3 weeks ago
NRI Joint Property Sale: How Capital Gains Tax Exemption Works
Two sisters own a house together in India.
One sister lives in Germany, and the other lives in India.
They each paid half the money for the house seven years ago.
Now they want to sell the house.
When you sell a home you have owned for a long time, the profit is called a capital gain, and you may have to pay tax on it.
The new rule says this tax is 12.5% of the gain.
The sister living in India can also choose an older rule, which might give her a lower tax bill, whichever is better for her.
If the sister in India uses her share of the money to buy another house, she can avoid paying tax on her share, as long as she follows the rules and deadlines.
She can get this benefit even if her sister in Germany does not buy a new house.
Each sister's tax is calculated separately.
An NRI living in Germany jointly owns a residential property in India with her resident sister, each having contributed 50% of the purchase price seven years ago.
Because the sale will occur after 1 April 2026, the tax implications are governed by the Income-tax Act 2025, which took effect on that date.
The property qualifies as a long-term capital asset, and long-term capital gains are taxable at 12.5% (plus surcharge and cess) without indexation for sales on or after 23 July 2024.
The resident sister may compare the earlier 20% with-indexation tax treatment with the new 12.5% option and choose the more beneficial one, while the NRI is taxable only at 12.5% without indexation.
The sister can independently claim the capital gains exemption on reinvestment, up to ₹10 crore per reinvested asset, even if the NRI does not reinvest her share, subject to prescribed conditions.
- Who
- An NRI living in Germany and her sister who is a resident of India, co-owners of a residential property.
- What
- Determination of how long-term capital gains on the sale of a jointly owned residential property are taxed and whether one co-owner can claim the reinvestment exemption independently.
- Where
- India, where the jointly owned residential property is located and where the tax applies.
- When
- The property sale is planned after 1 April 2026, when the Income-tax Act 2025 takes effect.
- Why
- To clarify separate tax treatment for each co-owner and confirm the resident sister's eligibility for the capital gains exemption even if the NRI sister does not reinvest her share.
Key facts
- Property location
- India
- Ownership split
- 50% NRI / 50% resident sister
- Holding period
- Seven years (long-term capital asset)
- Applicable law
- Income-tax Act 2025 (effective 1 April 2026)
- New LTCG tax rate
- 12.5% plus surcharge and cess, without indexation
- Old LTCG tax rate (resident option)
- 20% plus surcharge and cess, with indexation
- NRI tax treatment
- 12.5% without indexation benefit
- Reinvestment exemption cap
- Up to ₹10 crore per reinvested asset
Quotes
Author
Tax advisory author
“‘Even if you may not want to reinvest your share of the capital gains, it is possible for your sister to independently avail the benefit of capital gains tax exemption available upon reinvestment of the capital gains amount.’”
livemint.com
Sources
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