Are you a Non Resident Indian or NRI selling property in India? It is a big step. You are likely moving on to new chapters. This sale involves money, and money means rules. When you sell property, the government wants to know. They also want their share of the profit. This share is called tax for nri selling property in india. It sounds complicated. Therefore, we will break it down into simple pieces. You need to understand three main things: TDS deduction for nri, capital gain tax on sale of property in india, and your final nri filing of income tax return. Many NRIs miss these steps. You do not have to be one of them. We are here to help you navigate these tax implications for nri selling property in india.
When you sell your property, the buyer does not pay you the full amount right away. Why? Because the government wants to make sure it gets its tax money first. This is where TDS on sale of immovable property by nri comes in. TDS means Tax Deducted at Source.
Think of it this way. Imagine you sell a house for ₹1 crore. The tax department tells the buyer, "Hold on. Before you give the full ₹1 crore to the NRI seller, you must take out some tax money and give it to us." The buyer acts like a temporary tax collector. Consequently, the buyer is responsible for making the tds deduction for nri. The property is immovable, so this rule is very strict.
The tds rate on sale of property by nri is not a fixed percentage. It depends on how long you held the property.
This tax is deducted from the total sale amount, not just the profit. Therefore, this often leads to a large amount of money being held back.
Do you see a problem with the high TDS rate? You only owe tax on your profit, not the entire sale value. For example, if you bought a house for ₹80 lakhs and sold it for ₹1 crore, your profit is ₹20 lakhs. If the buyer deducts 20% of the ₹1 crore (₹20 lakhs), they have deducted all your profit!
You can apply for a Lower or Nil Deduction Certificate from the Income Tax department. This is done by filing Form 13. By using this, you tell the tax office, "Look, my actual tax is much lower than 20% or 30%. Please tell the buyer to deduct less." This is a crucial step to improve your cash flow after the sale.
The buyer must also do something after deducting the tax. They have to deposit the TDS with the government. Then, they have to give you a certificate. They do this by filing a statement called Form 27Q filling. This form is proof that the tax was deducted from your sale and paid to the government. You need this Form 27Q to claim credit for the TDS when you file your own nri filing of income tax return.
The money you make as profit from selling the property is called Capital Gain. The government taxes this profit. This is the real capital gain tax for nri.
The tax rules change based on how long you kept the property.
To figure out your profit, you need a simple formula.
This calculation is simple for STCG. However, for LTCG, you get a special benefit called Indexation.
Inflation means money loses value over time. ₹10 today buys less than ₹10 did ten years ago. Because of this, the tax department lets you increase your original cost. This is called Indexation.
By increasing the original cost using the Indexation table, your taxable profit becomes much smaller. Therefore, your final capital gain tax on sale of property in india goes down significantly. You can use an online capital gain tax on sale of property in india calculator to see the benefit. Remember, you must consult a professional to ensure you get the benefit of indexation correctly.
No one wants to pay more tax than necessary. The Indian government gives you ways to save your capital gain tax on sale of property. These are called exemptions. You can claim these by reinvesting your profit.
The most common way to save tax is by buying another residential house in India.
If you do not want to buy another property, you can invest in special government bonds.
Sometimes you sell the property but have not found the new house to buy yet. You still need to file your nri tax filing on time. The government allows you to deposit the capital gain amount into a special account called the Capital Gains Account Scheme before the tax filing due date. This keeps your claim for the tax exemption alive. Once you find the new property, you withdraw the money from this account for the purchase.
Do not think that because the buyer deducted TDS, your work is done. It is not. You must always file your income tax return in India if you have property income or capital gains.
Your nri tax filing will use the correct Income Tax Return Form. You must have your documents ready, including the sale deed, purchase deed, and the Form 27Q provided by the buyer. The process can be technical, but with expert help, it becomes simple.
We understand these rules are complex and can be stressful. We specialize in non resident taxation and can handle the entire process for you. Contact us today to ensure your sale is tax compliant and stress free. You can find more details about our services on our About Us page.
The buyer must deduct TDS at 20 percent on long term gains and as per slab rate on short term gains.
Yes, NRIs must file returns to report gains and claim refunds if TDS is higher than actual tax.
Use the formula: Sale price minus indexed cost of purchase equals capital gain. Then apply the tax rate. You can also use a capital gain tax on sale of property in India calculator.
Yes. You can reinvest in property or specified bonds to claim exemptions.
It is the form buyers use to deposit TDS deducted on payments made to NRIs.