Understanding tax for NRIs on the sale of property in India can often feel complicated, especially with updated tax residency rules expected to take effect from April 2026. In many cases, NRIs unintentionally trigger residency status due to changes in stay duration or income thresholds, which can significantly affect their tax liability in India. The situation becomes even more complex when considering that TDS on capital gains can range from 12.5% to 30%, depending on the property holding period and applicable tax rules.
This blog explains the tax implications for NRIs selling property in Delhi NCR while comparing resale properties and new projects in detail. It covers how TDS on the sale of property by an NRI works, outlines key tax benefits available through different exemptions, and highlights the financial differences between resale vs new projects in Delhi NCR. The objective is to help NRIs understand how property transactions can be planned more efficiently from a tax perspective.
Tax framework for NRI property investments in Delhi NCR
NRI tax residency status and implications
Tax liability on property transactions depends on the individual’s residential status during the relevant financial year. A person generally qualifies as an NRI if their stay in India remains below 182 days in that financial year. However, certain additional conditions apply. For example, if an Indian citizen earns more than ₹15 lakh as income in India, the threshold for determining residency can change, and the stay limit may reduce to 120 days instead of 182 days in specific situations.
This distinction plays a major role in determining how income is taxed. For NRIs, only income earned or received in India is taxable. Income generated outside India is not subject to Indian taxation. In contrast, individuals classified as residents must pay tax on their global income. There is also an intermediate category known as RNOR (Resident but Not Ordinarily Resident), under which most foreign income continues to remain outside the Indian tax scope for a certain period.
Long-term vs short-term capital gains
The tax treatment of property sales also depends on how long the property was held before the sale. When a property is owned for more than 24 months, it is treated as a long-term capital asset. If the property is sold within 24 months, the profit is treated as short-term capital gain.
The tax rates applied to these two categories differ considerably:
- Long-term capital gains (LTCG):
- Properties purchased before July 23, 2024, attract a 20% tax with indexation benefits, which adjust the purchase price for inflation.
- Properties acquired on or after July 23, 2024, attract a 12.5% tax without indexation.
- Short-term capital gains (STCG):
- Gains are taxed according to the applicable income tax slab rates, which can go up to 30% for NRIs depending on total income.
How TDS works for NRI property transactions
When an NRI sells property in Delhi NCR, the buyer is legally required to deduct Tax Deducted at Source (TDS) before releasing the payment. To complete this deduction process, the buyer must obtain a TAN (Tax Deduction Account Number).
The applicable TDS rates generally follow these guidelines:
- Long-term capital gains: TDS at 20% plus surcharge and cess
- Short-term capital gains: TDS at 30% on the sale consideration
After deduction, the buyer must deposit the TDS amount with the Income Tax Department within seven days from the end of the month in which the payment was made. Once the TDS return is filed, the buyer provides Form 16A to the seller as official proof of the tax deduction.
If the seller’s actual tax liability is lower than the deducted TDS amount, it is possible to apply for a lower or nil TDS certificate through the assessing officer. This helps avoid excess tax deductions during the transaction.
Form 15CA and 15CB for fund repatriation
When an NRI transfers property sale proceeds from India to a foreign bank account, certain compliance forms must be submitted to the bank. These include Form 15CA and Form 15CB.
- Form 15CA: An online declaration submitted to the Income Tax Department before remitting funds abroad.
- Form 15CB: A certificate issued by a chartered accountant confirming that all applicable taxes on the transaction have been properly calculated and paid.
Form 15CB is typically required when the remittance amount exceeds ₹5 lakh in a financial year. In addition, the overall repatriation limit for NRIs is USD 1 million per financial year through an NRO account. For residential property, repatriation of sale proceeds is generally allowed for up to two properties during a lifetime, subject to regulatory conditions.
Buying resale properties: complete tax breakdown for NRIs
When is TDS deducted on resale properties
When purchasing resale properties from an NRI seller, TDS obligations arise under Section 195 of the Income Tax Act. In such cases, the buyer is required to deduct TDS on the entire sale consideration, not just on the capital gain portion. This requirement applies before releasing the payment to the seller.
The applicable TDS rates depend on the holding period of the property:
- Long-term holdings (more than 24 months): TDS is generally deducted at 12.5% without indexation, along with applicable surcharge and 4% cess.
- Short-term holdings (less than 24 months): TDS is deducted at 30%, as the gain is treated as short-term capital gain.
In practice, the effective TDS rates can vary depending on the total capital gain involved in the transaction. For example:
- Gains below ₹50 lakh may result in an effective TDS rate of around 20.8%
- Gains between ₹50 lakh and ₹1 crore may attract approximately 22.88%
- Gains above ₹1 crore can lead to an effective TDS rate of about 23.92%
These rates include applicable surcharge and cess components.
Lower or nil TDS certificate option
To avoid excess tax deduction during the property transaction, NRIs have the option to apply for a lower or nil TDS certificate under Section 197. This allows the tax authority to determine the correct amount of TDS based on the actual capital gain rather than the full sale value. The application is submitted through Form 13 on the TRACES portal, along with supporting documents such as the following:
- Copy of the sale agreement
- Cost of acquisition details
- Capital gains calculation
- Proof of reinvestment or applicable tax exemptions
After reviewing these documents, the jurisdictional assessing officer may issue a certificate specifying a reduced TDS rate that the buyer should apply during the transaction. The approval process generally takes 30 to 45 days, including document preparation, application review, and final certification.
Actual tax liability vs TDS deducted
In many transactions, the TDS deducted during the sale can be significantly higher than the seller’s actual tax liability. This happens because TDS is applied on the entire transaction value, while tax is calculated only on the capital gain portion.
For example:
- Sale price: ₹1.50 crore
- Purchase price: ₹1.10 crore
- Capital gain: ₹40 lakh
In this case, the buyer may deduct around ₹22.425 lakh as TDS, while the seller’s actual tax liability could be approximately ₹5.20 lakh depending on the applicable tax rules. Without a lower TDS certificate, the remaining amount stays with the tax department until the seller files an income tax return and claims the refund.
Tax benefits available on resale purchases
Buyers purchasing resale properties can claim several deductions under the Income Tax Act. These deductions help reduce the overall tax burden on the property investment.
Common deductions include:
- Home loan interest deduction: Up to ₹2 lakh per year for self-occupied residential property.
- Principal repayment deduction: Up to ₹1.5 lakh under Section 80C, which also includes stamp duty and registration charges paid during the purchase.
These deductions apply once the property is completed and the loan repayment has begun.
Timeline considerations for tax planning
Proper planning is important to avoid delays or financial inconvenience during resale transactions. For instance, applications for lower TDS certificates should be submitted well before the expected completion of the transaction.
Key timing considerations include the following:
- Apply for the lower or nil TDS certificate early to avoid excessive tax deduction.
- Ensure that TDS returns are filed quarterly after deduction.
- Confirm that the buyer deposits the deducted TDS by the 7th day of the following month with the Income Tax Department.
Following these timelines helps ensure compliance with tax regulations while preventing unnecessary delays in property transactions.
Buying new projects: complete tax breakdown for NRIs
Payment structure and tax implications
Purchasing new projects in Delhi NCR involves certain tax components that are not applicable to resale properties. One of the key differences is the application of Goods and Services Tax (GST) on under-construction properties. For most non-affordable housing units, buyers are required to pay 5% GST without input tax credit. Affordable housing projects receive a lower GST rate. A property qualifies as affordable housing when the carpet area is up to 60 square meters in metropolitan cities and the property value does not exceed ₹45 lakh. In such cases, the GST rate reduces to 1%.
For example:
- A ₹50 lakh under-construction apartment in a regular housing category attracts ₹2.5 lakh GST at 5%.
- The same value property under affordable housing would attract approximately ₹50,000 GST at 1%.
Unlike certain other tax credits, this GST amount cannot be recovered later and therefore becomes an additional cost added to the total property investment.
Construction-linked payment plans and TDS
Many new residential projects follow construction-linked payment plans, where buyers pay installments based on construction progress. When the property value exceeds ₹50 lakh, buyers must deduct 1% TDS on each installment paid to the developer. This process differs from ready-to-move properties where TDS is deducted only once during the final payment. In under-construction projects, TDS must be deducted for every stage payment and deposited with the Income Tax Department.
Important points regarding this process include:
- 1% TDS applies when the property value exceeds ₹50 lakh
- TDS must be deposited within 30 days from the end of the month in which the payment was made
Recent updates under Budget 2026 have simplified the compliance process. Resident buyers purchasing property from NRIs can now deduct and deposit TDS using a PAN-based challan, which removes the requirement to obtain a Tax Deduction Account Number (TAN).
Ready-to-move vs under-construction tax differences
A major tax difference exists between ready-to-move properties and under-construction units. Properties that have already received a completion certificate are exempt from GST. This can result in immediate cost savings for buyers.
For example:
- A ₹1 crore ready-to-move apartment does not attract GST.
- The same property purchased while under construction could attract around ₹5 lakh GST at the 5% rate.
Another important aspect relates to Section 54 capital gains exemption. In cases where buyers invest in under-construction property to claim this exemption, the possession date generally becomes more important than the purchase agreement date. Judicial rulings have also clarified that booking an unfinished property is treated as construction of a house rather than direct purchase, which can affect how exemption timelines are applied.
Additional costs and their tax treatment
In addition to GST and TDS considerations, buyers must also account for stamp duty and registration charges during the property purchase. These charges apply to both new and resale properties and usually range between 6% and 7% of the property value in Delhi NCR, depending on local regulations. From a tax perspective, NRIs may claim deductions on certain purchase-related expenses. Under Section 80C of the Income Tax Act, buyers can claim deductions of up to ₹1.5 lakh for:
- Principal repayment on home loans
- Stamp duty and registration charges paid during the purchase
These deductions help reduce the taxable income associated with property investments in India.
Making the right choice: tax-smart comparison for NRIs
Direct tax comparison between resale and new projects
When comparing resale properties and new projects, the tax impact differs mainly because of GST and TDS treatment. Resale properties do not attract GST, which can immediately reduce the overall purchase cost. However, transactions involving NRI sellers may involve TDS obligations that require careful compliance. In contrast, under-construction units in new projects attract 5% GST, which increases the total investment value. For example, purchasing a ₹1 crore under-construction property can add approximately ₹5 lakh as GST. However, ready-to-move properties in new developments with completion certificates do not attract GST, allowing buyers to benefit from new construction without this additional tax cost.
Hidden tax costs in each option
Beyond the visible taxes, certain additional costs may influence the final investment decision. Buyers should consider the following charges when evaluating property options:
- Stamp duty in Delhi:
- Around 4% for women buyers
- Around 6% for men buyers
- Generally 1% of the property value
Administrative aspects may also differ between resale and new projects:
- New projects:
- Construction-linked payment schedules may require multiple TDS deductions across several installments.
- Resale properties:
- Typically involve a single TDS deduction event, although rates may vary depending on the seller’s tax status, especially in NRI transactions.
Exemptions under Section 54 and 54F
The Income Tax Act provides several exemptions that help reduce capital gains tax when reinvesting proceeds from property sales.
Important provisions include:
- Section 54:
- Allows exemption on long-term capital gains up to ₹10 crore when the proceeds from selling a residential property are reinvested in another residential property within the prescribed time limits.
- Section 54F:
- Applies when selling non-residential assets such as land, commercial property, or shares.
- Full exemption is available if the entire net consideration is reinvested in a residential property.
- Section 54EC:
- Offers another option for tax relief through investment in specified government bonds.
- The investment limit under this section is ₹50 lakh, and the investment must be made within six months of the sale.
Optimal investment timing for tax savings
Timing plays an important role when claiming capital gains exemptions. For example, under Section 54, property investment may qualify for exemption if:
- A new property is purchased up to one year before the sale of the existing asset
- The purchase occurs within two years after the sale
- For under-construction properties, the construction period may extend up to three years
Planning the transaction within these timelines helps maintain eligibility for capital gains exemptions.
Delhi NCR-specific considerations
NRIs must also consider regulations related to transferring funds outside India after a property transaction. Funds held in NRO (Non-Resident Ordinary) accounts can be repatriated abroad, but the transfer amount is generally limited to USD 1 million per financial year. Because of this limit, careful planning of property transactions and fund transfers helps ensure smoother repatriation of sale proceeds from Delhi NCR property investments.
Conclusion
By and large, the choice between resale properties and new projects in Delhi NCR depends largely on the buyer’s tax position and investment priorities. Each option carries different tax implications related to TDS obligations, GST applicability, and capital gains exemptions, which can influence the overall cost of the investment. Therefore, understanding these differences helps in making a more financially efficient property decision.
While evaluating both options, the main objective should be to manage the overall tax impact while aligning the purchase with long-term investment goals. A few practical considerations can support better planning:
- Apply for lower TDS certificates early to avoid excess tax deduction during the transaction
- Plan reinvestment timelines carefully to qualify for exemptions under Section 54 or related provisions
- Review tax implications in advance when comparing resale properties and new projects
- Consult a qualified tax advisor to structure the transaction in a tax-efficient manner
With careful planning and proper timing, buyers can manage tax exposure effectively and make a well-informed investment decision in the Delhi NCR property market.
