Capital Gains Tax Rules for NRIs in India: What You Should Know

Non-Resident Indians (NRIs) who earn capital gains in India are taxed differently depending on the type of investment and the holding period. 

The tax rates change for short-term and long-term gains, and the capital gain tax for NRI varies for shares, real estate and other investments. NRIs also have to pay Tax Deducted at Source (TDS), but they can reduce their tax burden by reinvesting their gains under certain exemptions. 

This blog will help you understand the capital gain tax for NRIs on different types of investments, tax rates, tax exemptions, etc. Let’s get started! 

Quick Synopsis 

• Capital gain tax for NRI applies differently based on asset type and holding period.
• NRIs face TDS on capital gains between 10%-30% depending on the asset.
• You can reduce taxes by reinvesting under Sections 54, 54F or 54EC exemptions.

Different Types of Capital Gains Taxes Applicable for NRIs in India 

Capital gain tax for NRI depends on the type of asset and how long you hold it.

Short-Term Capital Gains (STCG)

If you sell an asset within the short-term holding period, you have to pay higher taxes.

• If you sell equity shares, equity mutual funds or UTI units within 12 months, your gains are treated as STCG. 
• For investments in debt mutual funds, market-linked debentures or unlisted bonds/debentures, these are always short-term investments.
• If you sell property such as land or a building within 24 months, those gains also fall under STCG.

Long-Term Capital Gains (LTCG)

If you keep an asset beyond the required holding period, you get the benefit of lower long-term capital gain tax for NRI.

• If you hold equity shares, equity mutual funds or UTI units for 12 months or more, long-term capital gain tax for NRI applies on the profits above ₹1.25 lakh.
• Long-term capital gain tax on property for NRIs applies if you keep the property for more than 24 months.

Capital Gains Tax Rates for NRIs in India 

The tax on capital gains and interest income for NRIs is different depending on the type of account and investment:

Fixed Deposits (FDs)

If you earn interest from fixed deposits in your NRO account, that income is fully taxable. NRIs do not get the exemption that resident Indians enjoy, so TDS at 30% applies on the entire interest. However, interest on NRE fixed deposits or savings accounts is completely tax-free.

Listed Shares & Equity Mutual Funds

If you sell equity shares or equity-oriented mutual funds within 12 months, the gains are short-term capital gains. It is taxed at 20%, and TDS is also applied at the same rate. 

If you hold them for more than 12 months, the gains qualify as long-term. The tax on LTCG exceeding ₹1.25 lakh is 12.5%, and TDS also applies.

• Debt Mutual Funds

As per the TDS rules applicable from 1 April 2025, TDS will be deducted at 30% for redemptions made from debt mutual funds by NRIs. 

• Property Transactions

If an NRI buys property from a resident and the value exceeds ₹50 lakh, they must deduct 1% TDS while making payment. 

When selling property, long-term gains apply at 12.5% without indexation benefit. In case of short-term capital gains, they are taxed at the applicable slab rate of the NRI, plus surcharge (if any) and 4% cess.

Tax Exemptions on Capital Gains Tax for NRIs 

NRIs can avoid paying capital gains tax in several situations by reinvesting their gains smartly:

• Section 54: If you sell a long-term residential property and reinvest the capital gains into another residential house, you can claim an exemption. You can even buy up to two houses if your gains are within ₹2 crore.
• Section 54F: If you sell any other long-term asset (like land or shares), you can save tax by investing the sale proceeds into a new residential house.
• Basic Conditions: You need to purchase the property within the government-prescribed timelines and have to keep it for at least 3 years.
• Section 54EC: You can also claim exemption by investing up to ₹50 lakh of your gains in specified bonds such as NHAI or REC within the allowed timeframe.
• Capital Gains Account Scheme: If you have not invested the gains before filing your ITR, you can park the amount in this scheme to keep it tax-exempt until you make the eligible investment.

Final Word 

NRIs form an important part of the Indian stock market, actively investing in equities even while residing abroad. To regulate these investments, the government and the Finance Ministry have set tax rules for capital gain tax for NRIs. 

During the Union Budget 2024, the capital gains tax for NRIs was revised. It is now 12.5% for long-term gains and 20% for short-term gains.