The new NRI LTCG Tax Rate in India stands at 12.5%, effective for all transfers made on or after 23 July 2024. This flat rate, introduced through the Finance Act 2024, has replaced the earlier 10% and 20% structures across most asset classes. For NRIs filing their ITR 2025-26, this single change reshapes how equity, property, mutual funds, gold, and unlisted shares are taxed and reported.
If you are a Non-Resident Indian selling Indian assets during FY 2025-26, understanding the revised Section 112A exemption, the correct use of Schedule CG, and the new holding period rules is critical. Errors here trigger mismatch notices, refund delays, and reassessment scrutiny.
This guide breaks down everything an NRI needs to know before filing their return this year.
What Changed in the LTCG Regime from July 2024
The Finance Act 2024 introduced the most significant overhaul of India's capital gains structure in decades. For NRIs, the key shifts are:
- A single, uniform LTCG rate of 12.5% across all asset classes
- The STCG rate on listed equity shares, equity mutual funds, and Gold ETFs has risen to 20%
- The LTCG exemption under Section 112A has been raised from Rs. 1 lakh to Rs. 1.25 lakh
- Indexation benefit removed for most assets sold on or after 23 July 2024
- Uniform holding period: 12 months for listed securities, 24 months for other assets
- Debt mutual funds acquired on or after 1 April 2023 continue to be taxed at slab rates regardless of holding period
For NRIs, the change is even more impactful because TDS is deducted at source on Indian capital gains, and any excess must be claimed back through the ITR. A single filing error can trap thousands of dollars in refund limbo.
For a personalised residency and capital gains assessment, start with our NRI Tax Residency Calculator.
The New LTCG and STCG Tax Rates for NRIs in ITR 2025-26
Here is the updated capital gains structure applicable to NRIs for AY 2025-26 and AY 2026-27.
| Asset Type | STCG Rate | LTCG Rate | Holding Period for LTCG |
| Listed equity shares (STT paid) | 20% | 12.5% | 12 months |
| Equity mutual funds | 20% | 12.5% | 12 months |
| Property (land or building) | Slab rate | 12.5% | 24 months |
| Physical gold | Slab rate | 12.5% | 24 months |
| Gold ETFs | 20% | 12.5% | 12 months |
| Debt mutual funds (post 1 Apr 2023) | Slab rate | Slab rate | Any period |
| Unlisted shares | Slab rate | 12.5% | 24 months |
| Foreign shares held by NRI | Slab rate | 12.5% | 24 months |
The 12.5% LTCG rate applies without indexation for transfers on or after 23 July 2024. For property acquired before that date, taxpayers may opt for the older regime of 20% with indexation if it produces a lower tax outgo.
Section 112A: The Rs. 1.25 Lakh Exemption Explained
Under Section 112A of the Income Tax Act, LTCG on listed equity shares and equity-oriented mutual funds enjoys an exemption of Rs. 1.25 lakh per financial year. Only gains above this threshold are taxed at 12.5%.
Important points for NRIs:
- The exemption is applied automatically by the system
- Gains must still be reported in Schedule CG even if below Rs. 1.25 lakh
- Leaving the field blank because no tax is owed is treated as non-disclosure
- Grandfathering applies to shares purchased before 1 February 2018: cost is the higher of actual cost or the lower of the 31 January 2018 fair market value and the sale price
Many NRIs assume that because their gains are below Rs. 1.25 lakh, no reporting is needed. This is one of the most common causes of tax notices. The AIS (Annual Information Statement) already reflects your equity gains from broker data.
Which ITR Form Should an NRI Use for Capital Gains
NRIs cannot file ITR-1 or ITR-4. The correct choice depends on the nature of income:
- ITR-2: If you have capital gains, salary, house property, or other income, but no business or professional income
- ITR-3: If you also earn business income (including F&O trading, which is treated as business)
Schedule CG is available in both forms and is mandatory for all capital gains disclosures.
If you sold Indian mutual funds, listed shares, property, or gold during FY 2025-26, you must use ITR-2 at a minimum. NRIs with F&O activity in Indian markets must move to ITR-3.
For hassle-free NRI filings, explore our Income Tax Returns Filing Service built specifically for global Indians.
How to Report Capital Gains in Schedule CG
Schedule CG in the ITR contains separate sections for each type of gain. Filing under the wrong section is a frequent trigger for reassessment.
Report your gains under the correct section:
- Section 112A: Listed equity shares and equity mutual funds
- Section 111A: Short-term gains on listed equity and equity mutual funds
- Section 112: Property, physical gold, unlisted shares
- Section 50AA: Specified debt mutual funds, market-linked debentures
- Section 115AD: FII/FPI gains (rarely applicable to individual NRIs)
For each transaction, disclose:
- Date of acquisition and date of sale
- Purchase cost, sale consideration, and net gain
- Grandfathered cost (for equity bought before 1 Feb 2018)
- Indexed cost (only where the old regime is opted for on pre-July 2024 property)
Do not club short-term and long-term gains. Each stands independently and is taxed at different rates.
Section 54, 54F and 54EC: LTCG Exemptions NRIs Can Still Use
Even with the flat 12.5% regime, NRIs can reduce their LTCG liability through statutory exemptions:
Section 54: Sale of Residential Property
If you sell a residential house and reinvest the LTCG in another residential property in India within the stipulated period, the gain is exempt. NRIs can hold only up to two residential properties in India for this exemption.
Section 54F: Sale of Any Long-Term Asset
If you sell a long-term asset other than a residential house (for example, listed shares, land, or unlisted equity) and reinvest the net sale consideration into a residential property in India, the gain is exempt.
Section 54EC: Investment in Specified Bonds
You may invest up to Rs. 50 lakh of your LTCG (from land or building) in bonds of NHAI, REC, or PFC within six months of sale. The bonds have a five-year lock-in.
Claiming these exemptions requires:
- Detailed disclosure in Schedule CG
- Correct linking of reinvested amounts
- Proof of purchase or bond investment before filing
Merely reducing the capital gain figure without completing these fields invites a notice. Our Capital Gain Tax service helps NRIs claim these exemptions with airtight documentation.
Property Sales by NRIs: The Special Considerations
When an NRI sells Indian property, TDS is deducted by the buyer at higher rates:
- 12.5% on LTCG (plus applicable surcharge and cess)
- 30% slab-linked rate on STCG
The buyer needs a TAN to deduct and deposit this TDS. If TDS is deducted on the sale consideration instead of the net gain, the excess must be claimed back through your ITR refund process.
Grandfathering for pre-2024 property:
- Property acquired before 23 July 2024 can opt for 20% with indexation if that results in a lower tax
- Property acquired on or after 23 July 2024 is taxed at a flat 12.5% without indexation
This choice is exercised at the time of filing and cannot be revised later. NRIs selling ancestral property or long-held family real estate should compare both options carefully.
Use our NRI TDS Refund Calculator to estimate the excess TDS deducted on your property sale.
Debt Funds, Gold, and Gold ETFs: New Reclassification Rules
Post July 2024, several asset categories have moved to flat 12.5% LTCG with revised holding periods:
- Debt mutual funds acquired on or after 1 April 2023: slab rate, no LTCG benefit at all
- Debt mutual funds acquired before 1 April 2023: LTCG at 12.5% after 24 months
- Gold ETFs, Silver ETFs, Overseas Fund of Funds: from 1 April 2025, taxed at 12.5% LTCG with 12-month holding (24 months for Overseas FoFs); no longer slab-rate assets
NRIs holding these should reconcile their broker or AMC statement carefully before filing. Reporting an old-regime treatment on a post-reform sale is a common Schedule CG error.
Reporting Capital Losses: File on Time to Carry Forward
Losses are as important to report as gains. Under the Income Tax Act, capital losses can be:
- Set off against capital gains of the same nature in the same year
- Carried forward for up to 8 assessment years
- STCL can offset both short-term and long-term gains
- LTCL can offset only long-term gains
To carry losses forward, you must file your ITR before the due date, which is generally 31 July 2026 for individual NRIs without an audit requirement.
Missing this deadline means your capital losses are lost forever. This is one of the costliest mistakes NRIs make, especially those with unrealised equity losses.
Common Reasons NRIs Receive Capital Gains Tax Notices
The department now cross-checks your ITR against AIS, Form 26AS, broker statements, and registrar data. NRIs commonly receive notices when:
- Exempt gains under Section 112A are not disclosed
- Grandfathering benefit is claimed incorrectly on pre-2018 shares
- STCG and LTCG are clubbed under the same section
- Property sale value differs between AIS and ITR
- Reinvestment exemptions are claimed without proper disclosure
- Foreign asset gains are missing from Schedule FA (for RNOR taxpayers)
- TDS credit does not match Form 26AS
If you receive such a notice, do not respond without professional review. Our NRI Income Tax Notice Solution helps you draft a compliant reply and close the file.
How MostlyNRI Helps You File Capital Gains Correctly
Filing NRI capital gains is more than plugging numbers into Schedule CG. It involves residency verification, TDS reconciliation, exemption planning, DTAA evaluation, and defensive documentation.
At MostlyNRI, we offer:
- NRI ITR Filing with correct Schedule CG entries
- Capital Gains advisory on Section 54, 54F, and 54EC exemptions
- Property TDS refund claims for NRIs
- DTAA benefit claims where applicable
- Handling of capital gains notices and mismatch queries
- Portfolio review for future tax-efficient exits
Frequently Asked Questions (FAQs)
What is the new LTCG tax rate for NRIs in ITR 2025-26?
The new Long Term Capital Gains rate for NRIs is 12.5% without indexation, applicable on transfers from 23 July 2024. It covers listed equity, mutual funds, property, unlisted shares, and gold under a single unified regime.
What is the Section 112A exemption limit for NRIs?
Section 112A allows an exemption of Rs. 1.25 lakh per financial year on LTCG from listed equity shares and equity-oriented mutual funds. Only gains above this threshold are taxed at 12.5%. NRIs must still report gains below this limit.
Do NRIs pay STCG on Indian equity at 20% or 15%?
The short-term capital gains rate on listed equity shares and equity mutual funds has been raised from 15% to 20% for transfers on or after 23 July 2024. This rate applies uniformly to NRIs and residents.
Which ITR form should NRIs file for capital gains in 2025-26?
NRIs with capital gains must use ITR-2. If they also have business income, including F&O trading, they must file ITR-3. ITR-1 and ITR-4 are not permitted for NRIs, and both forms include Schedule CG.
Can NRIs still get the indexation benefit on property sale?
Only for property acquired before 23 July 2024. Such NRIs may opt for the old regime of 20% with indexation if it results in a lower tax. Property acquired on or after 23 July 2024 attracts flat 12.5% LTCG without indexation.
Do NRIs need to report exempt LTCG under Section 112A?
Yes. Even when gains are below the Rs. 1.25 lakh exemption threshold, NRIs must disclose them in Schedule CG under Section 112A. Leaving the section blank is treated as non-disclosure and often triggers a notice from the tax department.
What is the LTCG holding period for equity mutual funds for NRIs?
For listed equity shares, equity mutual funds, and Gold ETFs, the LTCG holding period is 12 months. For property, physical gold, and unlisted shares, the holding period is 24 months. Overseas Fund of Funds requires 24 months of holding.
How can NRIs claim TDS refund on property sale?
If TDS is deducted on the total sale consideration rather than on the actual gain, NRIs can claim the refund by filing ITR-2 with correct Schedule CG entries and matching Form 26AS. Our TDS refund calculator helps estimate the recoverable amount.
Can NRIs use Section 54, 54F, or 54EC exemptions on capital gains?
Yes. NRIs can claim Section 54 for reinvestment in Indian residential property, Section 54F for other long-term assets, and Section 54EC for investment in NHAI, REC, or PFC bonds up to Rs. 50 lakh within six months of sale.
What happens if NRIs do not file capital losses on time?
Capital losses can be carried forward for eight years only if the ITR is filed by the due date, generally 31 July 2026, for individual NRIs. Missing the deadline forfeits the loss permanently and prevents any future set-off against gains.
0 Comments