Selling Your Indian Property as an NRI: RBI Rules on Repatriating the Sale Proceeds

Non-resident Indians hold an estimated slice of India's residential stock that runs into lakhs of flats, and every sale eventually raises the same two questions: how much tax India keeps, and how much money can leave the country. The answers sit in two separate rulebooks. The Reserve Bank of India controls the money's exit under the Foreign Exchange Management Act, 1999 (FEMA), while the Income-tax Act, 1961 controls how much is skimmed before it goes. This guide walks a resident of the United States, the United Kingdom or the United Arab Emirates through both, using the rates in force for FY 2025-26.

The single most important number to fix early is the repatriation ceiling. Under RBI Master Circular No.04/2011-12 on Acquisition and Transfer of Immovable Property, an NRI who bought property with foreign exchange may repatriate sale proceeds only up to the amount originally paid in foreign currency, and this concession is capped at no more than two residential properties. Everything above that, plus proceeds of inherited or rupee-funded property, moves through the separate USD 1 million per financial year window. Model your own numbers on the NRI repatriation calculator before you commit to a sale date.

FEMA / DTAA Position

FEMA is a permission regime, not a prohibition regime. Section 6 of FEMA, 1999 requires RBI permission for capital-account transactions unless the transaction is specifically permitted, and the sale-and-remittance of immovable property is one of the areas the RBI has pre-cleared through its master circulars rather than case-by-case approvals. The controlling instrument remains RBI Master Circular No.04/2011-12, published on the RBI website, which an NRI selling in 2026 should read alongside the current Foreign Exchange Management (Non-debt Instruments) Rules.

The circular sets three conditions for repatriating sale proceeds of residential or commercial property without prior RBI approval. First, the property must have been acquired in accordance with the FEMA rules in force at the time of purchase. Second, the amount repatriated cannot exceed the foreign-exchange consideration originally paid for acquiring the property, or the amount paid out of a Foreign Currency Non-Resident (FCNR) or Non-Resident External (NRE) account. Third, in the case of residential property, repatriation of sale proceeds is restricted to not more than two such properties in a lifetime.

Inherited property follows a different track. Because no foreign exchange was ever paid in, its sale proceeds are not eligible for the "original consideration" route. Instead they flow through the USD 1 million per financial year facility that the RBI extends to NRIs and persons of Indian origin, and that remittance requires prior tax clearance, as the master circular spells out. A dual-resident then turns to the tax treaty. A Double Taxation Avoidance Agreement does not exempt Indian property gains: under every Indian treaty, immovable property is taxable in the country where it is situated, so India keeps the primary right to tax a flat in Pune whether its owner lives in New Jersey or Dubai.

Tax Treatment in India

India taxes the capital gain, not the sale price. Immovable property held for more than 24 months is a long-term capital asset (the holding period was cut from 36 to 24 months by the Finance Act, 2017 with effect from FY 2017-18); anything sold within 24 months produces a short-term gain taxed at slab rates, up to the top rate of 30% under the FY 2025-26 slabs. The distinction is worth real money because the long-term capital gains regime carries a single low rate.

Budget 2024 rewrote that rate from 23 July 2024. The table below sets out the two regimes side by side; the choice only exists for property acquired before that date.

The indexation option matters for older holdings: a flat bought in 2005 may show a smaller taxable gain at 20% with cost inflation applied than at a flat 12.5% on the unindexed gain, and the seller may pick whichever is lower for property acquired before 23 July 2024. On top of the base tax sits surcharge and a 4% health and education cess. The surcharge slabs for FY 2025-26 are:

Note that the new regime caps surcharge at 25% even above Rs 5 crore, against 37% in the old regime. Because a non-resident's sale triggers withholding, the buyer is the tax collector. Section 195 of the Income-tax Act, 1961 obliges the buyer to deduct TDS at the lower of the DTAA rate or the Act's rate, and to route it through the Section 195 machinery, not the Section 194-IA 1% mechanism that applies only to resident sellers. In practice the buyer withholds on the full sale consideration at the long-term rate of 12.5% (plus applicable surcharge and 4% cess) unless the seller obtains a lower-deduction certificate from the Assessing Officer, which is the single most useful step an NRI can take because TDS on the whole price, not just the gain, otherwise locks up cash until the refund arrives.

Three exemptions reduce the taxable gain. Section 54 exempts the long-term gain on a residential house if it is reinvested in another residential house within the statutory timelines. Section 54F extends similar relief where a long-term asset other than a house is reinvested in a residential house, subject to conditions. Section 54EC allows up to Rs 50 lakh of long-term gain to be sheltered by investing in five-year NHAI or REC bonds. An NRI can claim all three, and can estimate the residual liability on the NRI tax calculator before filing.

Tax Treatment Abroad

Paying tax in India does not close the file, because the seller's country of residence taxes worldwide income. The treaty's role here is to prevent the same gain being taxed twice at full rates. India's Double Taxation Avoidance Agreements let the resident country tax the gain but require it to give credit for the Indian tax already paid, so the resident effectively pays the higher of the two rates rather than the sum.

The Indian side of that credit is fixed: India retains its taxing right on immovable-property gains at 12.5% for a long-term sale, and this is never treated as "exempt" under any treaty. What varies is the foreign top-up. The table shows the treaty position for three common NRI home countries; the capital-gains figure is India's retained rate, and the treaty article that grants the foreign credit is noted alongside.

For a US resident, the gain is reportable on the US federal return, but Article 24 of the India-US treaty (effective 12 September 1991) allows a foreign tax credit for the Indian tax paid, so a Californian seller who paid 12.5% plus surcharge and cess in India offsets that against US long-term capital-gains tax rather than paying both in full. A UK resident uses the ordinary credit method under the India-UK treaty in force since 26 October 1993. A UAE resident faces no personal income tax on the gain locally, so the Indian 12.5% is generally the end of the liability, though the India-UAE treaty of 22 September 1993 still governs the residency certificate the seller needs. Non-residents can size the offset with the foreign tax credit calculator.

The mechanics of claiming the credit abroad depend on documentary proof of Indian tax paid, chiefly Form 16A or the TDS certificate and the Indian assessment, so keeping the Section 195 paperwork is not optional. Rental income earned before the sale follows a parallel treaty logic and is worth checking on the rental income tax calculator if the property was let out in the year of sale.

Repatriation Mechanics

The money's exit runs through the NRI banking architecture, and the account it lands in decides how freely it moves. Sale proceeds of Indian property are first credited to a Non-Resident Ordinary (NRO) account, because that is the account meant for India-sourced income; they cannot be paid directly into an NRE account. From the NRO account the NRI then remits, and here the two ceilings from the FEMA section apply.

Where the property was bought with foreign exchange or from NRE/FCNR funds, repatriation is capped at the amount originally paid in foreign exchange, for up to two residential properties, straight out of the sale proceeds. Everything else, the rupee-funded surplus, the gain itself, and all proceeds of inherited property, goes out under the USD 1 million per financial year facility. That facility requires the seller to have paid or provided for the Indian tax and to file the certificates below.

Two forms gate the wire transfer. Form 15CB is a chartered accountant's certificate confirming the remittance and the tax withheld, and Form 15CA is the remitter's declaration filed on the income-tax portal; together the Form 15CA/15CB pair is what an authorised dealer bank asks for before it releases foreign exchange under the USD 1 million window. Building the tax settlement into the sale timetable matters, because a bank will not process the outward remittance until the certificates are in hand.

A practical sequence keeps the sale clean. First, confirm the property was FEMA-compliant at purchase and count how many residential properties have already been repatriated against the two-property limit. Second, apply for a lower-deduction certificate before signing, so the buyer withholds nearer the real 12.5% liability than on the gross price. Third, park the net proceeds in the NRO account and reconcile the Section 195 TDS. Fourth, obtain Form 15CB and file Form 15CA, then instruct the bank to remit within the USD 1 million financial-year cap. Compare wire and forex costs across banks on the remittance cost calculator before choosing where to send it.

FAQ

Can I repatriate the full sale price of my Indian flat?

Not automatically. If you bought the flat with foreign exchange or from NRE/FCNR funds, you may repatriate up to the amount you originally paid in foreign currency, for a maximum of two residential properties, under RBI Master Circular No.04/2011-12. Any surplus above that original consideration, including the capital gain, must go out under the separate USD 1 million per financial year facility with Form 15CA/15CB.

How much tax will India take on a long-term sale?

For property sold on or after 23 July 2024 the long-term rate is 12.5% without indexation, plus surcharge (10% to 25% depending on income) and a 4% cess. If you acquired the property before 23 July 2024 you may instead elect 20% with indexation, choosing whichever produces the lower tax. Property held 24 months or less is short-term and taxed at slab rates up to 30%.

Is the gain exempt under my country's tax treaty?

No. India's Double Taxation Avoidance Agreements do not exempt gains on Indian immovable property; India retains the right to tax them at 12.5% for a long-term sale. Your country of residence may also tax the gain but must give a foreign tax credit for the Indian tax, so you pay the higher of the two rates, not both in full. The India-US treaty has granted this credit since 12 September 1991.

What TDS will the buyer deduct?

Under Section 195 of the Income-tax Act, 1961, the buyer deducts at the lower of the DTAA rate or the Act's rate, and applies it to the sale consideration, not the 1% resident mechanism. That means withholding at 12.5% plus surcharge and 4% cess for a long-term sale unless you obtain a lower-deduction certificate from the Assessing Officer, which is strongly advisable because TDS otherwise applies to the whole price.

Can I avoid the tax by reinvesting?

You can reduce it. Section 54 exempts the long-term gain reinvested in another residential house within the statutory timelines, Section 54F offers proportionate relief where a non-house asset is put into a residential house, and Section 54EC shelters up to Rs 50 lakh in five-year NHAI or REC bonds. These can be combined, and NRIs are eligible for all three.

How do I repatriate proceeds of an inherited property?

Inherited property carries no original foreign-exchange consideration, so its entire sale proceeds move under the USD 1 million per financial year window rather than the two-property route. You must first settle the Indian tax, obtain a chartered accountant's Form 15CB, file Form 15CA, and then instruct your authorised dealer bank to remit within the annual USD 1 million cap.

Which account receives the sale proceeds?

The proceeds are credited to your NRO account, because that is the designated account for India-sourced receipts; they cannot be paid directly into an NRE account. You then repatriate from the NRO account under whichever of the two ceilings applies, using Form 15CA/15CB where the USD 1 million facility is invoked.