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 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.
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:
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:
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.
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 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.
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:
In practice, the effective TDS rates can vary depending on the total capital gain involved in the transaction. For example:
These rates include applicable surcharge and cess components.
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:
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.
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:
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.
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:
These deductions apply once the property is completed and the loan repayment has begun.
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:
Following these timelines helps ensure compliance with tax regulations while preventing unnecessary delays in property transactions.
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:
Unlike certain other tax credits, this GST amount cannot be recovered later and therefore becomes an additional cost added to the total property investment.
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:
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).
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:
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.
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:
These deductions help reduce the taxable income associated with property investments in India.
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.
Beyond the visible taxes, certain additional costs may influence the final investment decision. Buyers should consider the following charges when evaluating property options:
Administrative aspects may also differ between resale and new projects:
The Income Tax Act provides several exemptions that help reduce capital gains tax when reinvesting proceeds from property sales.
Important provisions include:
Timing plays an important role when claiming capital gains exemptions. For example, under Section 54, property investment may qualify for exemption if:
Planning the transaction within these timelines helps maintain eligibility for capital gains exemptions.
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.
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:
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.