Capital Gains and DTAA for NRI Land Sellers (2026)

First question: is it a capital asset?

Tax on capital gains only arises if the land is a capital asset. The Income Tax Department's FAQ on agricultural land says rural agricultural land is specifically excluded from the definition of a capital asset, so gains from its transfer are not chargeable under capital gains, while gains on urban agricultural land are chargeable under that head. The page does not define rural or urban, and we could not confirm the distance and population tests from it. See capital gains on agricultural land (54B and 54F).

Whether your land is rural or urban is a factual and legal question. Ask a chartered accountant with the village, the distance from the nearest municipality and the population evidence. Do not assume.

Holding period and rate for land

The Income Tax Department page on tax on long-term capital gains says land and buildings are long-term only if held for more than 24 months. It says the long-term capital gain is chargeable at 12.5 per cent, and that for transfers on or before 22 July 2024 the rate was 20 per cent. The page says it contains the 1961 Act as amended by the Finance Act, 2026. The Income-tax Act, 2025 section 197(1)(b) also shows 12.5 per cent on long-term capital gains.

We did not read an official page for the rate on short-term gains from land, so we state none. A gain on land held for 24 months or less is a short-term gain; ask your accountant for the current treatment. Also, rates and thresholds change with each Finance Act, so check the current year.

The indexation option is for residents only

For long-term assets transferred on or after 23 July 2024, the page says no indexation benefit is allowed. For land or buildings acquired before 23 July 2024, a grandfathering option exists, but the page says it applies only to resident individuals or Hindu Undivided Families. Section 197(3) of the 2025 Act is worded in the same way: it applies to a resident individual or HUF transferring land or building acquired before 23 July 2024, with a formula that uses a 20 per cent rate and indexed cost.

The consequence is that an NRI who inherited or bought land long ago generally cannot use the old indexed route that a resident seller can, on the text we read. Do not rely on a broker or an old calculator that applies indexation. Have your accountant compute the gain for a non-resident seller. The page also says that only a resident individual or HUF can adjust the basic exemption limit against long-term capital gains.

Working out the gain

The gain is the sale price less cost of acquisition and the cost of any improvement and transfer expenses, as the law defines them. For land that came by inheritance or gift, the cost and date of acquisition rules refer to the previous owner. We did not open the provisions that define these, so we cannot give the exact computation rules.

What you can do now is gather the documents: the old sale deed or inheritance papers, proof of the year of acquisition, receipts for improvements and registration costs, and the sale agreement. A buyer will also want these for the withholding tax discussion in TDS section 195 when buying from an NRI. For the general computation, read capital gains on land.

Reliefs and reinvestment

Resident-focused reliefs exist for reinvestment of gains. Whether and how an NRI can use them depends on the section and the year. We have separate guides on sections 54B and 54F and the Capital Gains Account Scheme. We could not confirm from the pages used for this guide how the 2025 Act treats each relief for non-residents, so check before you plan around one.

What a DTAA does

A double taxation avoidance agreement is a treaty between India and another country that decides which country can tax which income and gives relief where both could. The Income Tax Department's "Treaty Comparison" page, headed Double Taxation Avoidance Agreements, links to a utility on DTAA and to old treaties; it does not list the treaties or their terms on the page we opened.

For land, the model treaty wording is helpful. Under Article 13(1) of both the United Nations and OECD model conventions, gains from alienation of immovable property situated in the other contracting state may be taxed in that state. Professional material from the ICAI's western region says the state where the land is located has the right to tax and decides whether to tax and how much under its own law.

In plain terms, India, as the country where your land is, can tax the gain. The treaty with your country of residence usually affects how your home country gives credit for the Indian tax. We could not open the text of any particular treaty, so we do not state what it says. Read the Article on capital gains in the treaty with your country, and take advice in that country.

Treaty claims and paperwork

Section 393 of the 2025 Act mentions a certificate under section 159(8) in connection with lower treaty rates for certain categories of income. That reference is to certain serials of the table, and we did not confirm that it applies to a land sale. Do not assume that a treaty reduces the withholding on land. The route we confirmed for reducing withholding is an application to the Assessing Officer under section 395. See our page on section 195 TDS.

Ask your accountant whether you will need documents such as a tax residency certificate from your country, and whether a return must be filed in India. We could not confirm the exact documents.

Bringing the money out of India

Tax is only one side. The money must also be allowed to leave India. The RBI Master Direction on immovable property (paragraph 8.2) allows repatriation of sale proceeds for property other than agricultural land, a farm house or plantation property if the property was acquired under the foreign exchange law in force, the purchase money was paid through banking channels or from FCNR(B) or NRE accounts, and for residential property the repatriation is limited to not more than two such properties. The Master Direction on deposits says NRO balances can be repatriated up to USD 1 million per financial year (paragraph 5(C)(iii)).

We could not confirm from these pages how sale proceeds of inherited farmland are repatriated, or whether tax must be paid before a bank remits. Ask the bank in writing before the sale. Read repatriating land sale proceeds and NRE, NRO and FCNR accounts for land deals.

Seller checklist

1. Find out if the land is rural agricultural land, urban agricultural land or non-agricultural land.
2. Confirm your residential status for the year of sale with a chartered accountant.
3. Collect cost, date and improvement documents and inheritance papers. See inheriting agricultural land and mutation after death.
4. Ask the buyer how withholding will be handled, and consider an application for a lower deduction certificate before registration.
5. Decide whether you will keep the money in an NRO account or remit it abroad, and check the limits.
6. Check your home country's tax return rules and treaty credit.
7. Keep a copy of the registered sale deed. See the sale deed guide and how to sell agricultural land.

What is unconfirmed

We could not confirm the rate or treatment of short-term gains on land, the rural versus urban tests, the computation rules for cost of acquisition for inherited land, how each reinvestment relief applies to non-residents under the 2025 Act, the text of any specific DTAA, or how foreign tax credit works in any country. The LTCG page we read is labelled as the 1961 Act as amended by the Finance Act, 2026, while the 2025 Act applies from 1 April 2026, so confirm the current text. We did not read any CBDT circular specific to NRI land sales.

Frequently Asked Questions

Sources

• Income Tax Department: Tax on long-term capital gains
• Income Tax Department: Section 197, Income-tax Act, 2025 (tax on long-term capital gains)
• Income Tax Department FAQ: taxability of capital gain on sale of agricultural land
• Income Tax Department: Treaty Comparison (Double Taxation Avoidance Agreements landing page)
• Income Tax Department: Section 395, Income-tax Act, 2025 (certificates)
• Income Tax Department: Section 393, Income-tax Act, 2025 (tax to be deducted at source)
• RBI Master Direction on Acquisition and Transfer of Immovable Property in India
• RBI Master Direction on Deposits and Accounts (FEMA Deposit Regulations, 2016): NRE, NRO and FCNR(B) accounts
• WIRC of ICAI: Interpretation of Articles 13 and 14 of DTAA (professional body material, for model treaty wording)