How will my property sale be taxed after I relocate to India?

I have worked outside India for 12 years but I will be relocating back to India in April for a better employment opportunity at an MNC. I have one residential property in India from 2010 which I will sell and instead purchase a bigger one after I return. Approximately how much tax will be there on the sale so that I can plan out the budget for new property? 

- Name withheld on request

Since you will be permanently returning to India in April, your stay in the country during the financial year 2025-26 will exceed 182 days. As a result, you will be classified as a resident under the Income Tax Act, 1961.

If you were a non-resident in at least 9 out of the last 10 financial years or if your total stay in India during the past 7 financial years was less than 730 days, you will be considered a ‘not ordinary resident’ for the financial year 2025-26. 

Also read: Realty check: How NRIs can minimise complexities in selling property in India

If you do not meet either of these conditions, you will be classified as an ‘ordinary resident’ for FY 2025-26.

Tax implications on selling immovable property in India

As a resident, when you sell immovable property in India, the buyer is required to deduct TDS at 1% if either the sale price or the stamp duty value exceeds ₹50 lakh.

You will be taxed at lower of (a) 12.5% on long term capital gains without indexation; and (b) 20% on long term capital gains with indexation if property is purchased before 23 July 2024. Additionally, surcharge and cess will be over and above the tax.

Also read: Do I need to repay my home loan to claim a long-term capital gains exemption?

However, you may still qualify for an exemption from capital gains tax under section 54, provided the amount reinvested in a new property is equal to or greater than the capital gains.

I’m an NRI living and working in the US. Would the new income tax bill tax my US income in any way? 

- Name withheld on request

The Income-Tax Bill, 2025 (ITB) retains the same definition of total income as the Income Tax Act, 1961 (ITA).

This means that any foreign income currently not taxable under ITA will also remain non-taxable under ITB.

Also read: How will foreign-sourced dividend income be taxed in India?

Additionally, taxpayers can continue to avail benefits under the double taxation avoidance agreements (DTAA), where applicable, for foreign income deemed to accrue or arise in India, such as consultancy fees earned from an Indian entity.

Harshal Bhuta is partner at P. R. Bhuta & Co. CAs