For Non-Resident Indians (NRIs) living abroad, understanding India’s capital gains tax rules in 2025 is key to smart financial planning. The Finance Act, 2024, has made some changes to how profits from selling assets like property or shares are taxed. This article explains the capital gains tax structure in simple terms, focusing on what NRIs need to know and how to save on taxes.
Capital Gains Tax Explained
When you sell something valuable like a house or stocks, the profit you make is called a capital gain. For NRIs, this is taxed in India only if the asset is in India. The tax depends on how long you owned the asset:
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Long-Term Capital Gains (LTCG): For assets held longer than 24 months (for property) or 12 months (for listed shares/equity mutual funds).
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Short-Term Capital Gains (STCG): For assets sold sooner than that.
Here’s what’s new in 2025:
1. Property Sales
Long-Term Gains (LTCG): If you sell a property after holding it for 24 months or more:
- For properties bought after July 23, 2024, the tax is 12.5% on your profit, without adjusting for inflation.
- For properties bought before July 23, 2024, you can choose:
- Pay 12.5% on the full profit, or
- Pay 20% after adjusting the purchase price for inflation (this can lower your taxable profit).
- The buyer deducts 12.5% (or 20% if you use inflation adjustment) as Tax Deducted at Source (TDS) when paying you.
Short-Term Gains (STCG): If you sell within 24 months, your profit is taxed at your income tax slab rate (like regular income), and the buyer deducts 30% as TDS.
2. Shares and Equity Mutual Funds
Long-Term Gains (LTCG): If you hold listed shares or equity mutual funds for over 12 months, profits above ₹1.25 lakh are taxed at 12.5% (up from 10%).
Short-Term Gains (STCG): If sold within 12 months, profits are taxed at 20% (up from 15%).
3. Saving on Taxes
You can avoid paying LTCG tax by reinvesting your profits:
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Buy a House: Use the profit to buy or build a new home in India within 1–3 years (Section 54).
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Invest in Bonds: Put up to ₹50 lakh of your profit into NHAI or REC bonds within 6 months (Section 54EC).
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Non-Property Assets: If you sell shares and reinvest the profit in a house (up to ₹10 crore), you may avoid tax (Section 54F).
Example
Suppose you’re an NRI in Dubai selling a Mumbai flat you bought in 2020 for ₹50 lakh, now sold for ₹80 lakh in 2025. Your profit is ₹30 lakh.
- Option 1: Pay 12.5% tax on ₹30 lakh = ₹3.75 lakh.
- Option 2: Use inflation adjustment (if eligible), reducing taxable profit to, say, ₹20 lakh, and pay 20% = ₹4 lakh.
- Option 3: Invest ₹30 lakh in a new house or ₹50 lakh in bonds to pay no tax on the profit.
You can also apply for a lower TDS certificate (Form 13) if the 12.5% or 30% TDS is too high compared to your actual tax.
Tips for NRIs
- Check Your Dates: Know when you bought the asset to decide if it’s long-term or short-term.
- Plan Sales: Choose the tax option (12.5% or 20% with inflation) that saves you more for older properties.
- Reinvest Wisely: Use exemptions like buying a house or bonds to cut your tax bill.
- Get Help: Talk to a tax expert to file correctly and claim refunds.
Conclusion
The 2025 capital gains tax rules for NRIs are simpler but need careful planning. By understanding the tax rates and exemptions, you can save money when selling properties or shares. For more details, check out Navigating the New Tax Landscape for NRIs in 2025.
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