NRI Capital Gains Tax in India: Rates, Rules & Exemptions

An NRI selling an Indian property, shares, mutual funds or another capital asset may have an Indian tax liability on the resulting capital gain. However, the tax is not determined simply by the sale amount: the type of asset, holding period, date of transfer, applicable tax rules, exemptions and the NRI's circumstances can all affect the result.

This guide explains how capital gains taxation generally works for NRIs in India, how gains are calculated, when different tax rates may apply, and what to consider regarding exemptions, TDS, DTAA and tax reporting.

Tax note: Indian capital-gains rules are time-sensitive. For transactions in Tax Year 2026–27 and later, the Income Tax Act, 2025 applies, while earlier tax years can continue to be governed by the Income Tax Act, 1961 under the applicable transitional rules.

How Does Capital Gains Tax Apply to NRIs in India?

Yes, an NRI may have to pay capital gains tax in India when taxable capital gains arise from the transfer of an Indian capital asset. The exact tax treatment depends on the asset, the date and nature of the transfer, the applicable computation rules and any available exemption or treaty provision.

For example, an NRI may create a taxable capital gain by selling:

• Indian land or a residential property
• Shares of an Indian company
• Securities
• Mutual fund units
• Other assets treated as capital assets under Indian tax law

The fact that the seller lives outside India does not by itself remove Indian tax considerations. For tax years beginning from 1 April 2026, the Income Tax Act, 2025 governs the applicable tax framework, while the Income Tax Act, 1961 continues to matter for earlier tax years and certain transitional situations.

Which Indian Assets Can Create Capital Gains for an NRI?

Capital gains can arise when an NRI transfers a capital asset for more than the applicable tax basis. However, different asset classes can have different holding-period rules, tax rates and exemptions.

This means there is no single "NRI capital gains tax rate" that applies to every asset.

For example, the tax treatment of a long-term gain on an Indian property cannot simply be assumed to be identical to the treatment of a gain on listed equity shares.

Short-Term vs Long-Term Capital Gains for NRIs

The distinction between short-term capital gain (STCG) and long-term capital gain (LTCG) is important because the applicable tax treatment can differ.

There is also no single holding period that applies to every type of capital asset. The relevant period must be determined according to the asset-specific provisions applicable to the transaction.

For certain listed equity shares and specified equity-oriented investments where the statutory conditions are satisfied, the special short-term capital-gains rate is currently 20% for applicable transfers. Long-term gains covered by Section 112A are currently subject to a 12.5% rate on the portion above the applicable ₹1.25 lakh threshold, subject to the conditions of the provision.

These rates should not be applied automatically to property, mutual funds or every other type of security.

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How Is Capital Gain Calculated for an NRI?

The basic calculation begins with the amount received or accruing from the transfer and then applies the deductions and cost rules permitted for that particular asset.

A simplified representation is:

Capital Gain = Sale Consideration − Eligible Transfer Expenses − Applicable Cost of Acquisition/Improvement

The actual statutory calculation can be more detailed. Depending on the asset and transaction date, the calculation may involve rules concerning the cost of acquisition, cost of improvement, fair market value, foreign-currency conversion or other specific provisions.

For example, suppose an NRI sells an Indian capital asset for ₹80 lakh. Assume, purely for illustration, that the applicable acquisition cost is ₹50 lakh and eligible transfer expenses are ₹2 lakh.

The simplified gain would be:

₹80 lakh − ₹50 lakh − ₹2 lakh = ₹28 lakh

This ₹28 lakh is only the illustrative capital gain, not automatically the final tax payable. The applicable tax rate, exemptions, losses and other provisions must still be considered.

For certain non-resident transactions involving shares or debentures of an Indian company acquired in foreign currency, the law provides a specific foreign-currency computation mechanism intended to address exchange-rate fluctuations. The Income Tax Department confirms that this mechanism continues under the Income Tax Act, 2025.

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NRI Capital Gains Tax Rates in India

There is no universal capital-gains rate for NRIs. The applicable rate depends on the type of capital asset, whether the gain is short-term or long-term, the date of transfer and the specific statutory provision.

For current transactions, the Income Tax Department's tax-return materials identify 12.5% as the long-term capital-gains rate for relevant categories and 20% as the special short-term rate for specified transactions. Other capital gains can be subject to different provisions.

The date of transfer is particularly important. Changes introduced from 23 July 2024 altered several capital-gains provisions. For example, the Income Tax Department's validation rules confirm that for non-residents, long-term gains from land or buildings transferred on or after 23 July 2024 are subject to the 12.5% rate and that indexation is not allowed for such non-resident transactions.

Therefore, an NRI should not calculate tax by applying a rate found in an older article without checking the transaction date and current law.

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Can NRIs Claim Capital Gains Exemptions?

Yes. Certain capital-gains exemptions can be available to NRIs, provided the transaction satisfies the relevant statutory conditions.

Common provisions historically associated with capital-gains exemptions include Sections 54, 54EC and 54F of the Income Tax Act, 1961. The transition to the Income Tax Act, 2025 means the applicable provision and transitional treatment should be checked for the relevant tax year.

For example:

• Section 54 has historically provided relief in qualifying cases involving long-term capital gains from residential property and reinvestment in another residential property.
• Section 54EC has historically provided a route for eligible long-term gains from specified assets through investment in qualifying bonds, subject to statutory conditions.
• Section 54F has historically provided relief in certain cases involving long-term gains from assets other than a residential house, subject to its conditions.

These provisions are not automatic NRI exemptions. Eligibility depends on factors such as the asset transferred, nature of the gain, amount reinvested, timing and other statutory requirements.

The Income Tax Department has also clarified that exemptions claimed under the earlier Act can have consequences after 1 April 2026 if conditions attached to the exemption are subsequently breached.

For this reason, an NRI should verify the relevant provision before selling or reinvesting rather than assuming that a capital-gains exemption will apply.

TDS on Capital Gains for NRIs

TDS and final capital-gains tax are not the same thing. TDS is a withholding mechanism, while the final tax liability is determined after applying the relevant income-tax rules to the taxpayer's complete circumstances.

Payments to non-residents can attract TDS under Section 195 where the amount is chargeable to Indian income tax. The Income Tax Department also explains the related Form 15CA/15CB compliance framework for certain payments to non-residents.

For an NRI selling an Indian asset, the applicable withholding requirement depends on the nature of the transaction and payment. Property transactions, securities and other assets can therefore require different analysis.

An NRI should retain TDS documentation and reconcile the tax deducted with the information available in the income-tax reporting system before filing the return.

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How Should an NRI Report Capital Gains in India?

Capital gains that are taxable in India generally need to be appropriately reported in the NRI's Indian income-tax return when a return is required.

The reporting process can involve:

1. Identifying the correct residential status and applicable tax year.
2. Determining the nature of the capital asset.
3. Calculating the applicable capital gain.
4. Applying eligible exemptions and losses.
5. Reconciling TDS and tax information.
6. Reporting the gain under the appropriate capital-gains schedules in the return.

The Income Tax Department's current ITR-2 guidance includes capital-gains reporting and requires certain individuals, including those holding unlisted equity shares, to use ITR-2 where the applicable conditions are met.

NRIs should also check information shown in Form 26AS and the Annual Information Statement (AIS) and retain purchase documents, sale agreements, expense records, investment statements and TDS certificates.

This article does not cover the complete NRI ITR filing process; a dedicated filing guide is more appropriate for that purpose.

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Can DTAA Affect NRI Capital Gains Tax?

Yes, a Double Taxation Avoidance Agreement (DTAA) can affect the taxation of capital gains in some cross-border situations, but the result depends on the treaty between India and the country in which the NRI is tax resident, the type of asset and the specific treaty provisions.

An NRI should therefore distinguish between:

• Indian domestic tax rules
• Tax rules in the country of tax residence
• The applicable DTAA
• Foreign tax credit or other relief mechanisms, where relevant

A DTAA should not be treated as an automatic exemption from Indian capital-gains tax. The applicable treaty needs to be examined for the particular income and transaction.

What Should an NRI Check Before Selling an Indian Asset?

Before completing a sale, an NRI should gather the information needed to determine the actual tax position:

• Tax residency: Confirm that the individual qualifies as an NRI for Indian income-tax purposes for the relevant tax year.
• Asset type: Identify whether the transaction involves property, shares, mutual funds, securities or another capital asset.
• Acquisition date: Determine the applicable holding period.
• Acquisition cost: Keep the original purchase documents and evidence of eligible costs.
• Improvement costs: Retain supporting invoices and records where relevant.
• Sale consideration: Keep the sale agreement and payment records.
• Transfer expenses: Document eligible brokerage and other transaction expenses.
• TDS: Check the amount withheld and obtain the relevant documentation.
• Exemptions: Verify whether a statutory capital-gains exemption is available before relying on it.
• DTAA: Review the relevant treaty if the NRI is tax resident in another country.
• Reporting: Reconcile the transaction with AIS, Form 26AS and the eventual tax return.

Common Mistakes NRIs Should Avoid

A few assumptions can lead to incorrect capital-gains calculations:

Assuming every NRI pays the same tax rate.
The applicable rate depends on the asset and statutory provision.

Using the same holding period for every asset.
Holding-period rules differ across asset categories.

Using an old capital-gains rate.
Capital-gains rules have changed, including changes effective from 23 July 2024. Current law should be checked for the transaction date.

Treating TDS as the final tax.
TDS is withholding; the final liability is determined through the applicable tax computation.

Assuming indexation always applies.
Indexation treatment depends on the asset, taxpayer status and date of transfer. Current Income Tax Department guidance specifically states that indexation is not allowed for non-residents in the relevant post-23 July 2024 calculations.

Assuming a DTAA automatically eliminates Indian tax.
Treaty treatment depends on the particular country, asset and treaty provisions.

Ignoring documentation.
Purchase agreements, improvement records, sale documents, TDS certificates and investment statements can be important when establishing the correct taxable gain.

Conclusion

For an NRI, capital gains tax in India depends on much more than the profit shown on a sale. Asset type, holding period, transaction date, applicable tax rate, eligible expenses, exemptions, TDS and DTAA provisions can all affect the final tax position.

The safest approach is to calculate the gain using the rules applicable to the specific asset and transaction date, reconcile TDS and tax information, and verify any exemption or treaty benefit before relying on it. Because India's capital-gains framework has changed in recent years and the Income Tax Act, 2025 now applies to Tax Year 2026–27 onward, current official guidance should be checked before filing or completing a significant transaction.