NRI selling Indian property faces same tax whether buyer is NRI or resident

An NRI in Singapore who owns residential property in India will face the same capital gains tax whether they sell the property to another NRI or an Indian resident, according to Harshal Bhuta of Ascentium India. Since the property is in India, the capital gains accrue in India and are taxable there. Long-term capital gains (held over 24 months) are taxed at 12.5% plus surcharge and cess, without indexation, short-term gains are taxed at slab rates.

The buyer must deduct tax at source (TDS) on payments to a non-resident, computed on the taxable capital gains. In practice, buyers often insist on a lower deduction certificate from tax authorities, or else TDS is deducted on the full sale consideration. As a Singapore tax resident, the NRI can claim the India-Singapore DTAA, but India retains the right to tax capital gains from immovable property in India.

The NRI can repatriate the entire sale proceeds if the property was acquired under foreign exchange laws and paid via banking channels or NRE/FCNR(B) accounts, but only for two residential properties in their lifetime. Otherwise, the $1 million per financial year remittance facility applies.