Non-Resident Indians (NRIs) often invest in Indian properties to diversify their portfolio or to have a place to stay in the future, when they decide to relocate, which is why it is a common option. However, with property ownership also comes the challenge of having to familiarize oneself with taxes and how to deal with them. Intelligent tax management with careful planning can save you a lot and also enhance investment returns. This blog gives practical recommendations of how NRIs can save some property tax with references to the Indian taxes and professional guidance.
Who Is Considered an NRI for Tax Purposes?
As per the Income Tax Act, 1961, a person is considered an NRI if:
- They have spent less than 182 days in India during the financial year, or
- They have spent less than 60 days in India in a financial year and less than 365 days in the last four years.
Understanding your residency status is the first step toward proper tax planning.
What Property Taxes Are Applicable to NRIs in India?
NRIs must consider the following property-related taxes:
- Income Tax on Rental Income
- Capital Gains Tax (on sale of property)
- TDS (Tax Deducted at Source)
- Stamp Duty and Registration Charges
Let’s explore how NRIs can legally minimize or save on each of these.
How Can NRIs Save on Tax from Rental Income?
If an NRI rents out their property in India, the income earned is taxable under the head “Income from House Property.”
Tax-Saving Strategies
- Claim standard deduction of 30 percent on the net annual rental income.
- Deduct home loan interest under Section 24(b) up to ₹2 lakh annually.
- Municipal taxes paid during the year can be subtracted from the gross rent.
- Co-owning the property with a spouse or relative can reduce the overall tax outgo by splitting the income.
Pro tip: Make sure the tenant deducts TDS at 30 percent, and file returns to claim any refund if your actual tax liability is lower.
How Can NRIs Minimize Capital Gains Tax on Sale of Property?
When an NRI sells property in India, capital gains tax applies depending on the holding period:
- Short-Term Capital Gains (STCG): If the property is sold within 2 years, gains are taxed as per slab rates.
- Long-Term Capital Gains (LTCG): After 2 years, taxed at 20 percent with indexation benefits.
Tax-Saving Options
- Reinvest LTCG in another residential property in India under Section 54 to claim exemption.
- Invest up to ₹50 lakh in NHAI or REC bonds under Section 54EC within 6 months of sale.
- Use indexation to adjust purchase cost for inflation and reduce taxable gain.
Pro tip: If you’re planning to sell, consult a tax advisor to structure it in a way that maximizes exemptions and minimizes TDS.
Is TDS Mandatory for NRIs? How to Manage It?
Yes. Under Section 195 of the Income Tax Act, any buyer of NRI property must deduct TDS at 20 percent for LTCG or 30 percent for STCG, regardless of actual profit.
TDS Reduction Strategies
- Apply to the Income Tax Officer for a lower or nil TDS certificate if your actual tax liability is less.
- File ITR in India to claim refund with supporting documents if excess TDS is deducted.
- Authorize a Chartered Accountant in India to handle TDS applications and filings.
Pro tip: Apply for a lower TDS certificate well in advance, as processing takes time.
Are There Ways to Save on Stamp Duty and Registration?
Stamp duty and registration charges are state-specific and non-refundable, but there are some ways to reduce costs.
Tips for Saving
- Buying in a woman’s name can qualify for reduced stamp duty in many states like Delhi and Haryana.
- Agricultural land often attracts lower stamp duty in some states.
- State governments sometimes offer discount schemes during festivals or specific housing drives.
Pro tip: Always verify the latest circle rates and government schemes in your chosen state before purchase.
Can NRIs Claim Deductions Under Section 80C?
Yes. NRIs are eligible for deductions under Section 80C up to ₹1.5 lakh per annum, including:
- Principal repayment of home loan
- Stamp duty and registration charges
- Life insurance premiums
- Investments in ELSS and other permitted schemes
This reduces your gross total income and overall tax liability.
What Are the Compliance Tips for NRIs Owning Property?
To avoid legal or financial issues, NRIs should follow these practices:
- File income tax return (ITR) in India even if income is below the taxable limit, especially for refund claims.
- Disclose all property income, including vacant properties.
- Maintain a PAN card and NRO bank account for all transactions.
- Appoint a resident Power of Attorney to manage property affairs if you live abroad.
With proper planning and timely action, NRIs can significantly reduce their tax burden on property investments in India. Whether it’s claiming deductions, using tax exemptions, or managing TDS, each move must be aligned with current laws and your long-term financial goals.
Staying compliant and informed is the best way to maximize returns while minimizing risks.
Get Expert Help with Your NRI Tax Planning
Need personalized guidance on tax savings, legal compliance, or selling/buying property in India as an NRI?
Contact The Whitelisted Estate
Phone: 7428812398 – Free consultation available for first-time clients.
Trusted by NRIs globally for legal, financial, and resale property services.
FAQ,s Frequently asked questions
1.What types of property taxes do NRIs need to pay in India?
NRIs are liable for property tax, capital gains tax on sale, and income tax on rental income from Indian properties.
2.Can NRIs claim deductions on property-related income in India?
Yes, NRIs can claim deductions under Section 24(b) for home loan interest and Section 80C for principal repayment.
3.Are there special exemptions for NRIs on capital gains from property sales?
Yes, NRIs can use exemptions under Sections 54, 54EC, or 54F by reinvesting in specified assets to reduce capital gains tax.
4.How can NRIs reduce tax on rental income from Indian properties?
NRIs can reduce tax by deducting municipal taxes, standard deductions (30%), and home loan interest from rental income.
5.Do NRIs need to file income tax returns in India for property income?
Yes, NRIs must file income tax returns if their total income from Indian sources, including property, exceeds the basic exemption limit.
