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US NRIs · Property Sale Tax

Property sale tax for NRIs in the US

When an NRI in the US sells Indian property, the buyer withholds tax on the whole sale value. A lower-deduction certificate brings that down to tax on the actual gain.

When you sell Indian property as an NRI living in the US, the tax on the gain is governed by India. Under the India-US treaty, immovable property is taxable in the country where it sits (Article 13), so the treaty does not lower the headline 12.5% long-term capital-gains rate. The expensive problem is the withholding: the buyer must deduct TDS on the entire sale consideration, not just your profit, which routinely blocks ₹20-30 lakh of cash at closing. The fix is a lower-deduction certificate, which drops the deduction to a figure based on your real gain.
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India-US key facts: property sale tax

Default non-resident TDS rate12.5%
What the treaty changes hereIt sets no lower rate on this income. What a treaty decides here is which country gets to tax it.
Treaty article / basisArticle 13, immovable property taxable in the source country (India)
Your TRC issuing authoritythe Internal Revenue Service (IRS)

Rates reflect India's domestic withholding under Section 393(2) (Section 195 until 31 March 2026) and the India-US treaty. Surcharge and cess apply on top where relevant.

How it works on the India side

On an NRI property sale the buyer deducts TDS under Section 393(2) (Section 195 until 31 March 2026) on the full sale value at the long-term capital-gains rate plus surcharge and cess, a much larger sum than the tax you actually owe, because your taxable gain is only the profit. Indexation is gone for NRIs on transfers from 23 July 2024, and the grandfathered 20%-with-indexation option that survived Budget 2024 was written for resident individuals and HUFs only, so your cost is the actual cost, lifted to the 1 April 2001 fair market value (Section 55(2)(b)) if you held the property before that date. The over-deduction then sits with the government until you file, which can be a year or more of blocked cash.

The certificate is how you avoid the block instead of chasing a refund afterwards. Filed before the sale on the TRACES portal, it asks the Assessing Officer to certify a lower or nil deduction based on your computed gain. With the certificate in hand the buyer deducts only the certified amount, so most of your proceeds reach you at closing. You apply on Form 128 under Section 395, which replaced Form 13 under Section 197 on 1 April 2026, so an adviser still saying "Form 13" means the same application.

What changes because you live in the US

US residents are taxed on worldwide income, so this Indian income also lands on your IRS Form 1040, with a foreign tax credit (Form 1116) for the Indian tax paid. On top of that you report your Indian accounts and assets on the FBAR (FinCEN 114) and Form 8938 once the thresholds are crossed, and Indian mutual funds can trigger punitive PFIC treatment. The India-side tax here is only half the picture.

Frequently asked questions

Common questions from American NRIs

The buyer must deduct TDS under Section 393(2) on the full sale value at the long-term capital-gains rate (12.5% plus surcharge and cess), not on your profit. Because the India-US treaty leaves immovable-property gains taxable in India, the rate itself doesn't drop. What you control is the withholding, which a Form 128 certificate brings down to your actual gain.

Because the default deduction is calculated on the gross sale value rather than the gain, so a large slice of your money goes to the tax department and only comes back at your next ITR. A lower-deduction certificate on Form 128, filed before the sale, gets the Assessing Officer to certify a deduction based on your real gain, so the buyer withholds far less and most of the proceeds reach you on the day. For an NRI in the US this is usually the single biggest lever on a property sale.

No. Gains on immovable property are taxable in the country where the property sits (Article 13), so yours stays taxable in India at 12.5% for a long-term holding. the US may tax the same gain, in which case you report it there and claim a foreign tax credit for the Indian tax paid. Read the note below first, because remittance rules and residence-year counts decide whether it reaches you at all. The treaty's role here is to prevent the same gain being taxed twice, not to lower the Indian rate.

Go further

Read the full guide, or see your country's complete picture

Lower-TDS certificate for an NRI property saleUS NRI tax guide: every income type and the rates that apply

Property Sale Tax sorted, by an Indian CA who works with American NRIs

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