What 2026 Changed for NRI Property TDS and Gains

The rules moved since you last checked

If you're an NRI who researched selling your Indian property a few years ago — maybe you even ran the numbers, talked to a relative's CA, and then paused the sale for personal reasons — there's a good chance the tax math you remember is out of date. The long-term capital gains regime for property sellers changed materially starting in 2024, and by 2026 that new regime is the only one in effect. Sellers who plan off memory rather than current rules risk either overestimating their tax bill (and pricing the deal wrong) or, worse, underestimating it and getting caught short at TDS time.

This article is a single, current reference point: what the LTCG and TDS rules look like for NRI property sellers as of 2026, what changed from the older regime, and — just as important — what has stayed exactly the same so you don't waste time re-verifying settled ground. As always with tax rules, treat this as a starting map, not a final answer; confirm your specific numbers with a chartered accountant before you price or close a sale.

The post-2024 LTCG shift, in plain English

For years, the default long-term capital gains treatment on property let sellers apply indexation — adjusting their original purchase cost upward for inflation using the Cost Inflation Index — before calculating the taxable gain at a 20% rate. The effect: a property bought decades ago, when prices were low, had its "cost" inflated to something much closer to current terms, which shrank the taxable gain substantially.

The 2024 changes restructured this. According to ClearTax's 2026 guide on TDS on sale of property by NRIs, the long-term capital gains regime for NRI property sellers as it stands now offers 12.5% without indexation as the headline rate, with an effective rate of roughly 14.95% once surcharge and cess are added. The same source notes a 20% with indexation path also exists as an alternative — meaning sellers aren't simply stuck with the higher-sounding headline number; the actual choice between the two paths depends on how much indexation would have reduced the gain for that specific property.

The practical upshot for a 2026 seller: you can no longer assume "20% with indexation" is your only option, but you also shouldn't assume the lower 12.5% headline number is automatically better for your specific sale. Which of the two wins depends heavily on how long you've held the property and how much the acquisition cost moves when indexed for inflation over that period — properties bought a long time ago, in a low-price era, often see indexation still deliver a lower final tax bill even against the higher 20% rate.

What stayed exactly the same

It's easy to assume "the tax regime changed" means everything is new. It doesn't. The structural mechanics that govern how tax is collected from NRI sellers — as opposed to how much is owed — are unchanged:

• Section 195 remains the withholding provision. TDS is still deducted by the buyer on the full sale consideration (not merely the computed gain), unless a lower-deduction order changes that.
• Section 197 lower-TDS certificates still exist as the mechanism for a seller to avoid over-withholding relative to their actual tax liability, and remain worth applying for well ahead of a planned sale.
• DTAA relief still requires a Tax Residency Certificate (TRC) plus Form 10F, exactly as before, for a seller wanting to claim a treaty-based benefit.
• Form 27Q remains the buyer's quarterly filing obligation, and Form 16A remains the certificate the buyer must issue the seller as proof of tax deducted.
• The USD 1 million per financial year cap on repatriation from an NRO account — the ceiling on how much sale proceeds an NRI can move out of India annually through the standard route — is unchanged.
• Section 54 reinvestment exemption is still available. Per the Income Tax Department's own page on Section 54, a seller who reinvests long-term capital gains from a residential property into another residential property within the prescribed window can still claim exemption — this mechanism did not disappear with the rate change.

How a 2026 NRI property sale is taxed, start to finish

1. Determine the holding period. Long-term treatment (the 12.5%/20% choice discussed above) generally applies to property held beyond the statutory threshold; shorter holdings are taxed differently and don't get the indexation-vs-no-index choice at all.
2. Compute the gain both ways. Work out the taxable gain under the 12.5%-no-indexation method and separately under the 20%-with-indexation method, using the Cost Inflation Index applicable to the acquisition and sale years.
3. Choose the lower resulting tax liability between the two computed paths — this is a computation your CA should run explicitly, not estimate.
4. Apply for a Section 197 certificate if the deal is being planned ahead of time, so the buyer doesn't over-withhold relative to whichever of the two final numbers applies.
5. At the sale, the buyer deducts TDS under Section 195 — on the full consideration absent a lower-deduction order, or at the reduced rate stated on one.
6. File your Indian income-tax return claiming credit for the TDS deducted (evidenced by the Form 16A the buyer issues) and, if the deducted amount exceeds your final computed liability, claim the refund.
7. If reinvesting, evaluate Section 54 before the reinvestment window closes, to reduce or eliminate the taxable gain on the original sale.

Pre-change vs 2026: side-by-side

Scenario: an NRI planning a 2026 sale of a flat bought in 2015

Consider Meera, an NRI based in the UK who bought a flat in Bengaluru in 2015 and is now, in 2026, planning to sell it. Under the old mental model she carried from when she last researched this (around 2021), she assumed indexation would automatically apply and reduce her taxable gain, taxed at 20%.

In 2026, her CA runs both computations. Because Meera's holding period is a decade-plus and property prices — and the Cost Inflation Index — moved meaningfully in that window, the indexed cost of acquisition materially closes the gap between her original purchase price and the sale price. In her specific case, the 20%-with-indexation path produces a lower final tax liability than the 12.5%-no-indexation path, even though 12.5% sounds like the smaller number at first glance. Her CA's advice: choose the indexed path.

Meera also confirms the mechanics she assumed were unchanged actually are: her buyer still needs a TAN, will still deduct under Section 195 on the full consideration unless she obtains a Section 197 certificate in advance, and she'll still need a TRC and Form 10F if she wants to claim any DTAA benefit relative to her UK tax residency. She uses DrawMagic's financial planning workspace to model her expected post-tax proceeds under both computation paths side by side, so she isn't waiting until closing to understand her net.

What buyers and sellers should re-verify for 2026

• Don't assume last year's rate discussion still holds — even within the post-2024 regime, always confirm the current computation with a CA rather than relying on a conversation from a year or two ago.
• Re-run the 12.5% vs 20%-indexed comparison for your specific property, not a rule of thumb — the "right" choice depends entirely on your holding period and acquisition cost.
• Confirm whether a Section 197 order is still worth applying for given your updated gain computation — the cash-flow benefit of avoiding over-withholding hasn't changed.
• Re-check your DTAA position if your country of residence has changed, or if your TRC has expired.
• Revisit Section 54 reinvestment plans if you're timing a sale around a planned purchase — the reinvestment window and exemption mechanics are unchanged, but your specific numbers need a fresh look.

Pro tips

1. Get both computations done, every time. Never assume 12.5%-no-indexation is automatically the better outcome — for older acquisitions, indexed 20% can still win.
2. Apply for a Section 197 certificate early if you're planning a sale months in advance; it smooths your cash flow regardless of which final rate applies.
3. Keep your Cost Inflation Index reference numbers and original acquisition documents together — your CA needs both to run the indexed computation accurately.
4. Time-stamp your research. If you got tax advice more than a year ago, treat it as a starting point, not a final answer, and get it refreshed before you commit to a sale price.
5. Use DrawMagic's property tax calculator for an indicative, directional sense of exposure — but always finalise the actual filing rate with a CA.

Common mistakes to avoid

• Assuming the 2024 changes eliminated indexation entirely. They didn't — indexation is still available as an alternative computation path, just not the default.
• Comparing the 12.5% and 20% rates as if they applied to the same base. They don't; one uses the un-indexed cost, the other the indexed cost, so the headline percentages alone don't tell you which wins.
• Forgetting that Section 195, Section 197, TRC/Form 10F, and the USD 1M repatriation cap are unaffected by the LTCG rate change — treating the whole regime as "new" wastes effort re-verifying settled rules.
• Not applying for a Section 197 order early enough to matter for the actual sale's cash flow.
• Relying on tax guidance that predates 2024 without confirming it against a current source.

How DrawMagic fits into this

DrawMagic doesn't provide tax advice, but it helps NRI sellers and their resident-buyer counterparts organise the moving pieces of a cross-border transaction. Use DrawMagic's financial planning suite to model both LTCG computation paths and see the after-tax proceeds side by side, DrawMagic's property tax calculator for a quick directional check, and the buyer workspace to keep your acquisition documents, TRC, and TDS trail organised across time zones. If you're unsure how to sequence the workflow itself, DrawMagic's help centre can point you toward the right resource.

Planning under current rules pays off

The cost of planning off stale information isn't abstract — it shows up as a mispriced sale, an unexpected TDS deduction that's larger than budgeted, or a missed Section 54 reinvestment window. NRI sellers who take the time to re-run their numbers under the actual 2026 rules, rather than what they remember from a few years back, avoid all three.

Key takeaways

• The post-2024 LTCG regime, as it stands in 2026, offers NRI property sellers a choice: 12.5% without indexation or 20% with indexation.
• The effective rate under the no-indexation path works out to roughly 14.95% once surcharge and cess are added, per ClearTax's 2026 guide.
• Which of the two options is better depends entirely on your specific holding period and how much indexation reduces your computed gain — always run both.
• Section 195 withholding mechanics, Section 197 lower-TDS certificates, TRC/Form 10F for DTAA relief, and the USD 1M/year repatriation cap are all unchanged from before 2024.
• Section 54 reinvestment exemption remains available and unaffected by the LTCG rate restructuring.
• Tax guidance more than a year or two old should be treated as a starting point, not a final answer — always re-verify with a current source and a CA.
• Applying for a Section 197 order ahead of a planned sale still smooths cash flow, regardless of which final LTCG option applies.
• Buyers purchasing from NRI sellers in 2026 still need a TAN and still file Form 27Q — none of that compliance changed.

FAQ

Did the 2024 changes make selling property more or less expensive for NRIs overall? It depends on the specific property. Sellers with strong indexation benefits (older acquisitions, high inflation-adjusted cost) can still choose the 20%-indexed path and may see limited change; sellers without much indexation benefit generally see a lower effective rate under the new 12.5% no-indexation option compared to the old flat 20% regime.

Is the choice between the two rate options automatic, or do I have to elect it? Your CA computes both and applies whichever produces the lower tax liability as part of your return; it isn't something a buyer's TDS deduction resolves on its own, which is one reason a Section 197 certificate and a proper year-end filing both matter.

Does this change anything about repatriating the sale proceeds? No — the USD 1 million per financial year cap on repatriation from an NRO account is unaffected by the LTCG rate change and continues to apply as before.

This article is for general information only and does not constitute tax or legal advice. Tax rules can change; confirm current requirements with a licensed chartered accountant before acting.