NRI Capital Gains Tax After the July 2024 Reform

1. The July 2024 reform — what changed in one page

Budget 2024 (announced July 2024, effective from 23 July 2024) was the most significant capital gains reform in India in over a decade. The headline changes:

• Equity STCG: 20% (up from 15%)
• Equity LTCG: 12.5% on gains above ₹1.25L (up from 10% above ₹1L)
• Debt funds: slab rates for funds bought after April 2023, no indexation
• Real estate: 12.5% LTCG without indexation (down from 20% with indexation)
• Holding period uniform: 12 months for listed equity, 24 months for everything else
• GIFT City IFSC: 10% flat LTCG retained

For NRIs specifically, the impact is concentrated: TDS rates at source have changed, indexation benefits that NRIs relied on for property sales are gone, and the strategic case for GIFT City has strengthened materially.

2. Equity: STCG and LTCG new rates

For NRIs investing in Indian listed equity (direct stocks or equity mutual funds):

Holding Period	Type	Rate (NRI)	Surcharge / Cess
< 12 months	STCG	20%	+ 4% cess
≥ 12 months	LTCG (above ₹1.25L)	12.5%	+ 4% cess
≥ 12 months (GIFT City IFSC)	LTCG	10% flat	None

NRIs in higher income brackets also face surcharges of 10% (income above ₹50L) or 15% (income above ₹1Cr). This pushes the effective NRI tax rate on equity LTCG to roughly 14.3% in many cases.

The ₹1.25L exemption is per individual per year on LTCG only. STCG has no exemption.

3. Debt funds: indexation removed

This is the change that hurts most NRIs the hardest. Before April 2023, debt funds enjoyed:

• STCG (under 36 months): slab rate
• LTCG (over 36 months): 20% with indexation, which often eliminated most of the gain

From April 2023 onward (and confirmed in July 2024), any debt fund purchased now is taxed entirely at slab rate, regardless of holding period. For NRIs in the 30% bracket, this is a significant tax drag.

The implications:

• Holding debt funds for tax-arbitrage no longer works
• FDs and debt funds are now tax-equivalent (both at slab)
• For NRIs wanting fixed income exposure, traditional FDs may be simpler
• Debt fund SIPs now work best within hybrid funds (which retain equity treatment if equity is 65%+)

4. Real estate: 24-month holding, no indexation

Real estate has seen mixed changes. The good news: holding period for LTCG is now 24 months (was 36 months for non-equity assets). The mixed news: the rate is 12.5% without indexation (was 20% with indexation).

For most properties held over 5-7 years, indexation removal means a higher absolute tax. For properties held under 5 years, the new 12.5% rate may actually be better than 20% with limited indexation.

The strategic question for NRIs: should you sell pre- or post-July 2024? For sales completed before July 23, 2024, the old regime applies. After that, the new rules apply. Some NRIs accelerated property sales in early 2024 to capture indexation.

5. TDS rates for NRIs at sale time

When NRIs sell Indian assets, the buyer/distributor is required to deduct TDS at source. The 2026 rates:

Asset	Holding	TDS Rate (NRI)
Listed equity	STCG (under 12 months)	20% (+ surcharge)
Listed equity	LTCG (over 12 months)	12.5% on gains above ₹1.25L
Equity MF redemption	STCG	20%
Equity MF redemption	LTCG	12.5%
Debt MF (post-Apr 2023)	Any	30% (slab) + surcharge
Real estate	STCG	30% (slab)
Real estate	LTCG (≥24 months)	20% (after indexation calculation by buyer)

Note that for property sales, the buyer is required to apply for a TAN and deduct TDS, then file Form 27Q quarterly. Many small-time NRI property sellers find this gets messy fast.

6. Form 13: lower deduction certificate

If you expect your actual tax liability to be lower than the TDS rate (for example, after applying basic exemption, indexation that still applies, or DTAA), you can file Form 13 with your jurisdictional Assessing Officer to request a Lower Deduction Certificate.

The certificate authorises the buyer to deduct TDS at a lower (or even zero) rate. This is particularly useful for NRIs selling property where the gain is small relative to sale price.

Filing Form 13 typically takes 30-45 days. Plan ahead — apply 2 months before the expected sale closing date.

7. Section 54 / 54F / 54EC exemptions

You can avoid LTCG tax on real estate sales by reinvesting under specific sections:

• Section 54: Sale of residential property → reinvest in another residential property in India. Up to ₹10 Cr exemption.
• Section 54F: Sale of other capital assets (land, gold, etc.) → reinvest in residential property. Conditions apply.
• Section 54EC: Up to ₹50 lakh investment in REC, NHAI, PFC bonds within 6 months. Locks for 5 years.

For NRIs, these exemptions still apply. The reinvested property must be in India. Section 54EC bonds yield ~5.25% — not exciting, but tax-shielded.

8. The new strategic implications

Pulling it all together, here's how the post-July 2024 landscape changes NRI strategy:

• Equity > Debt: Indexation removal makes equity SIPs even more compelling for long-term NRI wealth building.
• GIFT City IFSC > Mainland: The 10% flat LTCG rate (vs 12.5% mainland) is now even more attractive in absolute terms.
• Hybrid funds work better than pure debt: If equity is 65%+, the fund retains equity tax treatment.
• Real estate becomes harder to time: Indexation removal makes long-held property sales more punishing.
• DTAA paperwork matters more: Higher TDS rates make claiming treaty benefits even more valuable.