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Capital Gain Tax for NRIs in India – N D Savla & Associates
NRI Capital Gains

Capital Gain Tax for NRIs in India
Sections 111A, 112 & 112A, Section 195 TDS, Section 197 LDC, DTAA Treaty Rate & ITR-2 Schedule CG Filing

Complete NRI capital gain advisory — asset classification, holding period analysis, Section 195 TDS coordination with the buyer or broker, Section 197 Lower Deduction Certificate, DTAA treaty rate with TRC and Form 10F, Sections 54 / 54F / 54EC reinvestment planning, Capital Gains Account Scheme, and ITR-2 Schedule CG preparation — all under one roof.

Part of our NRI Tax Filing practice: NRI Tax Filing Capital Gains Exemptions Repatriation of Assets DTAA Benefits

Overview

What Is Capital Gain Tax for NRIs Under the Income Tax Act 1961?

Capital gain is the profit arising from the transfer of a capital asset — and for NRIs, it is the single most important tax head encountered when selling Indian property, listed equity, mutual fund units, gold, bonds, or unlisted shares. It is computed as the full value of consideration received on transfer, reduced by the cost of acquisition, the cost of improvement, and transfer expenses. Capital gain is taxed in the financial year of transfer, under the head Capital Gains in the ITR-2 return.

Two holding-period thresholds drive the entire NRI capital gain framework. Listed equity shares, equity mutual fund units, and business trust units become long-term capital assets if held for more than twelve months — Section 112A or Section 111A applies. All other capital assets — immovable property, unlisted shares, debt mutual funds (with exceptions), gold, jewellery, bonds — become long-term if held for more than twenty-four months — Section 112 applies. Short-term gains outside Section 111A are taxed at slab rates. Getting the classification right before the sale determines the TDS rate, the reinvestment exemption eligibility, and the DTAA treaty position.

N D Savla & Associates handles every angle of NRI capital gain advisory — asset classification and holding period analysis, capital gain computation with Section 50C stamp duty review, Section 197 Lower Deduction Certificate application before the sale, DTAA treaty rate documentation with Tax Residency Certificate and Form 10F, Sections 54 / 54F / 54EC reinvestment planning, Capital Gains Account Scheme coordination, ITR-2 Schedule CG preparation, AIS and Form 26AS reconciliation, excess TDS refund claim, and post-sale Form 15CA / 15CB repatriation. Our practice coordinates with the wider NRI Tax Filing framework — capital gains tax exemptions on reinvestment, repatriation of assets, and DTAA benefits.

The Section 197 Lower Deduction Certificate is our first-step planning instrument — not an afterthought. Applied for well before the sale deed registration, it calibrates the buyer's TDS to the actual tax liability and eliminates the multi-month refund cycle that follows over-deduction at source.

Common NRI Capital Gain Profiles

When Does NRI Capital Gain Advisory Become Critical?

Capital gain advisory matters for every NRI selling an Indian asset, but the applicable section, the TDS mechanism, and the reinvestment options differ materially by asset class and country of residence:

NRI Selling Indian Residential or Commercial Property

Section 112 LTCG with Section 50C stamp duty value check. Section 195 TDS applies on the buyer side — without a Section 197 Lower Deduction Certificate, the buyer deducts at the higher default rate on the gross sale consideration, creating a large over-deduction to be claimed back through ITR-2.

OCI Card Holder Disposing of Inherited Indian Property

The deceased's holding period and cost of acquisition apply — making the inherited asset almost always long-term in the NRI's hands. The deceased's original indexed cost typically reduces the taxable gain significantly. Section 54 reinvestment or Section 54EC bonds then determine whether any residual gain needs to be paid.

NRI Redeeming Indian Equity Mutual Funds or Selling Listed Shares

Section 112A for LTCG (held over twelve months) — annual exemption threshold applies, grandfathering FMV available for pre-listing acquisitions. Section 111A for STCG (held twelve months or less). For NRIs, the basic exemption limit cannot offset Section 111A gains — the full flat rate applies on every rupee.

NRI Selling Indian Gold, Jewellery or Bonds

Section 112 LTCG applies where the twenty-four-month holding period is met. Gold and jewellery held for decades — often across generations — typically generate large LTCG positions. Section 54F reinvestment into a residential house is the primary planning route where the NRI does not already own a residential property.

NRI Transferring Unlisted Indian Shares

Section 112 LTCG where held more than twenty-four months. Unlisted share transfers trigger Section 195 TDS and require valuation under Rule 11UA where the consideration is below fair market value. Singapore-India and US-India DTAA positions on unlisted shares differ — the treaty article must be confirmed before the transaction.

Returning Indian Selling Indian Assets Before Return

A returning Indian completing asset disposals while still NRI under FEMA gets the benefit of NRI Section 195 TDS treatment, DTAA treaty rate, and pre-return USD one million repatriation bandwidth. Crystallising capital gains under NRI status — before FEMA Resident status takes effect — is often the most tax-efficient sequencing.

Our Services

Our NRI Capital Gain Advisory Services

Our capital gain practice follows a structured eight-step workflow — asset classification, gain computation, Section 197 LDC application, DTAA documentation, reinvestment planning, TDS tracking, Schedule CG preparation, and post-sale repatriation. The six service blocks below cover the end-to-end engagement.

01

Asset Classification, Holding Period Analysis & Capital Gain Computation

Every capital gain engagement starts with classifying the asset — listed equity, immovable property, unlisted shares, equity mutual fund, debt mutual fund, gold, bonds, or other — and computing the exact holding period. The holding period determines whether Section 111A, Section 112, or Section 112A applies, and therefore the applicable tax rate, indexation position, and reinvestment exemption eligibility. For inherited assets, the deceased's holding period and cost of acquisition are carried forward — making the asset almost always long-term in the NRI's hands. For gifted assets, the previous owner's holding period similarly applies. Once classified, we compute the full capital gain — full value of consideration, cost of acquisition, cost of improvement, transfer expenses, and the Section 50C stamp duty value check for immovable property. Where Section 112A applies and the listed share was acquired before the grandfathering date, we use the grandfathering Fair Market Value where it exceeds the actual cost. The final computation is the foundation of the Section 197 application and the ITR-2 Schedule CG.
Income Tax Act – Sections 111A, 112, 112A, 48, 50C, 49
02

Section 197 Lower Deduction Certificate & Section 195 TDS Coordination

Section 195 requires the buyer or broker to deduct TDS on any payment to an NRI chargeable to tax in India. Without a Section 197 Lower Deduction Certificate, the buyer typically deducts at the higher default rate on the gross sale consideration — creating substantial over-deduction that the NRI must then recover through ITR-2, a process that routinely takes several months. We apply for the Section 197 Lower Deduction Certificate with the Jurisdictional Assessing Officer well before the sale deed registration or contract note date. The Section 197 application projects the actual capital gain, the real tax liability, the DTAA position where applicable, and the reinvestment exemption claim — producing a calibrated lower TDS rate that the buyer deducts from day one. For equity and mutual fund transactions, where TDS applies at the broker level, we coordinate the DTAA documentation and Section 197 application in parallel with the transaction timeline. After the sale, we reconcile the Section 195 TDS deducted against Form 26AS and AIS to verify correctness before the ITR-2 is filed.
Income Tax Act – Section 195, 197, 194-IA
03

DTAA Treaty Rate Application — TRC, Form 10F & Treaty Article Mapping

The applicable DTAA between India and the NRI's country of residence can modify the effective tax rate on capital gains — and in some treaties, allocate exclusive taxing rights to the country of residence on certain asset classes. We confirm the DTAA position before every NRI capital gain transaction: identifying the applicable treaty article on capital gains, mapping whether India or the country of residence holds primary taxing rights, and building the documentation set. The DTAA claim requires a Tax Residency Certificate from the country of residence, Form 10F filed electronically on the Income Tax e-filing portal, and a self-declaration on permanent establishment status. We coordinate the Tax Residency Certificate and file Form 10F before the transaction closes. Our DTAA service handles US-India, UK-India, Canada-India, Australia-India, Singapore-India, and other applicable treaties — selecting the correct treaty and the correct article for each asset class and NRI profile.
Income Tax Act – Section 90 · Form 10F · Tax Residency Certificate
04

Sections 54, 54F & 54EC Reinvestment Planning and CGAS Coordination

NRIs can eliminate or defer long-term capital gains tax on Indian asset sales through three reinvestment exemptions — Section 54, Section 54F, and Section 54EC. Section 54 applies to LTCG from the sale of a residential house property, reinvested into another residential house in India within one year before or two years after the sale (or three years where the new house is under construction). Section 54F applies to LTCG from any other long-term capital asset — land, gold, unlisted shares — reinvested into a residential house in India, with the exemption proportionate to the sale consideration reinvested. Section 54EC applies to LTCG from land or building, reinvested into specified notified bonds within six months from the sale date, subject to a prescribed annual investment ceiling and a five-year lock-in. Where reinvestment cannot be completed before the return filing due date, the unspent long-term capital gain is deposited in the Capital Gains Account Scheme at a designated PSU bank — preserving exemption eligibility until the purchase or construction completes within the statutory time limit. We track the reinvestment calendar, coordinate the CGAS deposit where needed, and verify that unutilised CGAS amounts are correctly treated in subsequent years. Our companion Capital Gains Tax Exemptions on Reinvestment page covers all three sections in full detail.
Income Tax Act – Sections 54, 54F, 54EC · Capital Gains Account Scheme
05

ITR-2 Capital Gains Schedule CG Preparation & AIS Reconciliation

The capital gains Schedule CG in ITR-2 covers every asset class — Section 111A short-term gains on listed equity, Section 112A long-term gains on listed equity above the exemption threshold, Section 112 long-term gains on property and other assets, short-term gains at slab rates, and exemption claims under Sections 54, 54F, and 54EC. For immovable property, Schedule CG also requires Section 50C disclosure where the stamp duty value exceeds the declared sale consideration. We build Schedule CG from the capital gain computations, reconcile every entry against the Annual Information Statement and Form 26AS — which both display transaction-level data sourced from the buyer, the broker, the mutual fund AMC, and the Registrar — and resolve any discrepancies before the return is filed. Where Section 195 TDS was over-deducted at source, the Schedule CG reconciliation against Form 26AS drives the excess TDS refund claim. The return is filed on or before the due date to preserve the Section 197 Lower Deduction Certificate position and the Form 67 foreign tax credit where applicable. Our Filing Return of Income in India service handles the full ITR-2 filing.
ITR-2 Schedule CG · AIS · Form 26AS · Section 50C disclosure
06

Post-Sale Repatriation — Form 15CA, Form 15CB & USD One Million Scheme

After the capital gain tax is settled and the net sale proceeds land in the NRO account, the NRI typically wants to repatriate the funds to the foreign bank account. Repatriation of NRO capital gain proceeds falls under the USD one million scheme — up to one million US Dollars per financial year per NRI — and requires Form 15CB issued by a Chartered Accountant and Form 15CA filed by the remitter bank. Form 15CB certifies the nature of the remittance, the capital gain computation, the TDS deduction, the DTAA application, and the tax payment evidence. We issue Form 15CB and coordinate Form 15CA filing with the Authorised Dealer bank, alongside the source-of-funds documentation, to complete the SWIFT transfer cleanly. For NRE and FCNR account proceeds — where the original investment was made from foreign currency — the repatriation is fully repatriable without the USD one million cap, and typically requires only Form 15CA Part A. Our dedicated Repatriation of Assets and Form 15CA-15CB services handle the full post-sale outward remittance.
FEMA 1999 · USD One Million Scheme · Form 15CA / 15CB · Section 195

Broader Practice

Our Broader NRI Tax and Capital Gain Compliance Services

NRI capital gain is the computation and tax layer — but it sits inside a wider compliance map covering Section 195 TDS, DTAA treaty application, reinvestment exemptions, post-sale repatriation, and annual return filing. Our complete practice covers:

Capital Gains Tax Exemptions on ReinvestmentDetailed Section 54 / 54F / 54EC framework — the companion page to this service.
NRI Tax FilingHub page for every NRI tax service — capital gain sits within this framework.
Repatriation of AssetsUSD one million scheme, Form 15CB, and SWIFT coordination after capital gain settlement.
DTAA BenefitsTreaty rate application on Section 195 TDS — US, UK, Canada, Australia, Singapore, UAE.
Tax Residency Certificate (TRC)TRC procurement and Form 10F — gateway to DTAA rate on capital gains.
Form 15CA-15CB FilingCA certification for post-sale NRO-to-foreign-account repatriation.
InheritanceSuccession documents, deceased's cost base, and inherited-property sale advisory.
Filing Return of Income in IndiaITR-2 where Schedule CG is filed and excess TDS refund is claimed.

Frequently Asked Questions

Common Questions on NRI Capital Gain Tax

What is capital gain under the Income Tax Act 1961?
Capital gain is the profit or gain arising from the transfer of a capital asset. It is computed as the full value of consideration received on transfer minus the cost of acquisition, the cost of improvement, and any expenses incurred wholly and exclusively in connection with the transfer. Capital gain is taxed under the head Capital Gains in the income tax return. Depending on the holding period, the gain is classified as short-term capital gain or long-term capital gain — each attracting different tax rates and exemption frameworks. Capital gains arise across asset classes — immovable property, listed equity shares, equity mutual funds, debt mutual funds, gold, bonds, and unlisted shares. Our Filing Return of Income in India page covers the annual ITR-2 filing mechanics.
What is the holding period to classify a capital asset as long-term or short-term?
Two holding-period thresholds apply. Listed equity shares, equity mutual fund units, business trust units, and zero-coupon bonds become long-term capital assets if held for more than twelve months. All other capital assets — immovable property, unlisted shares, debt mutual funds (with certain exceptions), gold, and jewellery — become long-term if held for more than twenty-four months. The holding period runs from the date of acquisition to the date of transfer. Inherited capital assets carry the deceased's holding period and the deceased's cost of acquisition — so an NRI selling inherited Indian property soon after inheriting it is almost always selling a long-term capital asset. Our ITR-2 Return Filing page covers Schedule CG mechanics.
What is Section 112A and how does it apply to long-term capital gains on listed equity?
Section 112A governs long-term capital gains on listed equity shares, equity-oriented mutual funds, and business trust units where Securities Transaction Tax has been paid and the holding period exceeds twelve months. Section 112A applies to all assessees including NRIs. It provides an annual exemption threshold per assessee — gains up to the prescribed limit are exempt, and gains above it are taxed at a concessional flat rate. Indexation is not available under Section 112A. Deduction under Chapter VI-A and rebate under Section 87A are also not available against Section 112A gains. For shares acquired before the grandfathering date, the Fair Market Value on the grandfathering date can be used as the cost of acquisition where it exceeds the actual cost. Our Capital Gains Exemptions page covers reinvestment options.
What is Section 112 and how does it apply to long-term capital gains on property and other assets?
Section 112 governs long-term capital gains on all capital assets other than those under Section 112A — immovable property, unlisted shares, gold, jewellery, bonds, and debt mutual funds (where applicable). The current framework provides a uniform concessional flat rate on Section 112 long-term capital gains without indexation. A transitional choice between the indexed rate and the flat unindexed rate is available for resident individuals and HUFs selling immovable property acquired before the prescribed amendment date. NRIs and foreign companies generally apply the flat unindexed rate under the post-amendment framework, subject to any beneficial DTAA treaty position. Section 50C may also apply — substituting the stamp duty value for the disclosed sale consideration where the two diverge beyond the tolerance band. Our DTAA page covers treaty rate application.
What is Section 111A and how does it apply to short-term capital gains on listed equity?
Section 111A governs short-term capital gains on listed equity shares, equity-oriented mutual fund units, and business trust units where STT has been paid and the holding period is twelve months or less. The short-term capital gain is taxed at a concessional flat rate, distinct from the assessee's slab rate. Deduction under Chapter VI-A and Section 87A rebate are not available against Section 111A gains. For NRIs specifically, the basic exemption limit cannot be set off against Section 111A gains — unlike resident individuals where the unexhausted basic exemption can partially offset such gains. This means NRIs face the full Section 111A flat rate on every rupee of listed equity short-term gain. Our Investments in India page covers parallel investment planning.
How does Section 195 TDS work on capital gains arising to an NRI?
Section 195 requires the buyer or broker to deduct TDS on any payment to an NRI chargeable to tax in India — including capital gains from property sales, equity transactions, and mutual fund redemptions. The default rate is the higher domestic rate. The NRI can reduce TDS in two ways: by claiming the DTAA treaty rate with a Tax Residency Certificate and Form 10F filed on the Income Tax e-filing portal; or by obtaining a Section 197 Lower Deduction Certificate from the Jurisdictional Assessing Officer in advance, calibrated to the actual tax liability. Without these, the buyer typically deducts TDS on the gross sale consideration, leading to significant over-deduction that the NRI must recover through ITR-2 filing — a multi-month refund cycle. Our Repatriation of Assets page covers post-sale outward remittance.
Can an NRI claim Section 54, 54F, and 54EC reinvestment exemptions on capital gains?
Yes — NRIs can claim all three major reinvestment exemptions on long-term capital gains. Section 54 covers LTCG from the sale of a residential house property reinvested into another residential house in India within the prescribed window. Section 54F covers LTCG from any other long-term capital asset — land, gold, unlisted shares — reinvested into a residential house in India, with the exemption proportionate to the sale consideration reinvested. Section 54EC covers LTCG from land or building reinvested into specified notified bonds within six months, subject to the annual investment ceiling and a five-year lock-in. Where reinvestment cannot complete before the return filing due date, the unspent gain can be parked in the Capital Gains Account Scheme at a designated PSU bank to preserve eligibility. Our Capital Gains Exemptions page covers all three sections in full detail.

Selling Indian assets and worried about capital gain tax?

Asset classification, Section 197 LDC before the sale, DTAA treaty rate, Sections 54 / 54F / 54EC reinvestment planning, ITR-2 Schedule CG, and post-sale repatriation — under one roof.

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