Table of Contents
From 15 October 2026, select high-value UPI merchant payments will carry a fee for the first time since January 2020. Here is exactly what changed, who pays, who is protected, and what is still unsettled — verified against Parliament records, the gazette notification, and official RBI, Finance Ministry and NPCI statements.
12.5%
NRI tax on long-term property gains, no indexation, plus surcharge and 4% cess
1 Oct 2026
Resident individual / HUF buyers can deposit TDS on PAN, no TAN needed
USD 1 mn
Per financial year NRO repatriation limit, all eligible assets combined
₹50 lakh
Cap on section 85 (old 54EC) capital gains bonds
1
What changed in 2026
The Income-tax Act, 2025 applies from 1 April 2026, with the Income-tax Rules, 2026 renumbering almost every form. A sale on or after that date sits in Tax Year 2026–27 under the new Act; a return you are filing now for FY 2025–26 still uses the 1961 Act. Most online advice still quotes the old numbers, so use this map when you speak to your CA or bank.
| What it covers | Old (1961 Act) | New (2025 Act) |
|---|---|---|
| Reinvest in a house after selling a house | Section 54 | Section 82 |
| Agricultural land reinvestment | Section 54B | Section 83 |
| Reinvest in a house after selling a plot or other asset | Section 54F | Section 86 |
| Stamp duty value substitution | Section 50C | Section 78 |
| Tax rate on long-term capital gains | Section 112 | Section 197 |
| TDS on payments to a non-resident | Section 195 | Section 393(2) |
| Seller’s lower / nil TDS certificate | Section 197, Form 13 | Section 395, Form 128 |
| Quarterly TDS return / certificate for NRI payments | Form 27Q / Form 16A | Form 144 / Form 131 |
| Remittance declaration / CA certificate | Form 15CA / 15CB | Form 145 / 146 |
The 1 October 2026 TAN change
Until 30 September 2026, anyone buying property from an NRI must obtain a TAN, deduct under section 393(2) and file quarterly returns. The Finance Act, 2026 amends section 397(1)(c) so that, from 1 October 2026, a resident individual or HUF buyer can deposit the TDS against their own PAN through a challan-cum-statement, much like the old Form 26QB route. [7] Companies, firms and LLPs still need a TAN. The CBDT has now notified the machinery. The Income-tax (Fifth Amendment) Rules, 2026 (Notification 121/2026, dated 22 September 2026, in force from 1 October) add a new Schedule E to Form 141 for these deductions and extend Form 132 as the buyer’s TDS certificate to the NRI seller. [8] Schedule E asks for the property, buyer and seller details, stamp duty value, instalments, capital gains particulars, the TDS rate and any section 395 certificate, and also the non-resident seller’s overseas address, tax residency certificate and foreign tax identification number.WHAT THIS DOES AND DOES NOT CHANGE
It changes the buyer’s paperwork, not your tax. TDS is still worked out at non-resident rates, not the 1% that applies when the seller is resident.
Payments or credits before 1 October still follow the TAN route. For a deal with an advance in September and the balance in October, check each payment separately.
Keep your TRC, foreign TIN, overseas address and PAN ready to hand to the buyer before the first payment.
2
Inherited or ancestral? Settle what you actually own
In everyday speech, “ancestral property” means anything that belonged to parents or grandparents. Legally it is narrower. A parent’s self-acquired property that passes to you under a will or by succession usually becomes your individual property. A genuine Hindu coparcenary or HUF property carries different rights and may even be a different taxpayer. The Supreme Court has held that property inherited under section 8 of the Hindu Succession Act is held as individual property, not as joint family property, in the hands of the heirs. [9]
- Daughters are coparceners under section 6 of the Hindu Succession Act, subject to its conditions. A deceased woman’s estate follows section 15, which differs from a man’s. [10]
- Other personal laws, and wills, can produce very different shares. Do not assume the eldest male member owns everything.
- For HUF property, confirm the HUF’s PAN, residential status and authority to sell before money is split among members. One member living abroad does not make the HUF non-resident.
Ask a lawyer in the state where the property sits for a written ownership note naming every owner, their share, any minor’s interest and the documents needed to sell.
3
Fix the title before you market the property
Mutation updates municipal or revenue records; it does not by itself prove ownership. The Supreme Court has repeatedly said revenue entries are for fiscal purposes and do not confer title. [11] A society share certificate or a relative’s assurance is not a substitute for the underlying documents either.
Assemble: the original purchase deed and every later registered transfer; death certificates; the will, if any, and any probate or letters of administration; legal heir or succession documents; partition or release deeds; and current municipal, revenue and society records. A succession certificate under the Indian Succession Act covers debts and securities; it is not a universal title document for land, and probate requirements differ across India. [12]
The lawyer should also check mortgages, litigation, attachments, tenants and occupiers, land-use restrictions, sanctioned construction and unpaid dues. If a co-heir is giving up a share, a registered release deed is usually needed; a casual no-objection letter may not be enough. If an heir is a minor, get advice on court permission before you sign anything.
GOLDEN RULE
Do not accept a single rupee of advance until four answers are in writing: who owns what share, what the taxable gain is, how the buyer will deduct TDS, and what your bank needs to release the money abroad.
4
Check your residence and the buyer’s eligibility
Income-tax residence and FEMA residence are separate tests. An OCI card, a foreign job or an NRO account does not settle either one. For tax, the day-count rules include the 182-day test, the 60-day test with its extended versions for Indian citizens visiting India, and the deemed-residence rule for high-income citizens not taxed elsewhere, so “under 182 days means NRI” is incomplete. FEMA looks at the purpose and circumstances of your stay abroad. [1,13] Give your CA your travel records and ask for a dated written residence conclusion.
Under RBI’s framework, NRIs and OCIs can inherit Indian property, including agricultural land. Residential and commercial property can generally be sold to a resident, an NRI or an OCI. Agricultural land, plantations and farmhouses can be sold only to a person resident in India, and state land laws apply on top. Never agree to sell inherited farmland to another NRI. [13]
5
Identify exactly what you are receiving
| Situation | Starting tax position | Keep this evidence |
|---|---|---|
| You inherit a property | Receipt under a will or inheritance is outside the gift-tax charge | Will or succession papers, title chain |
| You sell your inherited share | You compute and pay capital gains tax | Cost history, your share, sale documents |
| An executor sells and distributes | Establish who the taxable seller is first | Estate accounts, distribution authority |
| A living parent sells, then gives you money | Two events: the parent’s sale, then a gift | Parent’s sale papers, gift deed, bank trail |
| A sibling pays you to give up your share | Usually a taxable transfer of your rights, not a gift | Registered release deed, valuation |
India has no inheritance tax. The exclusion for property received by will or inheritance covers the receipt only; rent, interest and any later sale gain are taxable. Gifts from a “relative” as defined in the Act are also excluded, but a cousin or family friend is not automatically a relative. [14]
6
Calculate the gain from the family’s purchase history
- Cost carries over.For inherited property, your cost is generally the previous owner’s cost plus their improvements. It is neither zero nor reset to the value on the date of death. [15]
- Holding period carries over.The previous owner’s holding counts. Property held for more than 24 months is long-term, so selling a few months after inheriting a long-held flat is usually still a long-term sale. [16]
- Pre-2001 assets.For property acquired before 1 April 2001, you can use the fair market value on that date, but for land or buildings it cannot exceed the stamp duty value on that date. Get a registered valuer’s report backed by comparable evidence. This is a cost substitute, not indexation. [17]
Gain = sale consideration − transfer expenses − cost of acquisition − cost of improvement.
Brokerage and legal fees directly tied to the sale can qualify. Routine maintenance, your travel to India and loan repayments generally do not. Ask your CA to mark every deduction as supported, doubtful or ineligible. [1
7
The tax rate and the traps NRIs miss
An NRI’s long-term gain on property is taxed at 12.5% without indexation, plus surcharge where applicable and 4% health and education cess. Short-term gains are taxed at normal slab rates.
| Rule | Residents | NRIs |
|---|---|---|
| Option to pay 20% with indexation on land or buildings bought before 23 July 2024 | Available (lower of the two) | Not available |
| Using unused basic exemption against long-term gains | Available | Not available |
| Surcharge on this long-term gain | Capped at 15% | Capped at 15% |
This is the most common error in NRI property articles online: the indexation option introduced in 2024 is restricted to resident individuals and HUFs, and inheriting from a resident parent does not change that. [19] Surcharge depends on your total income, not the sale price, and cess applies on tax plus surcharge.
Stamp value matters. Under section 78 (old 50C), if the agreed price is below the stamp duty value by more than 10%, the stamp value is taken as your sale price for tax. A reference to the Valuation Officer is available in disputes. [2
8
Buyer TDS is not your final tax
TDS is advance tax collected by the buyer; your return settles the final bill. For a non-resident seller, the buyer deducts under section 393(2), and the resident-seller rules (1% above ₹50 lakh) do not apply. TDS is triggered on each payment or credit, including advances, not just at registration. [21]
Legally, TDS is due on the portion chargeable to tax. In practice, without a certificate, most buyers deduct on the full payment. On an ₹80 lakh sale with a ₹40 lakh gain, that difference can tie up several lakh rupees until your refund comes through.
- Seller’s route:apply for a lower or nil deduction certificate in Form 128 under section 395(1), with the draft agreement, cost evidence, gain computation and any planned reinvestment. [2,22]
- Buyer’s route:the buyer can separately apply in Form 129 to determine the taxable portion.
- Check the certificate’s validity, the named buyer, the amount and any conditions before relying on it. A CA’s working sheet is not a substitute.
- Give the buyer your PAN. Without a valid PAN, a higher TDS rate can apply.
Until 30 September, expect the TAN route with quarterly Form 144 and a Form 131 certificate. From 1 October, qualifying individual and HUF buyers use Form 141 Schedule E and issue Form 132. [2,8]
Write the TDS basis, payment schedule, who files what, when you get the certificate, and how errors will be corrected into the sale agreement. Then check the credit in your own Annual Information Statement (Form 168). Never rely on a buyer’s screenshot.
9
Use the exemption that fits your plans
Selling an inherited house: section 82 (old 54)
Available to individuals and HUFs, including NRIs. Invest the long-term gain in a residential house in India, bought one year before or two years after the sale, or constructed within three years. Relief is capped at ₹10 crore of investment. If the gain is ₹2 crore or less, a once-in-a-lifetime option lets you split it across two houses. Selling the new house within three years reverses the benefit. A house abroad does not qualify. [3]Selling a plot or other asset: section 86 (old 54F)
Here the test is investing the net sale consideration, not just the gain. Partial investment gives proportional relief. You must not own more than one residential house (other than the new one) on the date of sale; the ₹10 crore cap applies. Disclose every house you own, including overseas and jointly held homes, to your CA. [4]Capital gains bonds: section 85 (old 54EC)
Invest the long-term gain from land or buildings within six months in notified bonds, up to ₹50 lakh across the year of sale and the following year. Splitting between March and April does not create a ₹1 crore limit. The lock-in is five years, interest is taxable, and borrowing against the bonds withdraws the relief. HUDCO was added to the eligible issuers from 1 April 2025; confirm the current issuer list and NRI subscription terms before paying. [5]SCAM ALERT
Capital gains bonds are sold only through the issuer’s own channels and authorised arrangers. Never pay through a link sent on WhatsApp, SMS or email, and never treat ordinary corporate or tax-free bonds as a substitute.
Protect the deadline with the Capital Gains Account Scheme
If you have not reinvested by the time you file your return, deposit the unused amount in the Capital Gains Account Scheme with an authorised bank before filing, and no later than the original due date. An NRO fixed deposit does not count. The deposit does not extend the house purchase deadline or the six-month bond window. [3,4,23] Eligible losses from earlier years can also reduce the gain if the returns were filed on time; long-term losses can only offset long-term gains, and carry-forward is limited to eight years. [24] Remember that lowering Indian tax may also lower the foreign tax credit you can claim abroad.10
Worked examples
Example 1: an inherited house
An NRI sells a long-held inherited house for ₹80 lakh. Previous owner’s cost: ₹35 lakh. Documented improvements: ₹3 lakh. Brokerage and legal fees: ₹2 lakh. Assume no stamp-value adjustment, no other Indian income and therefore no surcharge.| Calculation | Amount |
|---|---|
| Sale consideration | ₹80,00,000 |
| Less cost of acquisition | ₹35,00,000 |
| Less improvements | ₹3,00,000 |
| Less transfer expenses | ₹2,00,000 |
| Long-term capital gain | ₹40,00,000 |
| Tax at 12.5% | ₹5,00,000 |
| Cess at 4% | ₹20,000 |
| Total tax before any exemption | ₹5,20,000 |
Tax is on the ₹40 lakh gain, not the ₹80 lakh price. After fees and tax, you keep ₹72.80 lakh. Investing ₹40 lakh in a qualifying Indian house under section 82 would make the whole gain exempt; you need not reinvest the full sale price. Alternatively, ₹40 lakh in section 85 bonds would do the same but lock the money for five years. These are alternatives, not claims to stack.
Example 2: an inherited plot
Net consideration ₹1 crore, long-term gain ₹40 lakh, ₹60 lakh invested in a qualifying house under section 86:
Exempt gain = ₹40 lakh × ₹60 lakh ÷ ₹1 crore = ₹24 lakh
The remaining ₹16 lakh is taxed at 12.5% plus 4% cess: ₹2.08 lakh. Investing only the ₹40 lakh gain would not give full relief on this route.
Saving ₹5.20 lakh by locking ₹40 lakh into a house you will rarely use, or into five-year bonds, is not automatically smart. Compare liquidity, maintenance, currency risk and your overseas cash needs. Paying the tax can be the better decision. These examples are illustrations, not assessments.
11
Receive and repatriate the money correctly
Rural agricultural land is not a capital asset, so its sale creates no capital gains. Urban agricultural land is taxable. Whether land is “rural” depends on municipal limits, population and prescribed distance tests, not on the revenue record’s description. Get a written classification. [18]
Even when there is no tax, FEMA still restricts the buyer to a resident Indian, and the bank will still want full documentation. The agricultural reinvestment relief in section 83 (old 54B) is rarely practical for NRIs, who cannot buy agricultural land under FEMA. [
12
Agricultural land needs its own check
Sale proceeds of inherited property go into your NRO account. If you still hold an ordinary resident savings account, it should already have been redesignated when your status changed. Giving the buyer an NRE account number does not make the money repatriable. [26] Where heirs co-own, each should be paid separately into their own account, with TDS credited to the correct PAN.
Under RBI’s Master Direction on Remittance of Assets, an NRI or PIO can remit up to USD 1 million per financial year from NRO balances, including sale proceeds of assets and inheritance, after applicable taxes and against documentary evidence. [27] Key points:
- It is one annual limit per person, across all eligible sources and banks, not per property.
- Amounts above the limit need RBI approval through your bank. Otherwise, spread remittances across financial years. That spreads the cash, not the tax: the gain is taxed in the year of sale.
- The separate route for property originally bought with foreign exchange, limited to two residential properties, does not apply to inherited property. [13]
Forms. For remittances from 1 April 2026, Forms 145 and 146 replace 15CA and 15CB, under Rule 220. Form 146 (the CA certificate) is not automatically required just because a transfer exceeds ₹5 lakh; the right part of Form 145 depends on whether the payment is taxable and what certificate supports it. Agree the form with your CA and bank, keep the acknowledgement, and verify the CA’s UDIN. [6]
Give the bank one file: identity and account documents, inheritance evidence, registered sale deed, payment trail, tax computation, TDS certificates and challans, and the remittance forms. Ask for their remaining conditions in writing before you commit to a purchase abroad.
“Our bank details have changed, please send the balance here.” Confirm any account change on a phone number you already trust, never one in the email.
“Take part in cash, it saves stamp duty.” Undeclared cash, off-book payments and hawala make the money unrepatriable and illegal.
“Pay a processing fee to release your remittance.” Banks do not release NRO funds against advance fees paid to individuals.
13
Inheritance is not the same as a gift from a living parent
If a living parent owns and sells the property, the gain is the parent’s. Money they then give you is a gift, with its own tax exclusion for relatives and its own FEMA route. It cannot be described as inherited sale proceeds. [14]
Resident parents send gifts abroad under the Liberalised Remittance Scheme, ordinarily up to USD 250,000 per financial year across all their LRS use; a rupee gift into an NRI relative’s NRO account also uses that limit. Your USD 1 million facility does not override the donor’s obligations, and the tax and FEMA definitions of “relative” differ. Ask the bank about TCS on the gift route; it does not apply to repatriating your own assets.
14
Plan your overseas tax before choosing an exemption
Tax treaties generally do not exempt Indian property gains. The India–US treaty, for example, lets each country tax capital gains under its own law, with relief for double taxation. [29] Ask your overseas adviser about cost basis, currency conversion, credit limits and calendar-year mismatch.
- US residents:inherited property generally takes a date-of-death market value basis in the US, while India carries forward the original cost. The two gains can be very different. [15,30]
- A US person receiving more than USD 100,000 in gifts or bequests from a non-resident alien or foreign estate generally files Form 3520. This can be triggered by the inheritance itself, before any sale. [31]
An Indian exemption through reinvestment can leave a foreign tax bill with no Indian credit to offset it. Get a combined estimate first.
15
Closing the sale while you live abroad
A special power of attorney can let a trusted person sign for you. Attestation rules depend on the country: some documents need consular attestation, others an apostille, and the POA must then be adjudicated and stamped in the Indian state within the prescribed time. [32] Limit it to the named property, require your written approval of price and buyer, direct payment only to your account, set an expiry date, and bar substitution. Never sign blank papers.
A sale of land or a completed building is outside GST, though brokerage and legal services carry their own GST. Stamp duty and registration are state levies. [33] Close only after you hold the registered deed, proof of every payment, possession handover and the TDS certificates.
16
Your action plan
A special power of attorney can let a trusted person sign for you. Attestation rules depend on the country: some documents need consular attestation, others an apostille, and the POA must then be adjudicated and stamped in the Indian state within the prescribed time. [32] Limit it to the named property, require your written approval of price and buyer, direct payment only to your account, set an expiry date, and bar substitution. Never sign blank papers.
A sale of land or a completed building is outside GST, though brokerage and legal services carry their own GST. Stamp duty and registration are state levies. [33] Close only after you hold the registered deed, proof of every payment, possession handover and the TDS certificates.
1
Confirm owners and shares, tax and FEMA residence, property type, buyer eligibility and the bank route.
2
Get the capital gains computation, decide on exemptions and overseas tax, and apply for a Form 128 certificate if TDS will be excessive.
3
Check the TDS trigger, certificate validity and which regime applies on that date (TAN route before 1 October, PAN route after for eligible buyers).
4
Verify the deed, the true consideration, cleared funds, TDS allocation and every signatory’s authority.
5
Complete any section 85 bond investment. Do not wait for the return deadline.
6
Deposit unused amounts in the Capital Gains Account Scheme, reconcile TDS in Form 168, and pay advance tax on any balance to limit interest.
7
Get written bank acceptance of your file, confirm your remaining USD 1 million headroom and conversion charges.
8
File the Indian return even if the gain is fully exempt or fully covered by TDS, claim any refund, and meet overseas reporting.
Quick reference: where to go
| Need | Where |
|---|---|
| Income-tax e-filing, Forms 128, 145, 146 | incometax.gov.in • 1800 103 0025 |
| TDS credit, Forms 131 / 132 certificates | TRACES: tdscpc.gov.in • 1800 103 0344 |
| Complaint against your bank (repatriation delays) | RBI CMS: cms.rbi.org.in • 14448 |
| Fraud or suspicious payment request | cybercrime.gov.in • 1930 |
| Official Income-tax Act 2025 text | incometaxindia.gov.in |
KEY TAKEAWAY
An inherited property is only worth what reaches your overseas account. Settle the title first, compute the gain from the original owner’s cost, get a lower-TDS certificate if the buyer would over-deduct, and assemble the bank’s repatriation file before you sign. Remember the NRI-specific rules: 12.5% without indexation, no 2024 grandfathering, NRO account only, USD 1 million a year.
Coordinate four people from the start: a property lawyer in the state, an Indian CA, your authorised-dealer bank and your overseas tax adviser.
Sources and verification notes
Checked on 23 September 2026. Official statutes, CBDT guidance and RBI directions were preferred. Notification 121/2026 was confirmed through two independent tax publications; the Gazette PDF should be linked once available. State property procedures and country-specific tax outcomes need transaction-specific advice. This guide is education, not tax or legal advice.[1] CBDT: FAQs on transition to the Income-tax Act, 2025 Read source
[2] CBDT: FAQs on forms under the Income-tax Rules, 2026 Read source
[3] Income-tax Act 2025, section 82 Read source
[4] Income-tax Act 2025, section 86 Read source
[5] Income-tax Act 2025, section 85 Read source
[6] Income Tax Department: forms transition, Forms 145 / 146, Rule 220 Read source
[7] Income-tax Act 2025 as amended by Finance Act 2026 Read source
[8] Income-tax (Fifth Amendment) Rules 2026, Notification 121/2026 (reported by TaxGuru) Read source
[9] Uttam v Saubhag Singh, Supreme Court, 2 March 2016 Read source
[10] Hindu Succession Act 1956, sections 6, 8 and 15 Read source
[11] Jitendra Singh v State of Madhya Pradesh, Supreme Court, 2021: mutation entries do not confer title
[12] Indian Succession Act 1925 Read source
[13] RBI Master Direction: Acquisition and Transfer of Immovable Property under FEMA Read source
[14] Income-tax Act 2025, section 92 Read source
[15] Income-tax Act 2025, section 73 Read source
[16] Income Tax Department: short and long-term capital assets Read source
[17] Income-tax Act 2025, section 90 Read source
[18] Income Tax Department: Capital gains guidance Read source
[19] Income-tax Act 2025, section 197 Read source
[20] Income-tax Act 2025, section 78 Read source
[21] Income-tax Act 2025, section 393 Read source
[22] CBDT: Form 128 FAQs Read source
[23] Income Tax Department: residential house reinvestment and CGAS Read source
[24] Income Tax Department: set off and carry forward of losses Read source
[25] Income-tax Act 2025, section 83 Read source
[26] RBI Master Direction: Deposits and Accounts (FEMA) Read source
[27] RBI Master Direction: Remittance of Assets Read source
[28] RBI Master Direction: Liberalised Remittance Scheme Read source
[29] India–US tax convention, Articles 13 and 25 Read source
[30] IRS Publication 551, Basis of Assets Read source
[31] IRS: Gifts from foreign person Read source
[32] Consulate General of India, Toronto: Power of Attorney (example) Read source
[33] CBIC: CGST Act Schedules II and III Read source
[34] Income-tax Act 2025, section 263 (return filing) Read source
[35] Income-tax Act 2025, section 404 (advance tax) Read source
