NRI Property Section 54 Exemption Guide
India-specific preparation guide
NRI Property Section 54 Exemption Guide needs current-law checks, portal verification, documents and a precise brief before you compare experts on the WorkIndex work index.
Post Your Requirement - FreeTDS on NRI Property Sale & Rental Income (Section 195)
TDS on payments to NRIs is governed by Section 195 of the Income-tax Act, 1961. Unlike resident transactions, there are no basic exemption thresholds for NRI TDS.
| Transaction type | TDS Rate & applicability | Key requirement |
|---|---|---|
| TDS on Rent (Section 195) | 31.2% TDS (30% tax + 4% cess) applied to gross rental income. | No basic limit of Rs. 2.4 Lakh. Tenant must obtain a TAN to deduct and deposit this tax. |
| LTCG Property Sale TDS | 20.8% TDS (20% tax + 4% cess + applicable surcharge) on gross sale value. | Applies if the property was held for more than 24 months. Indexation rules apply based on acquisition date. |
| STCG Property Sale TDS | 30.9% to 42.74% TDS on gross sale value depending on the slab. | Applies if the property was held for 24 months or less. |
| Lower TDS Certificate (Section 197) | Application via Form 13 on the e-filing portal to reduce TDS rate. | Enables the buyer to deduct TDS only on the actual capital gains rather than the total sale value. |
Capital gains exemptions and buyer obligations
- No 50 Lakh Threshold: Unlike resident property sales where TDS is 1% under Section 194-IA (only if sale > 50 Lakh), NRI property sales are subject to TDS on the entire sale price under Section 195.
- Section 54 Exemption: NRI can save LTCG tax by investing in another residential house property in India (capped at Rs. 10 Crore).
- Section 54EC Exemption: NRI can save LTCG tax by investing in NHAI/REC capital gains bonds within 6 months of sale (capped at Rs. 50 Lakh).
- Buyer TAN Obligation: The buyer must obtain a TAN to deduct NRI TDS under Section 195 and file Form 27Q quarterly.
Documents for property sale or rent tax filings
- Purchase deed and date of acquisition.
- Sale agreement / sale deed draft.
- Cost of improvement details (renovation, building, etc. with invoices).
- Form 13 Lower TDS certificate (if obtained).
- TAN certificate of the buyer or tenant.
NRI Property Section 54 Exemption Guide: year and source check
Last fact-checked: 18 June 2026.
AY 2026-27 means FY 2025-26 income and is filed under the Income-tax Act, 1961. Tax Year 2026-27 means FY 2026-27 income under the Income Tax Act, 2025. Do not mix the two.
Verify stay days, TRC validity, DTAA rates, NRO interest, and Form 15CA/15CB requirements against official CBDT guidelines, notifications, and portal utilities before taking a filing position.
FAQs
What is the TDS rate when buying a property from an NRI?
The TDS rate is 20.8% for Long-Term Capital Gains (held > 24 months) and 30.9% (or higher depending on surcharge) for Short-Term Capital Gains, deducted on the total sale consideration.
How can an NRI seller avoid high TDS on property sales?
The NRI seller can apply online for a Lower TDS Certificate under Section 197 using Form 13 on the e-filing portal. This directs the buyer to deduct tax only on the estimated capital gains instead of the entire sale price.
Does a tenant have to deduct TDS when renting from an NRI landlord?
Yes. Under Section 195, the tenant must deduct TDS at 31.2% on the gross rent, irrespective of the rent amount. The tenant must also obtain a TAN (Tax Deduction and Collection Account Number) to deposit the tax.
Frequently Asked Questions
1. How does NRI Property Section 54 Exemption Guide impact capital gains taxation and exemptions in India?
Capital gains or transactions relating to NRI Property Section 54 Exemption Guide are subject to specific holding periods and tax rates (such as LTCG at 12.5% or STCG). Reinvestment exemptions under Section 54 or 54F may be claimed subject to rules.
2. What tax planning options are available for gains on NRI Property Section 54 Exemption Guide?
Tax planning for NRI Property Section 54 Exemption Guide involves offsetting capital losses, investing in Section 54EC capital gains bonds, or depositing unutilized gains in the Capital Gains Account Scheme (CGAS) before the ITR deadline.
3. What are Section 54EC capital gains bonds?
Section 54EC allows taxpayers to claim tax exemption on LTCG from selling land or buildings by investing the gains in bonds issued by NHAI, REC, PFC, or IRCON. The investment must be made within 6 months of the sale date.
4. What is the investment limit for Section 54EC bonds?
The maximum amount you can invest in Section 54EC capital gains bonds is ₹50 lakh per financial year. These bonds have a mandatory lock-in period of 5 years.
5. How does Section 54 residential property exemption work?
Section 54 allows an individual or HUF to claim exemption on LTCG from selling a residential house by purchasing another residential house within 1 year before or 2 years after, or constructing a house within 3 years from the sale date.
6. What is the Section 54F capital gains exemption?
Section 54F allows tax exemption on LTCG from selling any asset other than a residential house (like land, gold, or shares) by investing the net sale consideration in buying or constructing a residential house within the specified timelines.
7. Can I deposit capital gains in a bank account to save tax?
Yes. If you cannot purchase or construct a house before the ITR filing deadline, you must deposit the unutilized capital gains in a Capital Gains Account Scheme (CGAS) with an authorized bank to claim Section 54/54F exemptions.
8. What is the tax rate on STCG for listed equity shares?
Under Section 111A, Short-Term Capital Gains (STCG) on listed equity shares and equity mutual funds sold through a recognized stock exchange (with STT paid) is taxed at a flat rate of 20%.
9. How is the sale of debt mutual funds taxed?
Capital gains on debt mutual funds (with equity exposure <= 35%) purchased on or after April 1, 2023, are treated as short-term capital gains and taxed at your individual income tax slab rates, regardless of the holding period.
10. Can capital losses be set off against other incomes?
No. Capital losses can only be set off against capital gains. Short-Term Capital Losses (STCL) can offset both STCG and LTCG. Long-Term Capital Losses (LTCL) can only offset LTCG. They cannot offset salary or business income.
11. For how many years can capital losses be carried forward?
Unabsorbed capital losses (both short-term and long-term) can be carried forward for up to 8 assessment years, provided the ITR for the year the loss arose was filed on or before the original due date under Section 139(1).
12. Is there a tax on selling agricultural land in India?
Capital gains on rural agricultural land are exempt because it is not considered a capital asset under Section 2(14). Gains on urban agricultural land are taxable, but exemption can be claimed u/s 10(37) on compulsory acquisition or u/s 54B on reinvestment.
13. How is the sale of gold taxed?
LTCG on gold (held for more than 24 months) is taxed at 12.5% without indexation. STCG (held for 24 months or less) is added to your total income and taxed at your applicable individual slab rates.
14. Which ITR form should I file if I have capital gains?
You must file ITR-2 (for individuals/HUFs without business income) or ITR-3 (if you have business or professional income). Salaried individuals with capital gains cannot file ITR-1.
15. What is Section 50C and how does it affect property sales?
Section 50C mandates that if the sale consideration of a property is less than the stamp duty value (circle rate) set by the state government, the stamp duty value is deemed to be the full value of consideration for computing capital gains tax, unless the difference is <= 10%.