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Owning, renting out or selling property in India from the US
Rent, sale and tax in both countries for a flat or land back home: the higher tax deducted when an NRI sells, getting a lower-deduction certificate, how much you can bring to the US, and what the IRS wants.
Renting it out
- Rent paid to an NRI has Indian tax deducted at source by the tenant (commonly at 30% plus surcharge and cess; ask a CA, because many tenants don’t know and you’re still liable).
- In India you can deduct a flat 30% of the net annual value for repairs, plus property tax and home-loan interest.
- Collect rent into your NRO account.
- In the US, the rent is income on your Form 1040 (Schedule E), with US depreciation and expenses. Indian tax paid becomes a foreign tax credit.
Selling
Tax in India. The buyer must deduct tax before paying an NRI seller (under section 393 of the new Act, formerly 195):
- Long-term (held more than 24 months): 12.5% on the gain for sales from July 23, 2024, plus surcharge and cess. Residents who bought before that date can choose 20% with indexation instead; NRIs can’t.
- Short-term: taxed at slab rates; buyers usually deduct at 30% plus surcharge and cess.
Buyers often deduct on the whole sale price, not the gain, because they can’t work out your gain. To stop that, apply for a lower or nil deduction certificate (Form 13 on the TRACES portal; now under section 395 of the new Act) a few weeks before the sale. Then file an Indian return to settle the final tax.
Bringing the money to the US.
- Up to the amount you originally paid in foreign currency, or from NRE/FCNR money, for at most two homes, can go back freely.
- Anything else goes through your NRO account within the USD 1 million a year limit, after tax.
Tax in the US. The gain is US income, worked out in dollars using the exchange rates when you bought and sold, which can make the US gain bigger or smaller than the Indian one. Indian tax paid is a foreign tax credit. The property itself isn’t on FBAR or Form 8938, but the sale money sitting in an Indian account is.
Someone has to sign
Registering a sale or a rental agreement needs you in India or someone holding your power of attorney. See power of attorney from the US.
Keep
Purchase deed and payment proof (especially foreign-currency payments), improvement receipts, the sale deed, TDS certificates, the lower-deduction certificate, and the bank’s remittance advice.
The good
- A lower-deduction certificate can stop the buyer from withholding tax on the full sale price
- Rent gets a flat 30% deduction in India for repairs and upkeep
- Proceeds from up to two homes bought with foreign money can come back freely
The hard
- NRIs can't use the old 20%-with-indexation option on property bought before July 2024
- The US taxes the gain too; Indian tax becomes a credit, not an exemption
- Someone in India usually needs a power of attorney to handle the sale
Sources
- Income Tax Department: TDS rate when a non-resident sells immovable property
- Income Tax Department: Tax on long-term capital gains
- Income Tax Department: Certificate for lower or no deduction of tax
- Income Tax Department: Income from house property
- MEA: Acquisition and transfer of immovable property in India by NRIs (repatriation)
- RBI: FAQs on accounts by non-residents (USD 1 million NRO limit)
- IRS: Comparison of Form 8938 and FBAR requirements
Rules change often. If something here looks out of date, it probably is; check the official source and talk to an immigration attorney about your own case.