Taxation for NRIs buying property in India.
TDS, capital gains, rental tax, and DTAA relief — a plain-English summary.
At Purchase
TDS of 1% u/s 194IA if the property value is ₹50 lakh or above — deducted by the buyer from the seller and deposited with the tax department. GST of 5% applies on under-construction property (nil on ready-to-move-in). Stamp duty (8% in Kerala) and registration (2%) are payable to the state.
During Ownership (Rental)
Rental income is taxable in India for NRIs. You get a 30% standard deduction and can also deduct municipal taxes paid. The balance is taxed at slab rates (0% up to ₹3 L, 5%, 20%, 30%). If tenant is deducting TDS, they usually deduct 30% — file returns to claim refund.
At Sale
Long-term capital gains (holding ≥ 24 months) taxed at 12.5% (indexation withdrawn from 2024). Short-term (holding < 24 months) taxed at slab rates. TDS at sale is 20% of sale value — apply for a Lower Deduction Certificate (Form 13) to align with your actual tax liability.
DTAA Relief
India has DTAA with most countries (UAE, US, UK, Singapore, Canada, Australia, etc). Tax paid in India can be claimed as a credit against tax in your country of residence, up to the lower of the two rates.
Section 54/54F Reinvestment
You can save capital-gains tax by reinvesting in another Indian residential property within 2 years (or under-construction within 3 years). Section 54EC bonds (NHAI/REC) also offer capital-gains-shelter up to ₹50 lakh.
Compliance
File ITR-2 in India for the year of sale/rent. Retain FIRCs, sale deed, TDS certificates, and 15CA/CB forms. Consider engaging a CA experienced in NRI taxation — most spend ₹15,000-40,000 per financial year for full-service compliance.