available now renumbered under the Income Tax Act, 2025.

Section 82 — reinvesting in residential property (formerly Section 54). Sell a residential property, reinvest the long-term capital gain in another residential property, and claim exemption. The amount invested must go towards either purchasing another residential house within one year before or two years after the sale, or constructing a new residential house within three years after the sale. The amount of capital gain that is invested is exempt from tax.

Section 86 — reinvesting proceeds from any other long-term asset (formerly Section 54F). Sold land, gold, or shares instead of a house? Purchase a house property situated in India within one year before or two years after the transfer, or construct one within three years, and you can claim exemption on the long-term gain from that other asset. The property purchased must not be sold within three years of purchase or construction. Here, the entire sale receipt must be invested for full exemption; investing only part of it makes the exemption proportionate.

Section 85 — investing in specified bonds (formerly Section 54EC). Don't want to reinvest in property at all? Invest your capital gains in bonds issued by the National Highways Authority of India (NHAI), Rural Electrification Corporation (REC), or Power Finance Corporation (PFC), within 6 months of the sale. These bonds carry a 5-year lock-in and must not be sold before that period lapses. The amount invested in such bonds is exempt from tax.

How to Reduce or Recover TDS

Most NRIs end up with TDS deducted well above their actual liability, simply because the deduction is computed on gross sale value rather than net gain. Two levers fix this:

Before the sale apply for a Lower/NIL TDS Certificate. To avoid this blockage of funds, the Income Tax Act provides for a lower deduction TDS certificate also known as a TDS exemption certificate under Section 395(1) of the Income Tax Act, 2025 (formerly Section 197). This certificate is obtained by filing Form No. 128 (formerly Form 13) online with the jurisdictional officer, along with the requisite documents, before the transaction closes. If approved, the buyer or broker deducts TDS closer to your actual expected liability rather than the standard flat rate this matters most for property sales, where the standard TDS otherwise applies to the full sale consideration.

After the sale file your ITR and claim a refund. If you're unable to obtain a lower/NIL TDS certificate in time, you can still minimise the impact by claiming a refund. File your Indian income tax return (ITR-2, or ITR-3 if you also have business income); your actual tax liability is computed, and a refund is issued for the excess TDS paid during the financial year. Keep your TDS certificate as supporting proof, and file before 31 July of the relevant assessment year for smoother processing.

DTAA and Repatriation: Avoiding Double Taxation

India has Double Taxation Avoidance Agreements with over 90 countries, including the US, UK, UAE, Canada, and Singapore. If your country of residence also taxes the same capital gain, DTAA relief prevents you from paying tax twice by obtaining a Tax Residency Certificate (TRC) from your country of residence, submitting Form 10F along with your Indian ITR, and, where your home country still taxes the gain, claiming a foreign tax credit there for tax already paid in India.

Repatriating the sale proceeds brings its own compliance layer, separate from the capital gains tax itself. Before remitting sale proceeds outside India, two certificates are typically required:

• Form 145 — a declaration of remittance furnished by the remitter to the authorised dealer bank before the payment is made, covering the remitter's and beneficiary's details, the purpose and amount of remittance, and any TDS deducted.
• Form 146 — a Chartered Accountant's certificate confirming that the payment is either not chargeable to tax in India, or that tax has been deducted at the appropriate rate, and that the remittance complies with the Income Tax Act and the applicable DTAA.

(These correspond to what were earlier known as Form 15CA and Form 15CB.) NRIs and PIOs selling immovable property in India other than agricultural land, a farmhouse, or plantation property can generally repatriate the sale proceeds outside India through an Authorised Dealer, provided the property was originally acquired in accordance with the foreign exchange regulations in force at the time.

What Changes Under the Income Tax Act, 2025

From Tax Year 2026-27 onward, India's income tax law runs under the new Income Tax Act, 2025, which replaces the six-decade-old 1961 Act. For NRIs, the substantive tax treatment of capital gains the rates, the holding periods, the reinvestment logic carries over largely unchanged. What's different is the vocabulary, the section numbers, and the forms:

Common Mistakes NRIs Make

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

How Dinesh Aarjav & Associates Can Help

Capital gains tax for NRIs isn't a single calculation it's a sequence of decisions that all need to be right: classifying the holding period correctly, structuring TDS before the sale rather than chasing a refund after it, timing exemptions within their statutory windows, and coordinating repatriation and DTAA relief across two countries. Getting any 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, and we regularly advise clients on exactly these transactions from a single mutual fund redemption to a full property sale with repatriation.

Our team assists NRI clients with:

• Computing capital gains tax accurately across shares, mutual funds, property, and unlisted assets
• Applying for a Lower/NIL TDS Certificate under Section 395(1) (Form No. 128) before a sale, so TDS isn't withheld on the full sale value
• Structuring Section 82, 85, and 86 reinvestment to legally minimise tax on property and other asset sales
• Filing ITR-2/ITR-3 to claim refunds of excess TDS
• DTAA and Foreign Tax Credit planning so the same gain isn't taxed twice across India and your country of residence
• Preparing Form 145 and Form 146 certificates required for repatriating sale proceeds outside India
• Serving as your authorised representative for property registration, and assisting with property transfer, documentation, and opening the necessary bank accounts
• Ongoing tax planning and advisory services for NRIs actively investing in Indian markets

Whether you're planning a single sale or restructuring a broader Indian portfolio before repatriating funds, our advisors can review your specific holding pattern and residency position before you transact not after the TDS has already been deducted.

Also Read:

• Sale of Property in India for NRIs — Complete Guide
• 401(k) Taxation in India (2026): The Complete Guide for NRIs & Returning Indians
• Can You Gift US Stocks Bought Under LRS to Your NRI Children? FEMA Rules
• Returning to India in 2026 — The Ultimate NRI Return Planning Guide
• Can an NRI Gift Mutual Funds in India? Complete Guide to Tax, FEMA & Compliance