If you're an NRI planning to sell property in India, a recent ruling by the Income Tax Appellate Tribunal (ITAT), Mumbai could be a big win for your tax planning.

The judgment clarifies that for calculating long-term capital gains (LTCG), you can apply indexation benefits starting from the year of the agreement to sale, even if you received possession years later.

Combined with the latest update in the Finance Bill, 2024, this makes timing your property sale more important than ever.

Let’s break this down.

Why NRIs Must Understand Capital Gains Tax in India

When you sell real estate in India, the gains are taxed as either short-term or long-term capital gains.

• If you held the property for more than 24 months, it is treated as a long-term capital asset, and LTCG rules apply.

LTCG Tax Rates for NRIs – As Per Finance (No. 2) Bill, 2024

The Finance (No. 2) Bill, 2024 has introduced key changes to Section 112(1)(c) of the Income Tax Act, specifically affecting LTCG for NRIs:

What This Means:

• Sell before July 23, 2024 if you want to claim indexation and reduce taxable gains.
• After July 23, you get a lower tax rate, but cannot adjust for inflation, which may increase your tax outgo depending on when you bought the property.

So how do you calculate indexation and apply the right holding period?

This is where the latest ITAT ruling brings clarity for NRIs.

Case Highlight: ITAT Rules in Favour of Taxpayer on Indexation Start Date

In a recent ITAT case, the NRI taxpayer:

• Sold a flat for ₹70 lakhs in FY 2014–15
• Signed the agreement to sale in FY 2007–08
• Received possession in FY 2010–11
• Made over 65% of the payment by FY 2007–08

The Assessing Officer (AO) applied indexation from FY 2010–11, increasing LTCG to ₹17+ lakhs.

But the Tribunal ruled that the taxpayer acquired the rights in the capital asset in FY 2007–08 through the registered agreement and substantial payment. Hence, indexation must begin from that year.

Real Tax Impact of Applying Indexation Earlier

Taxable capital gains reduced by over ₹15 lakh!

Why This Ruling Matters to NRIs

This ruling sets an important precedent. According to Section 48 (Explanation iii) of the Income Tax Act, the "indexed cost of acquisition" is based on when you first held the asset.

The Tribunal confirmed that “holding” starts:

• From the date of agreement to sale
• When substantial payment is made
• Even if possession is given later

It aligns with earlier judgments like:

• PCIT vs. Vembu Vaidyanathan (Bombay HC)
• Madhu Kaul vs. CIT (Punjab & Haryana HC)

Both rulings support that legal rights, not physical possession, determine the start of the holding period for LTCG indexation.

What Should NRIs Selling Property in India Do Now?

If you're a Non-Resident Indian selling property, here's what you should consider:

Date of Agreement vs. Possession
Use the agreement date for indexation, especially if you’ve made substantial payments early.

Sold Before July 23, 2024?
You can claim 20% LTCG with indexation.

Selling After July 23, 2024?
Expect 12.5% tax without indexation—beneficial only for properties bought recently.

How We Help NRIs Like You

At Dinesh Aarjav & Associates, we help NRIs with end-to-end support in:

• Capital gains calculation with or without indexation
• CA Certification & Form 15CA/15CB
• Repatriation under the Liberalised Remittance Scheme (LRS)
• Section 54 & 54EC reinvestment planning
• DTAA relief to avoid double taxation
• Structuring NRO/NRE/FCNR accounts effectively

Final Thoughts

This ITAT ruling is a big win for those selling NRI property in India.

It confirms that the indexation benefit for long-term capital gains can start from the agreement date, not possession—if substantial payments were made.

Combine this with the Finance Bill changes: If you're close to selling a property, consider the cut-off date of July 23, 2024, and decide whether indexation or lower tax rate benefits you more.

Ready to Save on Taxes and Repatriate Funds Smoothly?

Talk to our NRI taxation Experts today.

Plan Repatriation Wisely
Use Form 15CA/CB, NRO/NRE accounts, and LRS rules to move funds abroad legally.

Leverage DTAA Relief
Avoid double taxation if you live in the US, UK, Canada, or other treaty countries.