Indian property when you are a Dutch tax resident

In the Netherlands, an Indian property is an asset in Box 3, so on the face of it, it is taxed each year on a deemed return on its value, less any mortgage against it, at the flat Box 3 rate. That would mean an annual Dutch charge on the property's worth.

But the treaty steps in. Because the India-Netherlands treaty gives India, where the property sits, the right to tax it, the Netherlands relieves the property from Box 3 to avoid taxing it twice. In practice the property's value is counted for setting the overall position, then its share is exempted through a double-tax-relief deduction, so the deemed return on the Indian property is effectively removed from the Dutch tax. The important practical point is that this relief is not automatic, you have to claim it on the Dutch return, and a mortgage on the Indian property is allocated against the exempt property, not against your Dutch-taxed assets. Claimed correctly, the annual Dutch tax on the Indian property largely falls away.

The sale is where the Dutch system is strikingly different from most. The Netherlands has no separate capital-gains tax on a private asset. A gain on your property is not taxed as a gain at all; the Dutch system only ever taxed the annual value in Box 3 while you held it. So when you sell your Indian property, there is simply no Dutch capital-gains charge on the profit.

That is a genuine contrast with, say, a resident of the United States, the United Kingdom or Australia, who would face a capital-gains tax on the same sale. For a Dutch resident, the Netherlands takes nothing on the gain. Combined with the Box 3 relief while you held it, the Netherlands ends up taxing very little on the property overall.

Because the Dutch side is so light, India is really the only place the property is taxed, and that is where the work sits. India taxes the rental income while you own it, after a flat 30% standard deduction under Section 24, with the tenant deducting TDS under Section 195 on the gross rent. And when you sell, India taxes the whole gain from your original cost at 12.5% without indexation, with the buyer deducting TDS under Section 195 on the gain, and no currency relief for an NRI.

So the plan is India-side: file the Indian return on the rent and reclaim the over-deducted TDS, and on a sale, get a lower-deduction certificate so the buyer withholds closer to the real tax, then reclaim any excess. A practising CA handles the Indian computations and certificates, and gives your Dutch accountant the figures to claim the Box 3 relief on the property, so the light Dutch outcome is actually secured and not lost by a relief left unclaimed.