NRI Capital Gains Tax 2026: TDS Rates & Exemptions
The Direct Answer
When an NRI sells property, the buyer MUST deduct TDS at roughly 20-23% (for Long Term) or 30%+ (for Short Term) on the entire sale value, not just the profit. This locks up your capital. To save tax, you can reinvest in another house (Section 54) or buy Capital Gains Bonds (Section 54EC) within 6 months.
The Lower TDS Certificate
If your profit is small but sale value is high, 20% TDS is unfair. Apply for a Lower Deduction Certification (Form 13) from the Income Tax Officer before the sale deed is registered. This can reduce TDS to 1-3% of the sale value.
Long Term vs Short Term
| Type | Holding Period | Tax Rate | TDS Rate (Approx) |
|---|---|---|---|
| Short Term (STCG) | < 2 Years (24 Months) | As per Income Slab | 30% + Surcharge + Cess |
| Long Term (LTCG) | > 2 Years | 12.5% (New Regime 2024 onwards) | 20% + Surcharge + Cess |
Note: Budget 2024 changed LTCG rules (removed Indexation for many, lowered rate to 12.5%). Consult a CA for specific "Grandfathering" clauses active in 2026.
How to Save Capital Gains Tax
1. Section 54: Buy Another House
- Invest the Capital Gain amount (not full sale value) into one residential house in India.
- Timeline: 1 year before or 2 years after sale (for purchase), or 3 years (for construction).
2. Section 54EC: Bonds
- Invest up to ₹50 Lakhs in notified bonds (NHAI / REC).
- Lock-in: 5 Years.
- Interest: Taxable, but capital is safe.
3. Capital Gains Account Scheme (CGAS)
If you haven't found a new house by the tax filing deadline (July 31), deposit the unutilized money into a specialized CGAS Account at a bank to avoid paying tax that year.
Kanav Arora
Real Estate Investor
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