NRI Capital Gains Tax in India: Shares, Mutual Funds, Property and Tax Rates

Selling an Indian asset while living abroad can create two different tax numbers: the capital gains tax you actually owe and the tax deducted before the money reaches you.

For NRIs, the final tax depends mainly on:

• the type of asset,
• how long you held it,
• whether the gain is short term or long term,
• whether TDS applies,
• whether a reinvestment exemption is available, and
• whether a DTAA changes the tax treatment.

India can tax gains from Indian assets even if you live overseas.

The rules also differ across shares, mutual funds, property, gold and certain other investments.

This guide explains the complete framework for Tax Year 2026–27, under the Income Tax Act, 2025, while referring to older section numbers where they remain useful.

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Are Capital Gains Taxable for NRIs in India?

Yes, capital gains from Indian assets can be taxable in India even when the seller lives abroad.

Typical examples include gains from:

• Indian shares,
• Indian mutual funds,
• property located in India,
• gold or other Indian capital assets, and
• certain securities and investments issued in India.

The tax treatment depends on the asset itself, not simply on where the sale proceeds are received.

So receiving sale proceeds in an overseas bank account does not by itself remove Indian tax liability.

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Short-Term vs Long-Term Capital Gains for NRIs

Before looking at the tax rate, first check the holding period.

So holding an investment for more than two years does not automatically guarantee LTCG treatment.

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Capital Gains Tax on Listed Shares for NRIs

Listed Indian shares are among the simpler asset classes to understand, provided the relevant STT conditions are satisfied.

Short-Term Capital Gains

If the shares qualify as short term, the applicable special-rate STCG is broadly taxed at 20%.

Long-Term Capital Gains

If the shares are held for more than 12 months, eligible LTCG is broadly taxed at 12.5% on gains exceeding ₹1.25 lakh.

One Difference for NRIs

Resident individuals can, in certain special-rate capital-gain situations, use an unused basic exemption limit against the gain.

The relevant relaxation is specifically written for resident individuals or HUFs.

Foreign-Currency Computation for Certain NRI Investments

There is another rule that can matter for non-residents.

For qualifying shares or debentures of an Indian company purchased in foreign currency, capital gains can in certain situations be calculated in the same foreign currency in which the investment was made.

This helps neutralise exchange-rate movements.

The mechanism available under the old first proviso to Section 48 has been retained under Section 72 of the Income Tax Act, 2025.

This does not apply in every listed-equity situation, so the investment and tax provision need to be checked before using it.

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Mutual Fund Capital Gains for NRIs

Mutual funds need a little more care because the tax treatment changes by fund category.

Equity-Oriented Mutual Funds

Where the relevant equity provisions apply:

• STCG is broadly taxed at 20%, and
• LTCG is broadly taxed at 12.5% on eligible gains above ₹1.25 lakh.

Debt and Other Non-Equity Funds

There is no single tax rule for every non-equity mutual fund.

The result can depend on:

• the fund's underlying asset mix,
• when the units were acquired,
• whether the fund falls within the specified-mutual-fund rules, and
• whether the gain is deemed short term under the law.

Some specified mutual funds can be treated as producing short-term capital gains irrespective of holding period.

TDS on Redemption

For NRIs, tax may be withheld when mutual fund units are redeemed.

The amount deducted at source is not always the same as the final tax payable.

The final position depends on the actual gain, applicable threshold, fund category and treaty position where relevant.

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Capital Gains Tax on Property for NRIs

Property is where NRI capital-gains taxation often becomes more complicated.

Short-Term Property Gain

Property held for 24 months or less is generally treated as a short-term capital asset.

The gain is taxed under the applicable normal tax framework.

Long-Term Property Gain

Property held for more than 24 months generally qualifies as long term.

For current transfers, LTCG is broadly taxed at 12.5% without indexation.

The Indexation Difference NRIs Should Know

This is one of the most important NRI-specific rules.

This is why an older property with a large inflation-driven increase in value can produce a very different tax outcome for a non-resident seller.

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TDS on NRI Capital Gains

Capital-gains tax and TDS are related, but they are not the same thing.

Shares and Mutual Funds

For qualifying NRI capital gains, current withholding rates broadly reflect the applicable special tax rates, including:

• 20% for eligible short-term equity gains, and
• 12.5% for eligible long-term capital gains,

subject to the specific provision, surcharge and cess.

Property Sale

When a resident buyer purchases property from a non-resident seller, the transaction falls under the non-resident withholding framework rather than the simpler resident-seller property-TDS rule.

The key point is that Section 195 applies to a sum chargeable to tax, so the tax position should not automatically be confused with a flat percentage of the property's entire sale value.

In practice, determining the chargeable amount can be complex. A lower or nil deduction certificate can therefore be important where the expected withholding exceeds the seller's actual tax liability.

From 1 October 2026: Easier Buyer Compliance

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Can NRIs Claim Capital-Gain Exemptions?

Yes.

NRIs can use several capital-gain reinvestment provisions when the relevant conditions are satisfied.

Residential Property Reinvestment

Long-term gains from an eligible residential property can qualify for exemption when the gain is reinvested in another eligible residential house in India within the prescribed period.

The familiar old Section 54 framework now corresponds to the relevant provision under the Income Tax Act, 2025.

Sale of Another Long-Term Asset

Where an eligible long-term capital asset other than a residential house is sold, exemption may be available when the required amount is reinvested in an eligible residential house, subject to the conditions.

The old Section 54F broadly corresponds to Section 86 under the new Act.

Specified Bonds

Eligible capital gains from specified assets can also qualify for exemption where the prescribed amount is invested in notified bonds within the required period.

The old Section 54EC broadly corresponds to Section 85 under the Income Tax Act, 2025.

Limits, timelines and lock-in conditions differ between these provisions, so the exemption should be reviewed before the sale proceeds are reinvested.

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A Special Reinvestment Rule for Certain NRI Foreign-Exchange Assets

There is a separate regime that is specifically relevant to qualifying NRIs.

It applies to certain foreign exchange assets, broadly including specified assets purchased or subscribed to using convertible foreign exchange.

These can include:

• shares in an Indian company,
• qualifying debentures,
• qualifying deposits with Indian companies, and
• Central Government securities.

Under the old Income Tax Act, this regime appeared in Sections 115D, 115E and 115F.

Under the Income Tax Act, 2025, the corresponding provisions are Sections 213, 214 and 215.

For eligible long-term capital gains:

• a concessional rate can apply,
• reinvestment into specified assets can qualify for exemption,
• the reinvestment generally needs to be made within six months,
• partial reinvestment gives proportionate relief, and
• a lock-in/clawback condition applies if the new asset is transferred too early.

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Can DTAA Reduce Capital Gains Tax for an NRI?

Sometimes.

But DTAA does not automatically mean that capital gains from India become tax-free.

The answer depends on the treaty and the asset.

Indian Property

Tax treaties generally preserve India's right to tax gains from immovable property situated in India.

Shares and Securities

Treatment can differ from treaty to treaty.

The tax position can depend on:

• the country of residence,
• the asset sold,
• acquisition date,
• shareholding type, and
• the wording of the relevant capital-gains article.

Mutual Funds

Mutual fund units can be even more nuanced because different treaties allocate taxing rights differently.

Recent judicial decisions have also considered how certain treaty residual clauses apply to mutual fund units.

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Can NRIs Set Off Capital Losses?

Yes.

Capital losses can reduce taxable capital gains, subject to the normal set-off rules.

Eligible unabsorbed capital losses can generally be carried forward for up to eight years.

Filing the return within the applicable due date is generally important if the loss needs to be carried forward.

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Capital Gains Examples

Example 1: NRI Selling Listed Equity Shares

Assume an NRI purchased listed Indian shares for ₹8 lakh and later sold them for ₹11 lakh after holding them for more than 12 months.

Cess and surcharge, where applicable, would be additional.

This example assumes there are no other relevant equity LTCGs during the year and ignores transaction-level adjustments for simplicity.

Example 2: NRI Selling Indian Property

Assume an NRI sells a long-held property for ₹1 crore.

Original eligible cost and other permitted acquisition-related amounts: ₹60 lakh

Eligible transfer expenses: ₹2 lakh

If the gain is long term, the current broad rate is 12.5%, subject to the final computation and any exemption claimed.

The NRI should therefore review both before completing the sale.

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Which Return and Documents Are Usually Needed?

Where an NRI has capital gains and no business or professional income, the applicable non-business income-tax return has historically been ITR-2, subject to the form notified for the relevant tax year.

Useful records include:

• purchase contract or acquisition statement,
• sale contract,
• broker or AMC capital-gain statement,
• property purchase and improvement records,
• transfer-expense evidence,
• AIS and tax-credit records,
• TDS certificates,
• bank records, and
• TRC and treaty documents where DTAA relief is claimed.

Keep these documents before the transaction rather than trying to recreate the cost history later.

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NRI Capital Gains Checklist Before Selling

Before selling an Indian asset, check:

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Final Thoughts

For an NRI, capital-gains tax is not simply a choice between STCG and LTCG rates.

The final outcome can also depend on TDS, asset classification, reinvestment exemptions, capital losses, DTAA provisions and whether an NRI-specific rule applies.

That makes advance planning especially important for:

• large equity exits,
• property sales,
• mutual fund redemptions,
• portfolio restructuring, and
• investments purchased using foreign currency.

The tax impact is easiest to manage when it is reviewed before the transaction, not after tax has already been deducted.

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FAQs

1. What is the capital gains tax rate for NRIs in India?

There is no single NRI capital-gains rate. The rate depends on the asset and holding period. Eligible listed-equity STCG is broadly taxed at 20%, eligible listed-equity LTCG above ₹1.25 lakh at 12.5%, and many other long-term capital gains are broadly taxed at 12.5%.

2. What is LTCG tax for an NRI?

For many capital assets transferred under the current framework, LTCG is broadly taxed at 12.5%. Equity shares and equity-oriented mutual funds have a ₹1.25 lakh annual threshold where the special LTCG provision applies.

3. What is STCG tax for an NRI?

Eligible short-term gains on listed equity shares and equity-oriented mutual funds are broadly taxed at 20%. Other short-term gains can be taxed under different rules depending on the asset.

4. How are Indian shares taxed when sold by an NRI?

Listed shares held for more than 12 months generally qualify as long-term. Eligible LTCG is broadly taxed at 12.5% above the applicable ₹1.25 lakh threshold. Eligible STCG is broadly taxed at 20%.

5. How are mutual fund capital gains taxed for NRIs?

The tax depends on whether the fund is equity-oriented, a specified mutual fund or another non-equity category. Equity-oriented funds broadly follow the 20% STCG and 12.5% LTCG framework, while certain specified funds can be deemed short term irrespective of holding period.

6. What is the capital gains tax on property for an NRI?

Property held for more than 24 months generally qualifies as long term. Current LTCG is broadly taxed at 12.5% without indexation, subject to applicable exemptions and other provisions.

7. Can an NRI claim indexation on Indian property?

Under the current framework, the special protection allowing eligible taxpayers to compare the old indexed method with the newer 12.5% method for certain older property is limited to resident individuals and HUFs. NRIs do not receive the same resident-only protection.

8. Is TDS deducted on capital gains for NRIs?

Yes, TDS can apply to several NRI capital-gain transactions, including shares, mutual funds and property. TDS is a withholding mechanism and may differ from the final tax liability.

9. Can NRIs claim capital-gain exemptions by reinvesting?

Yes, where the prescribed conditions are met. Depending on the asset sold, reinvestment in an eligible residential property, specified bonds or certain specified assets can reduce or defer capital-gains tax.

10. Can an NRI set off capital losses?

Yes. Short-term capital losses can generally be set off against short-term and long-term capital gains. Long-term capital losses can generally be set off only against long-term capital gains.

11. Can DTAA reduce capital gains tax for an NRI?

Potentially. The result depends on the country of residence, the asset and the capital-gains article in the applicable DTAA. A treaty does not automatically make every Indian capital gain exempt.

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Disclaimer: This article is for general information and educational purposes only. It does not constitute investment advice, tax advice, legal advice, a recommendation or an offer to buy or sell any security or financial product. Capital-gains treatment depends on residential status, asset classification, holding period, acquisition date, transaction structure, applicable treaty, documentation and individual circumstances. The article reflects publicly available provisions and official guidance applicable at the time of publication, including the Income Tax Act, 2025 and relevant transitional provisions from the Income Tax Act, 1961. Tax laws, rules and treaty interpretations may change. Judicial decisions can be fact-specific and subject to appeal. Please consult a qualified tax professional for tax computation, filing, lower-deduction certificates and treaty interpretation, and a SEBI-registered investment adviser for investment advice. Mutual fund and securities investments are subject to market risks. Please read all related documents carefully before investing.