NRI income tax in India: property sale and rent basics
A Non-Resident Indian (NRI) is taxed in India on income that arises or is received in India, which includes rent from Indian property and gains on selling it. Tax is often deducted at source by the buyer or tenant, and the final liability is settled by filing an Indian income tax return. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026, so older material may use outdated section numbers and terms.
- The Income-tax Act, 2025 applies from 1 April 2026; it speaks of a "tax year" instead of "previous year" and "assessment year".
- Tax residence depends on days spent in India, not on citizenship or a passport.
- Buyers of property from an NRI and tenants paying rent to an NRI generally have tax-deduction duties; the rate depends on the type of income and the law in force, so check the current rate.
- A lower or nil deduction certificate (Form 128) can be applied for before the payment; a return can later be filed to claim any excess tax deducted.
- Remitting sale proceeds abroad needs Form 145, and in some cases Form 146, for remittances made on or after 1 April 2026.
Which law applies from 2026, and what changed?
The Income-tax Act, 2025 came into force on 1 April 2026, with the Income-tax Rules, 2026, as the Income Tax Department's press release and PIB report. The Department's transition FAQs say that sums paid or credited up to 31 March 2026 follow the 1961 Act, and those paid or credited from 1 April 2026 follow the 2025 Act.
Section numbers differ between the two Acts, so this article does not quote them. Check the Act as amended by the Finance Act, 2026 for the provision that applies.
How is NRI status decided for tax?
Residential status for tax is based on the days an individual stays in India in the tax year (and, for some tests, earlier years), not on citizenship. An individual who stays long enough, or meets the alternative tests, is resident; otherwise the person is a non-resident.
The tests carry extra conditions for Indian citizens and persons of Indian origin who visit India, and for citizens with high Indian income who are not taxed elsewhere.
The exact day counts and conditions are in the residential-status provision of the Income-tax Act, 2025. The brief on the 60, 120 and 182 day rules was written under the 1961 Act and should be read with that in mind. Status is determined every year, so the same person can be an NRI in one tax year and a resident in another.
What tax applies when an NRI sells property in India?
Gains on selling Indian property are taxable in India. The gain is the sale price less the cost of acquisition, improvement and sale expenses, as the law allows. Whether it is short-term or long-term depends on the holding period, and the rate depends on the provisions in force on the date of transfer.
Any indexation or other benefit also depends on those provisions. These details change with Finance Acts, so check the current rate on the Income Tax e-filing portal before computing tax.
When an NRI sells, the buyer is generally required to deduct tax at source on the payment. The Department's transition FAQs state that the TDS rates and monetary thresholds carry over from the 1961 Act. The buyer should deposit the tax and file the prescribed statements. Because the deduction is generally worked out on the amount paid rather than only on the gain, it can exceed the tax actually due.
How is a lower or nil deduction certificate obtained?
The seller applies in Form 128 (Rule 213 of the Income-tax Rules, 2026, the successor to Form 13) for a certificate that lets the buyer deduct tax at a lower rate or nil. The application is optional, and the certificate should reach the payer before tax is deducted. The Form 128 FAQs give the details.
Steps
- Estimate the gain and tax. Estimate the capital gain and the tax payable on the sale, and keep the purchase and improvement records.
- Apply in Form 128. Apply electronically in Form 128 (Rule 213 of the Income-tax Rules, 2026) before the buyer makes the payment; the Department's Form 128 guidance describes the route.
- Give the certificate to the buyer. The buyer deducts tax at the rate the certificate states.
- File the return. File the return after the sale to report the gain and reconcile the tax.
What about tax on rent received by an NRI?
Rent from Indian property is taxable in India. A tenant paying an NRI landlord is generally required to deduct tax at source under the non-resident withholding provisions, and the Department's transition FAQs say the rates carry over from the earlier law.
As with a sale, the landlord can seek a lower-deduction certificate if the actual tax is lower. Where the landlord's PAN is not furnished, a higher deduction can apply.
The rental income is reported in the return after the deductions the law allows for house property income, such as municipal taxes paid and interest on a home loan, subject to the rules of the tax year. Check the Income Tax portal for the current allowances.
How can an NRI claim a refund?
An NRI whose tax was deducted at a rate higher than the final liability files an income tax return for that tax year on the e-filing portal and claims the refund, using PAN, bank account details and the TDS credit shown in the tax credit statement on the portal.
A refund is credited to a bank account validated on the portal. Check the filing due dates for the relevant tax year on the portal.
What are Forms 145 and 146, and where does the DTAA come in?
Remitting sale proceeds abroad needs a remitter's declaration and, in certain cases, a Chartered Accountant's certificate, which the bank asks for before the transfer. Under the Income-tax Rules, 2026 these are Form 145 (earlier Form 15CA) and Form 146 (earlier Form 15CB). Banks may still use the old names in conversation.
The Department's Form 145 FAQs say that Forms 15CA and 15CB already submitted for remittances made on or before 31 March 2026 remain valid, and that Forms 145 and 146 are to be used for remittances on or after 1 April 2026. Form 146 is needed only in specific cases; check the thresholds and procedure on the e-filing portal.
A Double Taxation Avoidance Agreement (DTAA) between India and the country of residence may reduce or eliminate tax on some income or allow credit for tax paid in India. Benefits generally need a tax residency certificate from the other country and related declarations. Read the treaty text for the specific country on the Department's double taxation relief page. Foreign tax credit and reporting in the other country are matters of that country's law.
Last reviewed: 15 October 2026
Sources
- Income Tax Department press release: Income-tax Act, 2025 comes into force from 1 April 2026
- PIB: Income Tax Act, 2025 to come into effect from 1 April 2026
- Income-tax Act, 2025 as amended by the Finance Act, 2026
- Income Tax Department: FAQs on the transition to the Income-tax Act, 2025
- Income Tax Department: Form No. 128 FAQs (lower or nil deduction)
- Income Tax Department: Form No. 145 FAQs (earlier Form 15CA)
- Income Tax Department: double taxation relief
- Income Tax e-filing portal