Rohan moved to Toronto eleven years ago. His parents' 2 BHK in Baner had appreciated well, and with his father's health declining, the family decided it was time to sell. Rohan flew down, signed the sale agreement with a buyer from Balewadi, and only then called his CA — me — to ask how to bring the money back to Canada.
By that point, three of his options were already off the table.
This is the single most common mistake I see among NRI property sellers across Baner, Balewadi, Hinjewadi, and Kothrud:
the sale agreement gets signed first, and the tax and FEMA planning gets done afterward. It should be the other way around.
A quick but important note before we start:
From 1 April 2026, the Income-tax Act, 2025 replaced the Income-tax Act, 1961. The tax rules and rates for NRI property sales haven't changed — but almost every section number has. If your CA, buyer's advocate, or bank quotes an old section number, they're referring to the same provision under a new number. I've mapped both below so you're not confused when you see either.
Here is the checklist I walk every NRI client through — before ink touches paper.
1. What can an NRI actually buy or sell in India?
NRIs can freely buy and sell residential and commercial property. Agricultural land, plantation property, and farmhouses generally cannot be purchased by an NRI — though inherited agricultural land follows a separate set of rules. If you inherited the property (common in Pune's older Kothrud and Deccan-adjacent family homes), your permitted-transaction category may differ from a purchased property, and this affects everything downstream.
2. TDS is deducted on the sale — and it is NOT the resident 1% rate
This is the point that catches most NRI sellers off guard. When a resident buys from a resident, TDS is a flat 1%. When a resident buys from an NRI, the buyer must deduct TDS under Section 393(2) of the Income-tax Act, 2025 (this is the same obligation that lived under Section 195 of the old 1961 Act) — and it's frequently deducted on the full sale consideration, not your actual capital gain.
Practical effect: sell a ₹1.5 crore flat in Hinjewadi, and the buyer may be required to deduct TDS running into several lakhs — money that gets locked up until you file your return and claim a refund, sometimes a year later.
3. You can plan the TDS down — but only in advance
Before the deal closes, you can apply for a Lower or Nil Deduction Certificate under Section 395 of the Income-tax Act, 2025 (the old Section 197 provision, now renumbered — same Form 13 application to the Assessing Officer). If your actual tax liability, after cost of acquisition, improvement, and exemptions, is lower than the standard TDS rate, this certificate lets the buyer deduct only the correct amount — not the default rate on the gross value. This single step is often the difference between your funds being available at settlement versus stuck for a year in a refund queue.
This has to be applied for before the transaction, not after. Once TDS is deducted at the higher rate, you're waiting for a refund cycle, not avoiding one.
4. Capital gains computation is a separate exercise from TDS
TDS is only a withholding mechanism — it is not your final tax liability. Your actual capital gains have to be computed separately: acquisition cost, cost of improvement, holding period, and exemptions if you're reinvesting.
Current capital gains rate: For property held long-term, long-term capital gains are taxed at a flat 12.5% without indexation, under Section 197 of the Income-tax Act, 2025 (this replaced the old Section 112 — note the new Act reuses the number "197" for an entirely different provision than the old Act's Section 197, so don't confuse the two when reading older articles or your Form 26AS references). This 12.5% rate applies specifically to property acquired on or after 23 July 2024; the treatment for property purchased before that date carries its own conditions and is worth confirming against your specific acquisition date rather than assuming.
Reinvestment exemptions, renumbered:
Old Section 54 (reinvest gains from a house into another house) → now Section 82
Old Section 54EC (invest in NHAI/REC/PFC bonds, up to ₹50 lakh, within 6 months) → now Section 85
Old Section 54F (reinvest proceeds from a non-house asset into a residential house) → now Section 86
The conditions, caps (₹10 crore on the new property's cost for Sections 82/86), and timelines under these provisions are unchanged — only the section numbers moved.
5. Power of Attorney — don't use a broad General POA
If you can't be present in Pune for the transaction, a Power of Attorney is often essential. But a broad General POA creates unnecessary risk — for the transaction, and for you as the seller of record. A specific POA, limited to this particular sale, properly executed abroad and adjudicated/registered in India, is the safer route. I've seen General POAs create documentation disputes at the sub-registrar's office in Pune that delay closing by weeks.
6. Repatriation is not automatic — plan the route before you sell
Getting your sale proceeds out of India depends on how the property was originally acquired and funded. Broadly, this runs through the NRO repatriation framework (capped at USD 1 million per financial year, with a CA certificate — Form 15CA/15CB), or, if the original purchase was funded through specific foreign-exchange channels, additional repatriation considerations may apply. This is not a same-day process — start the documentation early.
7. Financial year matters more than you think
Your residential status for tax purposes is determined by the Indian financial year (April–March), not the calendar year. If you're timing a return trip or extended stay around the sale, both your arrival and departure days count toward your India presence — a detail NRI clients frequently undercount. And if your capital gains for the year cross ₹15 lakh, the day-count threshold that governs your residency status tightens from 182 to 120 days. If you're planning a property sale and a longer visit to Pune in the same year, this sequencing needs to be mapped out in advance.
8. Budget 2026 update: one paperwork hurdle is going away.
From 1 October 2026, under an amendment to Section 397(1)(c) of the Income-tax Act, 2025, resident individual and HUF buyers purchasing property from an NRI will no longer need to obtain a TAN (Tax Deduction and Collection Account Number) specifically for the transaction. TDS will instead be deposited using the buyer's PAN through a challan-cum-statement mechanism — broadly the same simplified process already used for resident-to-resident deals (that resident-to-resident form has itself been consolidated into the new Form 141 under the 2025 Act).
This is purely procedural — TDS rates and your underlying tax liability are unchanged. But in practice, it should mean fewer buyers hesitating or delaying deals because they don't want to deal with unfamiliar TAN paperwork — a friction that has quietly killed or delayed a number of NRI-seller transactions in Pune's secondary market. Note: companies, firms, and other non-individual/HUF buyers still need a TAN.
One more paperwork update worth knowing: the foreign remittance certification forms your CA files for repatriation — previously Form 15CA and Form 15CB — have also been renumbered to Form 145 and Form 146 under the Income-tax Rules, 2026. Same certification, same purpose, new form numbers.
The order that actually protects you
FEMA status → source of funds → title → POA → capital gains computation → TDS planning (Lower Deduction Certificate) → exemption/reinvestment → repatriation.
Work through this sequence before the sale agreement is signed — not after. Rohan's family eventually got their money to Canada, but it took an extra eight months and a chunk of unnecessarily blocked TDS that better planning would have avoided.
Frequently Asked Questions
Do I need to be physically present in Pune to sell my property?
No — a properly executed, transaction-specific POA can handle this. It needs to be executed abroad, notarized/apostilled as applicable, and adjudicated in India before use.
Will the buyer deduct TDS on my profit or on the full sale price?
By default, often on the full consideration, unless you've obtained a Lower/Nil Deduction Certificate under Section 395 of the Income-tax Act, 2025 (old Section 197) in advance.
Can I bring the entire sale amount back to Canada, the US, UK, or wherever I live?
Generally yes, through the NRO repatriation route, subject to the USD 1 million per financial year cap and the required CA certification — now filed as Form 145/146 (previously Form 15CA/15CB). The exact route depends on how the property was originally funded.
What's the current capital gains tax rate for an NRI selling property?
12.5% on long-term capital gains, without indexation, under Section 197 of the Income-tax Act, 2025 (old Section 112) — for property acquired on or after 23 July 2024. Short-term gains (property held 24 months or less) are taxed at your applicable slab rate.
I'm an NRI in the US — does DTAA help me here?
The India-US DTAA can prevent double taxation on the same gain, but it doesn't override the TDS deduction requirement in India — it affects your final tax credit claim in your country of residence. This needs to be planned alongside your Indian filing, not separately.
I work exclusively with NRI clients on property sale structuring — FEMA compliance, Section 393(2) TDS planning, Lower Deduction Certificates, capital gains computation, and NRO/NRE repatriation. If you're planning a sale in Pune's western corridor, the time to call is before the agreement, not after.
CA Bhavesh Panpaliya
This article is for general guidance and does not constitute tax or legal advice. Rules referenced (including Budget 2026 provisions) are current as of publication and subject to change — please confirm applicability to your specific facts before acting.
Comments