Selling investments in India can trigger a significant capital gains tax bill for Non-Resident Indians (NRIs). But the amount you eventually pay depends not only on how much you’ve earned, but also on what you’re selling.
Property, shares, mutual funds, gold and agricultural land all follow different tax rules. Each also comes with its own exemptions, documentation requirements and tax-planning opportunities.
Here’s what you should know before selling different assets in India.
1. Selling property? Documentation and timing can save you lakhs
Property often attracts the largest tax bills and also offers some of the biggest opportunities to reduce them.
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Property held for more than 24 months qualifies as a long-term capital asset and is generally taxed at 12.5% without indexation, while shorter holdings are taxed at the applicable slab rate.
One major issue for NRIs is that buyers are generally required to deduct TDS under Section 195 on the sale consideration, which often results in excess tax deduction and subsequent refund claims, according to CA Priyal Goel Jain, Partner and NRI Tax Expert at Dinesh Aarjav & Associates.
One of the biggest opportunities to reduce taxable gains is correctly claiming the cost of improvement. Expenses such as constructing an additional floor, major renovations or structural improvements can increase the property’s cost base, provided they are supported by proper documentation, says Sanyam Goel, Director at Accorp Partners.
NRIs may also reduce tax by claiming exemptions through reinvestment.
NRIs can sell Indian property and reinvest the gains into a residential property to save capital gains tax. Jain says that Sections 54 and 54F under the Income Tax Act, 1961 allows eligible reinvestment into residential property within the prescribed timelines, while the equivalent of the old Section 54EC allows investment of up to ₹50 lakh in specified capital gains bonds within six months.
Perhaps the most underused strategy is applying for a lower or nil TDS certificate under Section 197 before the sale. Without it, a substantial portion of the sale proceeds may remain blocked with the tax department until the refund is processed, adds Goel.
Also Read: India vs US: Where should US-based NRIs invest their money?
2. Selling agricultural land? First check whether it’s even taxable
Agricultural land is one asset where taxation depends more on the location than on the seller’s NRI status. Rural agricultural land is generally not treated as a capital asset under the Income-tax Act and therefore does not attract capital gains tax.
Urban agricultural land, however, is taxed broadly like other property.
NRIs generally cannot purchase agricultural land under FEMA, although they may inherit or receive it as a gift from a resident relative, according to Jain.
Many people wrongly assume inherited agricultural land automatically qualifies as rural land.
Municipal boundaries change over time, so land that was once rural may now fall within notified municipal limits, cautions Goel.
He advises checking the current classification before assuming the exemption applies.
For eligible urban agricultural land, Jain notes that the equivalent of the earlier Section 54B may provide relief if the prescribed conditions are met.
However, she warns that NRIs should also consider FEMA restrictions before planning reinvestment into another agricultural property.
3. Selling listed shares or equity mutual funds? Don’t ignore Section 215
Listed shares and equity-oriented mutual funds follow a different tax regime from property.
According to Jain, gains on holdings of more than 12 months are generally taxed at 12.5%, with the first ₹1.25 lakh of eligible long-term gains exempt under Section 112A. Short-term gains are generally taxed at 20%.
Goel says NRIs who originally purchased listed shares using funds remitted through NRE or FCNR accounts should also examine Section 215 (earlier Section 115F). Under specified conditions, reinvesting net sale consideration into eligible Indian securities within six months can provide a capital gains exemption.
However, this benefit generally does not apply if the original investment was made using NRO funds or to investments such as mutual funds or property.
Jain also reminds investors not to confuse equity mutual funds with debt mutual funds. Debt-oriented funds acquired on or after 1 April 2023 follow different tax rules, and many investors mistakenly assume that simply holding them for longer changes their tax treatment.
4. Selling unlisted shares? Currency movements won’t reduce your tax
Unlisted shares broadly follow the same holding-period rules as property.
According to Jain, holdings beyond 24 months generally qualify as long-term capital assets taxed at 12.5%, while shorter holdings are taxed at slab rates.
Goel says one point many overseas investors overlook is that Indian tax law does not adjust for rupee depreciation against the investor’s home currency. As a result, an NRI whose actual economic gain in dollars or pounds is relatively small because of currency movements may still pay tax in India on the full rupee gain.
5. Selling gold or jewellery? The biggest challenge may be proving ownership
Physical gold and jewellery broadly follow the same long-term and short-term capital gains framework as property, says Jain.
Gold held for more than 24 months generally qualifies as long-term, while shorter holdings are taxed at slab rates.
Although sales of physical gold may not attract TDS in the same way as property, they may still appear in the Annual Information Statement (AIS), making proper tax reporting important, she notes.
Goel says the biggest issue is often documentation rather than taxation.
Old family jewellery frequently comes without purchase invoices. In such situations, valuation reports, insurance records or even family photographs establishing long-term ownership may help support the claim if questioned by the tax authorities. Without sufficient evidence, disputes over the cost of acquisition can become much more difficult.
The tax payable when an NRI sells an investment in India depends as much on planning as on the asset itself.
For large transactions, experts recommend seeking tax advice before signing the sale agreement rather than after the money has already changed hands.
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