Capital Gains Tax for NRIs – Rates, TDS & Exemptions 2025

As an NRI living and working abroad, it’s important to manage your funds, especially in the case of investments. It’s essential to be aware of the capital gains tax for NRIs, so you can optimise your financial plan to reduce taxes on your gains. In this article, we cover what capital gains tax for NRI is, how it is applicable and how you can save on this taxation.

What Are Capital Gains?

Profits earned from the sale of financial assets like real estate, mutual funds, or stocks are referred to as capital gains. Capital gains are classified into two types based on the holding period of the asset:

Short-Term Capital Gains (STCG): Assets sold within a short holding period (duration varies by asset type)
Long-Term Capital Gains (LTCG): Assets held beyond the specified period.

Example: If you invested INR 60,000 in mutual funds in 2018 and sold it in 2024 for INR 1 lakh, the gain (adjusted for inflation) is a long-term capital gain, and would be subject to NRI mutual fund taxation rules applicable at the time of sale.

Types of Capital Assets for NRIs

As an NRI you can invest in or own various capital assets in India. The main types of capital assets include:

Asset Type	Description
Residential Property	Includes apartments, land, and commercial property (excluding agricultural land).
Listed Shares	Equity shares of Indian companies listed on recognised Indian stock exchanges.
Equity Mutual Funds	Funds with ≥65% equity exposure; can be held via NRE/NRO accounts.
Debt Mutual Funds	Invested in fixed-income instruments like bonds or debentures.
Unlisted Shares	Shares of private Indian companies not listed on stock exchanges.
Gold & Precious Metals	Physical gold, digital gold, gold ETFs, and mutual funds (excluding SGBs).
Other Capital Assets	Includes jewellery, artwork, and collectibles.
Special Foreign Currency Assets	Shares, deposits, or bonds acquired in foreign currency—eligible for special tax treatment under Sections 115C–115I.

Note: For properties purchased prior to July 23, 2024, investors may opt to pay a 12.5% tax without indexation or 20% with indexation. This choice, however, is only available if the investment was made before the specified date.

Inherited or Gifted Assets: Taxed on sale using the original owner's holding period and acquisition cost.

Short-Term Capital Assets

If you hold a financial asset for a period of less than the specified threshold, it is considered a short-term capital asset. The holding period varies by asset type. For NRIs, the holding period for short-term assets is determined as follows:

Listed Equity Shares & Equity-Oriented Mutual Funds: Less than 12 months.
Immovable Property (Land, Building): Less than 24 months.
Debt Mutual Funds, Unlisted Shares, Gold, Bonds, AIFs: Less than 24 months.

Long-Term Capital Assets

For a financial asset to be considered as a long-term capital asset, the holding period should generally be more than 12 months. This duration can vary depending on the asset such as:

Listed Equity Shares & Equity-Oriented Mutual Funds: Held for 12 months or more.
Immovable Property (Land, Building): Held for 24 months or more.
Debt Mutual Funds, Unlisted Shares, Gold, Bonds, AIFs: Held for 24 months or more.

Capital Gains Tax Rates for NRIs

As an NRI, your capital assets are subject to specific tax rules. To avoid unnecessary deductions, it’s important to know how long-term and short-term capital gain tax for NRI is applied. Refer to this table for a brief overview:

Asset Type	STCG Tax Rate	LTCG Criteria & Rate
Residential Property	Slab Rate	>24 months; 12.5% (no indexation)*
Listed Shares	20%	>12 months; 12.5% (above ₹1.25 lakh)
Debt Mutual Funds	Slab Rate	>24 months; 12.5%
Equity Mutual Funds	20%	>12 months; 12.5% (above ₹1.25 lakh)
Unlisted Shares	Slab Rate	>24 months; 12.5%
Gold, Bonds, AIFs	Slab Rate	>24 months; 12.5%

Note: For property acquired before July 23, 2024, taxpayers may choose between 12.5% without indexation or 20% with indexation, but only for investments made before this date. For all other cases, indexation is not available.

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Tax Deducted at Source (TDS) on Capital Gains for NRIs

As an NRI, whenever you are selling your investments in India, a Tax Deducted at Source (TDS) is deducted from the platform or the buyer purchasing the capital asset. The TDS rate for capital gains will vary by the asset type and holding period by an NRI:

Asset & Holding Period	TDS Rate (2025)
Property (Held >24 months, LTCG)	12.5% + surcharge & cess on gains
Property (Held ≤24 months, STCG)	Slab rate (up to 30%) + surcharge & cess on gains
Listed Shares/Equity Mutual Funds (LTCG)	12.5% + surcharge & cess (above ₹1.25 lakh gains)
Listed Shares/Equity Mutual Funds (STCG)	20% + surcharge & cess

Notes:

If a lower deduction certificate is not obtained, TDS may be applied to the full sale value, not just the gains.

How to Save Tax on Capital Gains in India

As per the recent changes announced in the new Tax Bill 2025, NRIs can claim several tax benefits on their investments. Here are some tips on how to save tax on capital gains tax in India:

Currency Value Fluctuation on Unlisted Shares
Claiming TDS Refunds
- If an excess amount was deducted as TDS from your capital gains, you can claim a refund by filing an income tax return in India.
Tax-Efficient Investment Planning
- Consider investing in tax-efficient investment options such as ETFs and tax-free bonds to reduce your tax liability on any future capital gains.
- Consider the timing of the redemption or sale of an asset to benefit from holding period rules and exemptions.
Reinvesting Gains
- For certain foreign assets, reinvesting profits into specified new assets (as per Section 115F) can exempt you from taxation.

Always maintain proper documentation of your investments, and consider services such as DBS Treasures Wealth Management, which provides services such as tax planning and personalised financial plans to achieve your wealth goals.

Tax Exemptions on Capital Gains for NRIs in India

If you are investing in India from abroad, it is important to be aware of the tax exemptions on capital gains in India for NRIs. You can claim the following exemptions through specific provisions of the Income Tax Act.

Capital Gain Tax on Property for NRI – Under Section 54, if you sell a residential property and reinvest the profits in another property in India within a specified time, your long-term capital gain tax for NRI may be exempted.
Capital Gain Tax for NRI through Bonds – If you have invested up to INR 50 lakh in bonds such as NHAI or REC bonds within 6 months of selling a property, you can claim exemption on capital tax on property for NRI through Section 54EC. The investment must be made from LTCG proceeds and held for 5 years.
NRI Capital Gains Tax on Shares and Other Assets - Section 54F allows exemption if the long-term capital gains from shares, mutual funds, or other capital assets are fully reinvested in one residential property in India. This can be useful if you are planning to reduce your NRI capital gains tax on shares and other eligible assets.

Note: These exemptions are not available on short-term capital gain tax for NRI, which is usually taxed at higher rates and lacks reinvestment relief.

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Final Thoughts

Navigating capital gains taxation in India can be complex for NRIs. Being aware of the rules and being proactive ensures more favourable results. Hold periods, exemptions, and TDS procedures need to be handled with caution.

To manage your finances in India with ease, you can open an NRI account with DBS Treasures, providing attractive interest rates, preferential exchange rates on remittance and access to expert wealth solutions.

Disclaimer: This article is for informational purposes only and should not be considered financial advice.