What is the TDS rate when an NRI sells property in India?

When an NRI sells property in India, the buyer must deduct TDS at 20% plus surcharge and cess (approximately 23.3%) on the entire sale consideration for long-term capital gain (property held more than 24 months). For short-term gains (less than 24 months), TDS is deducted at the applicable income tax slab rates — potentially up to 39%. This is significantly higher than the 1% TDS applicable when a resident Indian sells property. The NRI can file ITR-2 to claim a refund if actual tax payable — after Section 54, 54EC, or 54F exemptions — is lower than TDS deducted. Alternatively, NRIs can apply for a Section 197 Lower Deduction Certificate from the Assessing Officer before the sale.

Which ITR form should an NRI file?

NRIs must file ITR-2 for income from rental property, capital gains, NRO interest, and dividends. ITR-1 (Sahaj) is NOT available to NRIs from AY 2020-21 onwards. If an NRI has business income in India, ITR-3 is required. If income is from a profession under Section 44ADA, ITR-4 may apply. ITR-2 is mandatory even for small capital gains on Indian shares. NRIs with only salary from an Indian employer and no capital gains may still use ITR-2 if there are multiple employers or other income types.

What is Section 197 Lower Deduction Certificate for NRIs?

Section 197 of the Income Tax Act allows NRIs to apply for a Nil or Lower Deduction Certificate from the Assessing Officer before a property sale, rental payments, or other India-source payments. With this certificate, the payer (buyer, tenant, or bank) deducts TDS at a lower rate approved by the AO — rather than the standard 20-30% NRI rates. This avoids the need to wait months for a TDS refund after filing ITR. The application must be filed on the Income Tax portal with details of the proposed transaction, expected income, and applicable exemptions. TAXAJ assists NRIs in preparing and filing Section 197 applications.

How can NRIs reduce tax on NRO account interest?

NRO interest is taxable at 30% (plus surcharge and cess) for NRIs in India. However, two ways exist to reduce this: (1) DTAA Treaty Relief — if your country of residence has a DTAA with India (USA, UK, Canada, Australia, Singapore, Germany, etc.), interest is capped at 10-15% under the treaty. Submit a Tax Residency Certificate (TRC) from your country to the bank, along with Form 10F, to get TDS deducted at the treaty rate. (2) File ITR-2 — if TDS was already deducted at 30%, file ITR-2 claiming DTAA relief under Schedule TR. The excess TDS is refunded to your NRO bank account after ITR processing.

Can NRIs claim Section 54 exemption on property sale in India?

Yes. NRIs are eligible for the same capital gains exemptions as resident Indians: Section 54 (reinvest LTCG from residential house into another residential house in India — purchase 1 year before or 2 years after sale, or construct within 3 years), Section 54EC (invest LTCG up to ₹50 lakh in NHAI or REC bonds within 6 months), and Section 54F (reinvest entire sale consideration from non-property long-term asset into residential property). To avoid 20% TDS on the full sale value, NRIs should apply for a Section 197 Lower Deduction Certificate before the sale, showing the expected exemption. TAXAJ assists with both the certificate application and ITR-2 filing.

How do NRIs verify their income tax return without visiting India?

NRIs can verify their ITR without an India visit through several methods: (1) Electronic Verification Code (EVC) via Indian bank net banking — log in to your NRO/NRE bank account's net banking and generate an EVC; (2) EVC via bank ATM; (3) Physical ITR-V — print and sign the ITR-V acknowledgement, send by ordinary post or speed post to CPC, Post Bag 1, Electronic City Post Office, Bengaluru 560100, within 30 days of filing; (4) Digital Signature Certificate (DSC) — Class 2 or Class 3 DSC registered with the IT portal. TAXAJ guides NRI clients through the remote verification process.

What is the tax on NRI capital gains on Indian shares?

NRIs investing in Indian listed shares through a Portfolio Investment Scheme (PIS) account are subject to the same capital gains rates as resident investors from Budget 2024: LTCG on listed equity shares held more than 12 months is 12.5% on gains exceeding ₹1.25 lakh per year (with no indexation). STCG on equity shares held 12 months or less is 20% (raised from 15% in Budget 2024). No surcharge applies on these rates for NRIs investing through PIS. Capital losses can be carried forward for 8 years if ITR-2 is filed before the due date.

What is the due date for NRI income tax return filing in India?

The due date for NRI income tax return (ITR-2) for FY 2025-26 (AY 2026-27) is 31st July 2026 for NRIs without audit requirement. A belated return can be filed up to 31st December 2026 with a late filing penalty of ₹5,000 (₹1,000 if total India income is below ₹5 lakh). Filing after 31st July also means capital losses cannot be carried forward — they are forfeited for non-timely filers. If any India-source income exists and TDS has been deducted, filing before 31st July is strongly recommended to initiate the refund process.

What happens when NRI status changes to resident on returning to India?

When an NRI returns to India permanently and their residential status changes, they first become Resident but Not Ordinarily Resident (RNOR) for typically 2-3 years — during which foreign income is not taxable in India. After the RNOR period, they become Resident and Ordinarily Resident (ROR) with global income taxability. Key points for returning NRIs: (1) NRE accounts must be converted to resident accounts; (2) FCNR deposits can continue until maturity; (3) Once ROR, all foreign assets must be disclosed in Schedule FA of ITR-2; (4) Foreign bank accounts, investments, and properties must be declared. TAXAJ handles transitional year filings and status-change planning for returning NRIs.

What is the TDS rate on NRI property sale in India?

When an NRI sells property in India, the buyer must deduct TDS at 20% (plus surcharge and cess) on the entire sale consideration — not just the capital gain — if the property qualifies as a long-term asset (held more than 24 months). For short-term capital gain on property, TDS is deducted at the applicable income tax slab rate. The NRI can file ITR-2 to claim a refund if actual tax payable (after DTAA benefits and exemptions under Section 54/54EC) is lower than TDS deducted. Alternatively, NRIs can apply for a Nil or Lower Deduction Certificate under Section 197 before the sale.

What is the difference between NRE and NRO accounts for tax purposes?

NRE (Non-Resident External) accounts hold foreign earnings in India. The principal and interest in NRE accounts are fully exempt from Indian income tax — both principal and interest are repatriable freely. NRO (Non-Resident Ordinary) accounts hold India-earned income (rent, pension, dividends). NRO interest is taxable in India at 30% (plus surcharge and cess) for NRIs, with TDS deducted by the bank. However, DTAA may reduce the effective rate. NRIs can claim refund of excess TDS on NRO interest by filing an ITR-2.

Which ITR form should an NRI file?

NRIs must file ITR-2 for most income types — rental income, capital gains, NRO interest, and dividend income. ITR-1 (Sahaj) is NOT available to NRIs from AY 2020-21 onwards. NRIs with business income in India must file ITR-3. ITR-2 is mandatory regardless of income amount if the NRI has capital gains on shares, property, or mutual funds. NRIs with only salary income from an Indian employer can file ITR-1 if total income is below ₹50 lakh and there are no capital gains.

NRI Income Tax Return Filing India FY 2025-26 | ITR-2 NRE NRO TDS DTAA | TAXAJ

🌍 ITR-2 · NRI Tax Filing · FY 2025-26

NRI Tax Filing India — Claim Refunds, File Correctly

NRIs with India-source income — rental income, capital gains on property or shares, NRO interest — must file ITR-2. High TDS deducted at NRI rates? A TAXAJ CA files your return and claims maximum refund.

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Rental · Capital Gains · NRO Interest · DTAA · TDS Refund

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India-source income · NRI ITR-2 · FY 2025-26

Rental income from Indian property
Capital gains on Indian shares, MF, property
NRO account interest — TDS refund claimed
DTAA relief & lower TDS certificate (Sec 197)
ITR-2 e-filed + ITR-V in 1–2 days

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Who Is an NRI for Tax Purposes?

NRI Definition Under Income Tax Act 1961

Under Indian income tax law, an individual is a Non-Resident (NR) if they do NOT satisfy either of these conditions for a financial year:

182 days or more in India during the financial year — or

60+ days in the current FY and365+ days in the 4 preceding years.

Note: NRI for income tax is different from NRI for FEMA/banking. Always determine status separately for each law.

⚠️ ITR-1 Not Available to NRIs

From AY 2020-21 onwards, NRIs must file ITR-2 (not ITR-1) for all India-source income. Even if your only income is NRO bank interest, you must use ITR-2. Returning to India? See resident filing →

What Income Is Taxable for NRIs?

Only India-Source Income Is Taxed

🇮🇳 Taxable in India (India-Source)

→ Rental income from property located in India
→ Capital gains on Indian shares, MF, or property
→ NRO account interest
→ Dividends from Indian companies
→ Salary for services rendered in India
→ Income from Indian business or profession

✅ NOT Taxable in India (Foreign-Source)

✓ NRE account interest (fully exempt)
✓ FCNR (B) deposit interest (exempt)
✓ Salary earned and received outside India
✓ Foreign bank account interest
✓ Foreign rental income, capital gains abroad

📋 KEY: File ITR Even If No Tax Due

NRIs should file ITR even if all income is below exemption limit — needed for visa, loan applications, carry forward of capital losses, and TDS refund claims.

Income Categories

NRI India-Source Income — Tax Treatment & TDS Rates

Each income type has different TDS rates and tax treatment. TAXAJ CAs ensure correct reporting and maximum refund.

🏠

Rental Income (India Property)

Head: House Property

NRIs with rented-out Indian property must report net annual value in ITR-2. Tenant must deduct TDS at 30% on rent paid to NRI. Standard deduction of 30% on NAV is allowed. Municipal taxes and home loan interest can reduce taxable income further.

TDS by tenant: 30% of rent (+ surcharge + cess)

🏗️

Sale of Property (Capital Gains)

Head: Capital Gains

Buyer must deduct TDS at 20% (LTCG, held 24+ months) or applicable slab rate (STCG). NRI can claim refund via ITR-2. Section 54/54EC/54F exemptions reduce tax. Lower TDS certificate (Sec 197) can reduce deduction before sale.

Buyer TDS: 20% LTCG · Slab rate STCG (not just 1%)

📈

Indian Shares & Mutual Funds

Head: Capital Gains

LTCG on listed equity/equity MF at 12.5% over ₹1.25L, STCG at 20%. Same rates as residents. Broker/fund house deducts TDS. No surcharge for NRIs on equity gains. Capital losses can be carried forward 8 years if ITR filed on time.

Equity LTCG: 12.5% · STCG: 20% (same as residents)

🏦

NRO Account Interest

Head: Other Sources

NRO interest is taxable at 30% flat (plus surcharge and cess). Bank deducts TDS at 30%. DTAA may reduce this (e.g., USA DTAA caps interest tax at 15%). File ITR-2 to claim refund based on DTAA rate.

Bank TDS: 30% · DTAA may reduce to 10–15%

💰

Indian Dividends

Head: Other Sources

Dividends from Indian companies taxable at 20% for NRIs (Section 115E). Company deducts TDS at 20% (for NRI shareholders). DTAA may allow credit. Dividends from equity MF are also taxable. Report in ITR-2 under Other Sources.

TDS at source: 20% · DTAA reduction possible

👔

Salary in India / Indian Business

Head: Salary / Business

If an NRI provides services physically in India, salary for those days is taxable in India. Indian business income is taxable regardless. Most slab deductions (80C, 80D) apply to NRIs but HRA exemption is not available. Salaried filing help →

Employer TDS: As per slab (normal) · 80C deductions allowed

Key Reference

TDS Rates for NRIs — Section 195 & Others

TDS on NRI payments is deducted at higher flat rates — not the 1% applicable to resident property buyers. Claim refunds by filing ITR-2.

Transaction	TDS Rate (Basic)	Surcharge	Total (approx.)	Payer Obligation
LTCG on property (held 24+ months)	20%	As applicable	~23.3%	Buyer deducts under Sec 195
STCG on property (held <24 months)	Slab rate	As applicable	Up to ~39%	Buyer deducts under Sec 195
Rent received from tenant in India	30%	As applicable	~31.2%+	Tenant deducts monthly
Resident buyer of NRI property (<₹50L)	20% (LTCG)	Yes	~23.3%	NOT 1% — NRI seller = Sec 195 applies
Property sold — with Sec 197 certificate	As per certificate	Nil/reduced	Lower rate approved by AO	NRI must apply before sale

Income Type	TDS / Tax Rate	Surcharge	ITR Impact	Notes
LTCG on listed equity (held 12+ months)	12.5%	No surcharge for equity LTCG	Report in Schedule CG	₹1.25L/yr exempt; same as residents
STCG on listed equity (held <12 months)	20%	No surcharge for equity STCG	Report in Schedule CG	STT must be paid; same as residents
LTCG on equity MF (held 12+ months)	12.5%	No surcharge	Report in Schedule CG	Same as resident investors
Dividends from Indian MFs	20%	As applicable	Report under Other Sources	MF house deducts TDS
Capital gains on debt MF (any period)	Slab rate	As applicable	Report in Schedule CG	Post April 2023 rule; no LTCG benefit

Income Type	TDS Rate	DTAA Possible?	Account Type	Notes
NRO savings/FD interest	30%	Yes	NRO	DTAA can reduce to 10–15%; claim in ITR-2
NRE savings/FD interest	NIL	Not applicable	NRE	Fully exempt — no TDS, no ITR disclosure needed
FCNR (B) deposit interest	NIL	Not applicable	FCNR(B)	Fully exempt for NRIs under Sec 10(4)
Dividends from Indian companies	20%	Yes	—	Section 115E; DTAA may reduce rate
Royalties / Technical fees from India	10–20%	Yes	—	Section 115A; DTAA typically 10%
Pension from Indian Government	Slab rate	Yes	—	DTAA may exempt govt. pension

📋 Lower / Nil TDS Certificate — Section 197

NRIs can apply for a Lower Deduction Certificate under Section 197 from the Assessing Officer (AO) before the transaction. This certificate authorises the payer (buyer/tenant/bank) to deduct TDS at a lower rate than the statutory rate — reducing your cash flow burden and avoiding the wait for a refund.

When to Apply	For Which Income	How to Apply	Timeline	Result
Before property sale	LTCG on property — reduce from 20% to actual CG rate after exemptions	File application on IT portal with sale details, purchase cost, exemption claimed	4–6 weeks typically	AO issues Sec 197 certificate; buyer deducts at lower rate
Before multiple rent payments	Rental income — tenant can deduct at lower rate	Apply at jurisdictional AO with rental income computation	4–6 weeks	Tenant deducts at approved lower rate
Before bank FD maturity	NRO interest — bank deducts at DTAA rate	Submit Form 15CA + TRC + DTAA claim to bank	2–4 weeks	Bank deducts at DTAA treaty rate (10–15%)
Annual application	All India-source payments	Valid for one FY; renew every year	Once per year	All payers deduct at certificate rate

TDS on Property Sale →

Bank Accounts

NRE vs NRO Account — Tax Treatment Compared

🟢 NRE Account

Non-Resident External — holds foreign earnings

Interest taxationFully EXEMPT

TDS on interestNIL

Report in ITR-2?Not required

RepatriationFreely repatriable

CurrencyIndian Rupee (converted from foreign)

Funded fromForeign earnings only

Joint account with?Only with NRI / PIO

🟠 NRO Account

Non-Resident Ordinary — holds India-earned income

Interest taxationTaxable at 30%

TDS on interest30% by bank

Report in ITR-2?Yes — mandatory

RepatriationUSD 1 million/yr limit (after tax)

CurrencyIndian Rupee

Funded fromRent, pension, sale proceeds in India

Joint account with?Resident Indian allowed

💡

DTAA Can Reduce NRO Interest Tax from 30% to 10–15%

If your country of residence has a DTAA with India (USA, UK, Canada, Singapore, Germany, Australia, etc.), the tax on NRO interest may be capped at 10–15% under the treaty — not 30%. You need a Tax Residency Certificate (TRC) from your country. Submit to the bank to get lower TDS. File ITR-2 to claim any excess TDS refund. Form 15CA-CB for remittances →

💰 NRI TDS Refund Estimator

See how much TDS can be refunded by filing ITR-2 and claiming DTAA benefit.

Type of Income

Income Amount (₹)

DTAA Country

Applicable Tax Slab (if slab taxable)

Sec 54/54EC Exemption Claimed (₹)

TDS Already Deducted (₹)

Income Type—

Gross Income—

TDS Rate Deducted at Source—

TDS Amount Deducted—

DTAA / Actual Tax Rate—

Actual Tax Payable—

Estimated TDS Refund—

Indicative estimates only. Consult a TAXAJ CA for exact computation and refund eligibility.

Filing Process

How TAXAJ Files Your NRI ITR-2

Share income details

Provide Form 26AS (from IT portal), TDS certificates from bank/buyer/tenant, property sale deed, capital gains statement, and any DTAA TRC from your country of residence.

CA computes India-source income

Your CA calculates rental income, capital gains (with exemptions under Sec 54/54EC), NRO interest, and any other India-source income. DTAA relief quantified.

Computation shared for approval

We share a detailed computation sheet showing all income, deductions, tax payable, TDS credit, and refund amount. You approve before we file.

ITR-2 e-filed

CA files ITR-2 on the Income Tax portal. Return verified via Aadhaar OTP, EVC, or physical ITR-V sent to Bengaluru CPC. Filing done remotely — no need to visit India.

TDS refund tracked

We track your refund to your NRO bank account. If the refund is delayed beyond 60 days, TAXAJ follows up with the IT department on your behalf.

Who Should File

NRIs Who Must (or Should) File ITR-2 in India

🏠

NRI Property Owners

Earning rental income from an Indian property or planning to sell. Buyer deducts 20% TDS — file ITR-2 to claim refund after actual tax + exemptions.

🇺🇸

USA / UK / Canada NRIs

NRO interest taxable at 30% in India. DTAA caps at 10–15%. Filing ITR-2 claims the excess TDS refund. TAXAJ handles both US and India filings.

🇦🇪

UAE / Gulf NRIs

UAE has no income tax — no DTAA credit for NRO interest. 30% TDS still applies. File ITR-2 to claim refund based on actual slab rate if total India income is modest.

📈

Stock Market Investors

Trading Indian stocks via PIS account (mandatory for NRIs on exchange). TDS deducted by broker. File ITR-2 to carry forward capital losses and claim any refund.

👪

Inherited Property / Assets

Inherited India property generating rent or planning to sell. Holding period includes deceased’s period. Complex TDS and capital gains rules apply.

💼

NRIs on Indian Payroll

Working for an Indian company with salary received in India. Subject to normal TDS. ITR-2 mandatory; 80C deductions available. Salaried filing →

🏢

Business / Freelance Income

NRI with India-based business or providing professional services to Indian clients. Income taxable in India; ITR-3 or ITR-2 required.

🔄

Returned NRIs (Becoming Resident)

Status changes to RNOR then ROR when you return to India permanently. TAXAJ handles the transitional year filing with correct residential status.

📊

NRIs with Losses to Carry Forward

Capital losses on Indian shares or property. Must file ITR-2 before due date to carry forward losses for 8 years. File even if no tax is due.

FAQ

Frequently Asked Questions on NRI Tax Filing

Does an NRI need to file income tax return in India? ▾

An NRI must file ITR-2 in India if their taxable India-source income exceeds the basic exemption limit — ₹2.5 lakh for individuals below 60 years, ₹3 lakh for senior citizens (60–79), and ₹5 lakh for super seniors (80+). Even below these limits, filing is strongly recommended to: (1) claim TDS refund if excess TDS was deducted at higher NRI rates, (2) carry forward capital losses for future set-off (up to 8 years), (3) use as proof of income for visa/loan applications, and (4) avoid notices for non-filing when TDS credits appear in Form 26AS.

What is the TDS rate when NRI sells property in India? ▾

When an NRI sells property in India, the buyer must deduct TDS at 20% plus surcharge and cess (~23.3%) on the ENTIRE sale consideration for long-term capital gain (held 24+ months). For short-term (less than 24 months), TDS is at the applicable income tax slab rates — potentially up to 39%. This is very different from the 1% TDS applicable when a resident sells property. The NRI can apply for a Section 197 Lower Deduction Certificate from the Assessing Officer before the sale, or file ITR-2 after the sale to claim a refund. TDS on property →

Is NRE account interest taxable in India? ▾

No. Interest earned on NRE (Non-Resident External) savings accounts, fixed deposits, and recurring deposits is fully exempt from Indian income tax under Section 10(4) of the Income Tax Act. There is no TDS deducted on NRE interest. The principal and interest are also freely repatriable. By contrast, NRO (Non-Resident Ordinary) account interest is taxable at 30% plus surcharge and cess, with TDS deducted by the bank. DTAA may reduce the NRO interest tax rate.

Can NRIs claim 80C deductions in India? ▾

Yes. NRIs can claim most Section 80C deductions — including LIC premium, PPF (limited), ELSS investments, home loan principal repayment, and children’s tuition fees. However, some 80C investments are restricted: NRIs cannot make new PPF accounts (can only continue existing ones) and may have restrictions on Post Office schemes. Section 80D (health insurance) is available to NRIs for themselves and family in India. Standard deduction of ₹75,000 (FY 2025-26) is available on Indian salary income. HRA exemption is NOT available to NRIs since they don’t pay rent in India.

What is Section 54 / 54EC exemption for NRI property sale? ▾

NRIs can claim the same capital gains exemptions as residents: Section 54 — reinvest LTCG from house property into another residential house in India (1 yr before or 2 yrs after sale, or construct within 3 yrs). Section 54EC — invest LTCG up to ₹50 lakh in NHAI or REC bonds within 6 months. Section 54F — reinvest entire sale proceeds from non-property asset into a residential house. These exemptions can reduce TDS liability significantly. Apply for a Section 197 certificate before sale showing the expected exemption. Capital Gains Filing →

How do NRIs verify their ITR without an Indian phone number? ▾

NRIs have multiple ITR verification options: (1) Electronic Verification via Net Banking — use Indian bank account net banking to generate an EVC; (2) EVC via Bank ATM — some banks allow ITR verification via ATM; (3) Physical ITR-V — print and sign the ITR-V acknowledgement and send by speed post to CPC Bengaluru within 30 days; (4) Digital Signature Certificate (DSC) — use a Class 2 or Class 3 DSC registered with the IT portal. TAXAJ guides NRI clients through the verification process remotely.

Do NRIs need to report NRE/NRO accounts in their India tax return? ▾

NRIs do not need to report NRE or FCNR(B) accounts in their ITR as these are exempt. NRO account interest must be reported under “Income from Other Sources” in ITR-2, and the TDS deducted by the bank is credited against the tax liability. If DTAA reduces the rate and excess TDS was deducted, the refund is claimed in ITR-2. Note: The requirement to disclose foreign assets in Schedule FA applies only to Resident and Ordinarily Resident (ROR) individuals — not to NRIs. Once you return to India and become ROR, you must declare all foreign accounts in Schedule FA.

What happens if an NRI doesn’t file ITR in India? ▾

Consequences of non-filing when required: (1) Penalty of ₹5,000 (₹1,000 if income below ₹5 lakh) under Section 234F; (2) Interest under Sections 234A, 234B, 234C on unpaid tax; (3) Inability to carry forward capital losses — losses are forfeited if ITR not filed by due date; (4) TDS refunds cannot be claimed; (5) Scrutiny notices from IT department since TDS credits show up in Form 26AS without a matching return; (6) Inability to obtain Section 197 certificates in future. The due date for NRI ITR-2 is 31st July 2026 for FY 2025-26.

File NRI ITR-2 — Claim Your TDS Refund Today

TAXAJ CAs handle NRI rental income, capital gains, DTAA relief, Section 197 certificates, and TDS refunds — all remotely, with no India visit required.

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