Selling Indian property as an NRI: the rupee-depreciation trap

There is a real currency relief in the law, but it is narrow. The first proviso to Section 48 lets a non-resident compute the gain on shares in, or debentures of, an Indian company in the same foreign currency used to buy them, which strips out rupee movement. That proviso is written only for shares and debentures. It does not reach immovable property.

So when you sell a flat, the gain is computed the ordinary way, in rupees: the rupee cost you paid against the rupee price you receive. If you bought when your currency fetched many more rupees and the rupee has since weakened, a large part of the rupee gain is simply the currency moving, not real profit, and it is taxed all the same. A flat that barely rose in dollar or pound terms can show a hefty rupee gain. This is the single most common surprise for an NRI seller, and it is baked into how property, unlike shares, is computed.

It gets tighter, because the other cushion, indexation, is also gone for you. For transfers on or after 23 July 2024, property long-term gains are taxed at 12.5% without indexation. Residents who bought before that date get a choice, the lower of 12.5% without indexation or 20% with indexation, so they keep an inflation cushion. That choice is for resident individuals and Hindu undivided families only, and an NRI does not get it.

So an NRI selling a long-held property has neither of the two reliefs that soften a long gain: no currency protection, because property is outside the forex proviso, and no indexation, because the resident grandfathering does not apply. The gain is the full rupee difference, taxed at 12.5%. It is worth going in knowing that, rather than being caught by the size of the rupee number at closing.

A tax treaty will not help with the computation. Under the treaties, gains on Indian immovable property are taxable in India under Indian law, and the treaty gives no currency or inflation adjustment. So the lever is not the treaty; it is reinvestment.

The exemptions under Section 54, by buying another house, Section 54F, by investing the whole sale value in a house, and Section 54EC, by putting up to ₹50 lakh in notified bonds, all reduce or remove the tax on the gain, and all are available to NRIs. Timing the sale to spread it, or to fall in a year you can reinvest, is the real planning. And because your cost is fixed in rupees at purchase, keeping the original purchase papers and proof of the rupee price paid matters, since that rupee cost is your only shield against the full sale price. A practising CA computes the real gain, checks whether reinvestment can absorb it, and sets up the lower-TDS certificate so the deduction is not on the gross.