Who does this apply to?
Indian tax resident (OCI, citizen, or otherwise) sells property in US. You're US non-resident at time of sale.
Reverse of most NRI scenarios. Examples:
- Moved back to India after years in US, old house now being sold
- Inherited US property as Indian resident
- Hold US rental property while living in India
FIRPTA withholding
Foreign Investment in Real Property Tax Act (FIRPTA) requires buyer to withhold 15% of gross sale price (10% for properties under $1M in some cases) when buying from foreign person.
Upfront, not on gain. $1M property = $150,000 FIRPTA to IRS.
To reduce FIRPTA: Apply for Withholding Certificate (Form 8288-B) before sale. IRS estimates actual tax and reduces FIRPTA accordingly. 90+ days, plan ahead.
US tax mechanics
File Form 1040-NR for year of sale.
- Capital gain: Sale price - Cost basis (USD)
- LTCG (held >1 year): 15-20% US rate
- Depreciation recapture (if rented): up to 25%
- FIRPTA withholding credited; refund if exceeded actual tax
Indian tax mechanics
For Indian resident (RNOR or ROR), US-source capital gain taxable in India:
- Held >24 months: LTCG @ 12.5% (post-July 2024) without indexation for foreign assets
- Held ≤24 months: STCG at slab rates
Foreign Tax Credit in India under Section 90: credit for US tax via Form 67.
Worked example
Example
Bought Princeton NJ house 2010 for $300,000. Sold 2025 for $700,000. Held 15 years. Moved back to India 2022, now Indian ROR.
US tax:
- Gain: $400,000
- LTCG @ 15% = $60,000
- If rented: depreciation recapture @ 25%
FIRPTA withheld: 15% × $700,000 = $105,000 (without Withholding Certificate)
Indian tax (ROR):
- Gain in INR @ ₹83/$: ₹3.32 crore
- LTCG @ 12.5%: ₹41.5 lakh
- Less FTC for US tax: ~₹50 lakh
- Net Indian tax: ₹0 (FTC fully offsets)
Recover FIRPTA excess via US Form 1040-NR refund.
RNOR during sale
RNOR doesn't tax foreign income. So sale gain on US property NOT taxable in India during RNOR.
Still file US 1040-NR for US side, claim FIRPTA refund. Indian filing: ITR-2 with US property sale disclosed but exempt under RNOR.
Repatriating sale proceeds to India
Post-sale and post-tax, transferring to India:
- Wire to Indian NRO (or NRE if eligible)
- No specific FEMA cap on inward remittance
- Indian bank receives wire, FATCA reporting back to US
Common US-property-sale mistakes for Indian residents
- Not applying for FIRPTA Withholding Certificate
- Missing US 1040-NR filing for year of sale
- Missing Indian Form 67 to claim FTC
- Wrong USD basis (didn't account for capital improvements)
- Not reporting in Indian ITR
Practical advice
- Apply for FIRPTA Withholding Certificate 4 months before closing
- Get a US tax CPA for year of sale
- Time the sale for RNOR window if possible
- Maintain US-side basis records including improvements, depreciation
- Use Form 67 for India FTC in same FY as sale
Explore our complete US Tax Return Guide to understand refunds, filing rules, and IRS procedures for NRIs.