For the tax withheld when you sell, start with NRI selling property in India: 14.95% TDS on the sale price.
12.5%
It looks like a tax cut. For NRIs it is not.
India's long-term capital gains rate on most assets (property, gold, debt funds, unlisted shares) is 12.5% for sales after July 23, 2024, down from 20%.
For residents, that is a tax cut. For most NRIs, it is not.
The Finance Act 2024 dropped the rate from 20% to 12.5% and scrapped indexation. Indexation used to raise your cost basis using the Cost Inflation Index. On a long-held property, that could shrink the gain or wipe it out. Without it, you pay tax on the full nominal gain.
After backlash, the government added grandfathering for property bought before July 23, 2024. Residents can pick the better of 20% with indexation or 12.5% without. NRIs cannot.
For NRIs, the rate is a flat 12.5% without indexation, no matter when you bought.
The Mumbai apartment
Take an apartment bought in 2014 for ₹5.5 crore and sold in 2024 for ₹7 crore. In USD, that's an 8% loss, which is the rupee story. The tax result is worse.
The Cost Inflation Index ran 240 in FY 2014-15 to 363 in FY 2024-25. Under the old regime, indexation lifts the ₹5.5 crore basis to ₹8.32 crore. That is a taxable loss of ₹1.32 crore, and no Indian tax is owed.
The loss carries forward eight years, but only against future Indian long-term gains. It cannot offset NRE interest, US salary or US brokerage gains.
If the sale closes today, NRI rules apply and there is no indexation. The taxable gain is the full ₹1.5 crore. At 12.5%, that's ₹18.75 lakh, about $19,900 at the May 2026 rate.
It is the same property and the same sale price on a different date. Before July 23, 2024, the sale produced a tax loss you could carry forward. After that date, it produces a $19,900 tax bill.
The US side of the same sale
The Indian loss only counts on the Indian side. The US ignores indexation. Your US math is in nominal USD, with purchase rupees converted at the historical rate and sale rupees at the day-of-sale rate.
For the Mumbai apartment, that's $902,379 in (₹5.5 crore at 60.95) and $828,402 out (₹7 crore at 84.50), a $74,000 paper loss.
Whether you can use it depends on IRS classification. Rental property, reported on Schedule E year after year, lets the loss offset US capital gains and carry forward. Personal-use property (family home, parents' house, vacation flat, future retirement) gives you nothing. The IRS does not recognize personal real-estate losses.
Most NRI property is personal-use property. The Indian tax loss is real. For most NRIs, the US loss cannot be used.
For property held five years or less, the new regime usually wins. There is not enough inflation in the cost basis for indexation to matter. Break-even sits around 8 to 10 years. Older holdings cost more, often a lot more, under the new rules.
Form 13 and the TDS withheld at sale
The Indian tax bill above is what you owe eventually. At sale, something worse happens for an NRI living in dollars.
Since this was written, we worked through the withholding in more detail. With surcharge and cess, the buyer withholds 14.95% of the sale price on larger sales, and the forms have new numbers. The figures below use the simpler 12.5% and should be read alongside the 14.95% article.
Section 195 requires the buyer to withhold 12.5% TDS at sale, on the gross sale price and not on the gain. On a ₹7 crore Mumbai sale, that's ₹87.5 lakh withheld upfront, about $92,700. Actual tax liability is ₹18.75 lakh on the ₹1.5 crore gain.
The ₹68.75 lakh difference (roughly $72,800) sits with the Income Tax Department until you file and claim it back. Refunds take six to 12 months.
For dollar-earners, the delay is expensive. The rupee fell 10.5% in the 12 months to May 2026. A refund parked in INR is stuck in a falling currency and isn't earning real interest. A nine-month wait adds $5,000 to $6,000 in currency drift. The bigger the sale, the worse it gets.
Form 13 fixes this. It is an application to the Income Tax Department's Assessing Officer for a Lower Deduction Certificate (LDC). The certificate is written approval for the buyer to withhold less than 12.5%, usually matching your actual expected liability.
File Form 13 four to six weeks before closing. Attach the purchase deed, sale agreement, capital gains computation and proof of US tax residency. Processing takes 30 to 60 days. The result is a certificate setting the withholding rate, often a fraction of a percent instead of 12.5%.
On the Mumbai apartment, an LDC drops withholding from ₹87.5 lakh to ₹18.75 lakh. The final tax bill is the same. The cash flow is better, and no INR refund is stuck in a falling currency.
The sale, in order
Three numbers decide how this goes. Work them out before the listing goes up, not after the buyer's lawyer calls.
- The Indian gain is the sale price minus what you paid, with no indexation. Multiply by 12.5%. That is the bill.
- The withholding is 12.5% of the full sale price, unless you hold a certificate that says otherwise. That is the cash you won't see at closing.
- For the US result, take the purchase price in dollars at the rate on the day you bought, and the sale price in dollars at the rate on the day you sell. A rupee gain can be a dollar loss. For a personal-use flat, it is a loss the IRS won't let you use.
Then comes the calendar. Form 13 goes in four to six weeks before closing. The certificate takes 30 to 60 days. A buyer who wants to close in three weeks will withhold on the gross.
The 12.5% LTCG looks like a tax cut. For NRIs with older property it is a hike. Indexation is gone, and NRIs don't get grandfathering. A sale that would have produced a tax loss before July 2024 now produces a $19,900 tax bill.
Playbook Move: If you've held Indian property a decade or more, model the tax bill before listing. For older holdings, the new regime can cost three to five times what the old one would have. File Form 13 four to six weeks before the sale closes. Default TDS is 12.5% of gross, not gain. On a ₹7 crore property, that's the difference between ₹87.5 lakh stuck with the IT Department for a year and ₹18.75 lakh withheld at sale.
If you're selling soon, we can help with the Lower TDS Certificate application, and with moving the proceeds out of India afterward.
From Edition 2 of the NRI Playbook newsletter. Dollar figures use the exchange rate at the time of writing, May 2026. For informational purposes only; not financial, tax, or legal advice. For decisions about your specific situation, consult a qualified cross-border tax professional.