An NRI property investment guide built around FEMA only tells half the story, because tax and repatriation are what decide what actually reaches a bank account abroad once the sale closes. From October 1, 2026, the compliance side eases a little for resident buyers: Budget 2026 removes the requirement for a Tax Deduction Account Number (TAN) on purchases from NRI sellers, letting eligible buyers deposit TDS through a PAN-based challan instead (Gulf News, 2026). The rate itself has not moved. An NRI selling property held for more than 24 months still pays long-term capital gains tax at 12.5% without indexation, and unlike a resident seller, is not offered the fallback of the older 20%-with-indexation method, regardless of how long ago the property was bought. 4 Estates is a private property advisory firm curating premium and luxury residential investments across India, UAE, and the United Kingdom for HNIs, UHNIs, and NRIs. This guide sets out how FEMA, taxation, and repatriation interact at the point of sale, which is where most of the costly surprises actually happen.

Key Takeaways

1. NRIs who sell Indian property after July 23, 2024 pay a flat 12.5% long-term capital gains tax without indexation. Unlike resident sellers, they are not offered the alternative 20%-with-indexation option, no matter how long the property was held (Gulf News, 2025).
2. TDS under Section 195 is withheld on the full sale value, not the net gain, unless the seller secures a lower or nil deduction certificate under Section 197 before the transaction closes.
3. From October 1, 2026, resident individual and HUF buyers can deposit TDS on an NRI’s property sale using a PAN-based challan instead of first obtaining a TAN, under Budget 2026 (Gulf News, 2026).
4. Repatriation from an NRO account is capped at USD 1 million per financial year; proceeds traceable to NRE or FCNR funds, or to direct foreign remittance, can be repatriated up to the amount originally invested.
5. Reinvestment under Sections 54, 54EC, and 54F can bring an NRI’s capital gains liability to zero, subject to conditions and a combined ₹10 crore exemption cap that has applied since FY 2023-24.
6. 4 Estates sequences FEMA compliance, tax planning, and repatriation as one continuous decision rather than three separate problems. For the complete roadmap on eligibility, funding routes, and RERA verification, see our NRI property investment guide.

FEMA at the Point of Sale: What Changes When an NRI Exits

FEMA’s rules on buying property in India are settled and permissive; we cover eligibility, funding accounts, and Power of Attorney mechanics in full in our NRI property investment guide, linked in the Key Takeaways above. What gets less attention is FEMA’s role at the exit, and it deserves more, because a decision made at purchase quietly governs what can be repatriated years later.

Under FEMA, the sale proceeds of Indian property must be credited to the seller’s NRO account by default. The exception is proceeds traceable to a property originally bought with foreign exchange: funds remitted from abroad, or drawn from an NRE or FCNR account. That property retains a different, more favourable repatriation character on exit, but only if the NRI can document the original funding trail with bank statements, foreign inward remittance certificates, or the original purchase deed showing the funding source. An NRI who paid partly from an NRE account and partly from local India-sourced savings should keep both threads separately documented; a blended, undocumented funding history usually gets treated conservatively as NRO-origin at the time of repatriation, which caps it at the annual ceiling covered below.

Power of Attorney does not shift this responsibility. Where a PoA holder signs the sale deed and manages registration, FEMA compliance, including which account receives the sale consideration, remains the NRI seller’s obligation, not the attorney-holder’s.

Section 195: How TDS Is Actually Deducted on an NRI’s Sale

When a resident buys from a resident, TDS is a flat 1% under Section 194-IA, applied only above a ₹50 lakh threshold. The moment the seller is an NRI, Section 195 takes over, and it behaves nothing like the resident rule. There is no threshold, and the deduction is calculated on capital gains rather than a simple percentage of price, though the buyer must still withhold at the statutory rate on the full sale consideration unless a lower deduction certificate is in hand.

• Long-term capital gains (property held more than 24 months): 12.5% without indexation, following the Finance (No. 2) Act, 2024, effective for transfers on or after July 23, 2024.
• Short-term capital gains (property held 24 months or less): taxed at the NRI’s applicable income-tax slab rate.
• Surcharge and a 4% health and education cess apply on top of both, which can lift the effective deduction meaningfully on high-value transactions.

The indexation option resident sellers get, and NRIs do not

This is the detail most NRI sellers miss, and it is worth stating plainly: for property acquired before July 23, 2024, resident individuals and resident HUFs may choose whichever is lower between 12.5% without indexation and 20% with indexation. That choice was never extended to NRIs. An NRI selling a property bought in, say, 2008 still pays a flat 12.5% without indexation on the full nominal gain, with no adjustment for the inflation that indexation would otherwise have stripped out (Gulf News, 2025). For a long-held property, this can mean a materially higher tax bill than a resident sibling selling an identical asset would face.

Seller status	Property bought before July 23, 2024	Property bought on or after July 23, 2024
Resident individual / HUF	Lower of 12.5% (no indexation) or 20% (with indexation)	12.5% without indexation
NRI / OCI	12.5% without indexation, no choice	12.5% without indexation

What is changing from October 1, 2026

Budget 2026 does not touch these rates. What it changes is procedure: from October 1, 2026, a resident individual or HUF buyer purchasing from an NRI seller can deposit TDS using a PAN-based challan rather than first registering for a Tax Deduction Account Number, aligning the process closer to the simpler mechanism already used for resident-to-resident sales (Gulf News, 2026). Companies, LLPs, and partnership-firm buyers are not covered by this relief and continue to need a TAN. For NRI sellers, the practical upside is fewer delays on the buyer’s side of the paperwork, not a change in what gets withheld.

Form 13: Lowering the TDS Before the Sale Closes

Because Section 195 withholds on the gross computation the tax officer is willing to accept, not automatically on the true net gain, many NRI sellers find far more deducted than they actually owe. Section 197 provides the remedy: an application, commonly known as Form 13, to the jurisdictional Assessing Officer for a certificate authorising a lower or nil rate of deduction.

The certificate is specific to the buyer and the transaction; if the buyer changes mid-negotiation, a fresh application is required. Because of this, the application should be filed once the buyer is confirmed and well before the closing date, since assessing officers require supporting documentation, including computation of the actual capital gain, proof of acquisition cost, and, where treaty relief is being claimed, a Tax Residency Certificate. Filing late is the most common reason NRIs end up with capital tied up in India for months awaiting a refund after the return is processed, rather than receiving the correct amount at closing.

Reinvestment Relief Under Sections 54, 54EC, and 54F

An NRI does not have to accept the full capital gains liability if the proceeds are redeployed the right way.

• Section 54 exempts long-term capital gains on the sale of a residential property, provided the gain is reinvested in another residential property in India, purchased within two years or constructed within three years of the sale.
• Section 54EC offers an alternative for those who do not want another property: investing the gain, up to ₹50 lakh, in specified capital gains bonds within six months of the sale.
• Section 54F applies when the asset sold is not a residential house (a plot, for instance) and the net sale consideration is reinvested in a residential property, subject to the seller not owning more than one other house at the time of transfer.

Section	Applies to	Reinvest in	Time window	Cap
54	Sale of a residential house	Another residential house	2 yrs (buy) / 3 yrs (construct)	₹10 crore (combined w/ 54F, FY23-24+)
54EC	Sale of land or building	Notified capital gains bonds	6 months	₹50 lakh
54F	Sale of other long-term asset	A residential house	2 yrs (buy) / 3 yrs (construct)	₹10 crore (combined w/ 54)

Where reinvestment cannot happen before the return is filed, the unused proceeds can be parked in a Capital Gains Account Scheme, which preserves eligibility for the exemption while the right property is found. NRIs use the equivalent non-resident version of this account. Sections 54 and 54EC, or 54F and 54EC, can be combined on the same sale, provided the same rupee of gain is not claimed twice.

What DTAA Actually Does for a Property Gain

This is the point where advisory conversations go wrong most often. India’s Double Taxation Avoidance Agreements do not, as a rule, reduce the tax India collects on a gain from immovable property situated in India; under the immovable-property and capital-gains articles of virtually every Indian treaty, India retains the primary right to tax that gain at source. What the DTAA actually does is protect the NRI from paying tax on the same gain a second time in their country of residence, typically through a foreign tax credit claimed there for the Indian tax already paid.

For NRIs resident in the UAE, this nuance mostly does not bite in practice: the UAE levies no personal income tax, so there is no second tax on the gain to relieve in the first place, and the Indian TDS stands as the final cost. For NRIs resident in the UK, the credit method applies against UK tax on the same gain, and the claim runs on the UK’s own tax year rather than India’s, so a TRC from HMRC and the timing of the claim need to be mapped carefully against the mismatched periods, ideally with a cross-border adviser on both sides of the transaction.

Claiming treaty relief on withholding, where it is available for other income types, requires a Tax Residency Certificate from the country of residence, generally paired with a self-declaration (commonly Form 10F) filed electronically with the Indian tax authorities. Missing or incomplete paperwork, not the treaty itself, is the most common reason relief gets refused.

Repatriating the Proceeds, Step by Step

Planning the repatriation path should happen at the point of purchase, not discovery at the point of sale, since the funding source decided years earlier is what determines the ceiling now.

1. Confirm the account origin. NRO-routed funds, including inherited property, cap repatriation at USD 1 million per financial year. Funds traceable to NRE, FCNR, or direct foreign remittance can repatriate up to the amount originally invested, available for up to two residential properties.
2. Clear outstanding TDS. No repatriation proceeds without the tax position on the sale being settled first; pending liabilities delay or block the transfer.
3. Obtain a chartered accountant’s certificate (Form 15CB). The CA confirms the applicable tax has been correctly accounted for on the remittance.
4. File the remittance declaration (Form 15CA) with the Income Tax Department, based on the CA’s certification.
5. Route the transfer through an authorised dealer bank, which reviews the documentation, including the source-of-funds trail described earlier, before releasing the transfer abroad.

Inherited property follows the NRO route and the same USD 1 million annual ceiling, regardless of how the original owner funded the purchase.

What Changes Under the Income-tax Act, 2025

The Income-tax Act, 2025 came into force on April 1, 2026, replacing the Income-tax Act, 1961 (Income Tax Department, Government of India, 2026). For an NRI seller, the practical impact is smaller than the headline suggests: rates, exemptions, and the underlying rules described throughout this guide carry forward largely unchanged. What has changed is the numbering. Section 195, which governs TDS on payments to non-residents, is now Section 393(2); Section 197, the lower or nil deduction certificate provision, is now Section 395, a mapping independently confirmed on the Income Tax Department’s own portal, which references certificates “under section 395(4)” in its current compliance calendar. Form 13 is now Form 128.

Because search behaviour and professional practice are still catching up to the new numbering, this guide uses the familiar 1961-era names throughout, noting the 2025 Act equivalents where they are settled. A handful of more granular form references are still transitioning at the time of writing; confirm the current form name with a chartered accountant at the time of your transaction rather than relying on any single source, including this one.

Where This Fits in an NRI’s Portfolio

Sequencing FEMA, tax, and repatriation correctly protects the return on a single transaction. Zooming out, the more useful shift is to stop treating each India acquisition as a standalone event and start treating real estate as an asset class within a wider portfolio spanning Mumbai, Dubai, and London. In the FICCI-ANAROCK Homebuyer Sentiment Survey H1 2024, gathered from 7,615 respondents across 14 cities, real estate remained the most preferred asset class, favoured by 59% of respondents, with 67% buying for end-use and 33% investing (FICCI-ANAROCK, 2024). For NRIs specifically, that preference tends to combine an emotional anchor at home with a calculated place in a diversified holding.

4 Estates, a private property advisory firm curating premium and luxury residential investments across India, UAE, and the United Kingdom for HNIs, UHNIs, and NRIs, operates as a Private Office rather than a transactional brokerage, advising on allocations across luxury real estate in Mumbai, Dubai, and London as parts of one portfolio rather than three separate sales. Because the model runs on 0% commission, developer-funded advisory, the firm is compensated by the developer rather than the client, which keeps the guidance aligned with the allocation that suits the investor rather than with closing any single unit. We set out this thinking in more depth in how HNIs think about real estate as an asset class and in what makes a Private Office different from a brokerage.

For an NRI weighing India against a wider cross-border allocation across Mumbai, Dubai, and London, begin with a conversation, not a listing.

The 4 Estates Perspective

The law on FEMA is settled, and for residential property it remains permissive for NRIs and OCI cardholders alike. The risk was never really about whether an NRI can invest; it is in the sequence that follows a sale: which account receives the proceeds, whether a lower TDS certificate was filed in time, whether reinvestment relief was planned before the return was due, and whether the repatriation documentation was assembled before the transfer was needed rather than after. Each of these is a decision with a downstream cost when skipped, and none of them are visible from the purchase agreement alone.

4 Estates is a private property advisory firm curating premium and luxury residential investments across India, UAE, and the United Kingdom for HNIs, UHNIs, and NRIs. The firm treats FEMA compliance, tax planning, and repatriation as one sequence to be planned from the day of purchase, not three separate problems to solve at the point of sale, within a 0% commission advisory model funded by the developer rather than the client.

If you are an NRI planning an exit, or structuring a purchase with the exit already in mind, begin with a conversation, not a listing.

Frequently Asked Questions

References

1. Reserve Bank of India (2022). Master Direction – Acquisition and Transfer of Immovable Property under Foreign Exchange Management Act, 1999. RBI. Retrieved from https://www.rbi.org.in/scripts/BS_ViewMasDirections.aspx?id=10196

2. Income Tax Department, Government of India (2026). Income-tax Act, 2025 comes into force from 1st April, 2026 [Press Release]. Retrieved from https://www.incometaxindia.gov.in/w/income-tax-act-2025-comes-into-force-from-1st-april-2026

3. Income Tax Department, Government of India (2026). FAQs on Interplay and Transition to the Income-tax Act, 2025. Retrieved from https://www.incometaxindia.gov.in/documents/81799/11848482/FAQs-on-Interplay-and-Transition.pdf

4. FICCI and ANAROCK (2024). Homebuyer Sentiment Survey H1 2024. FICCI. Retrieved from https://www.ficci.in/press_release_details/4957

5. Gulf News (2026). India Budget 2026: What NRIs in UAE need to know about investing, property sales, tax filings. Retrieved from https://gulfnews.com/world/asia/india/india-budget-2026-what-nris-in-uae-need-to-know-about-investing-property-sales-tax-filings-1.500427735

6. Gulf News (2025). Indian expats in UAE race against time to amend higher tax rule for NRIs in Union Budget 2025. Retrieved from https://gulfnews.com/uae/people/indian-expats-in-uae-race-against-time-to-amend-higher-tax-rule-for-nris-in-union-budget-2025-1.500026559