NRI Property Tax Filing Guide: Selling or Renting Out Indian Real Estate from Australia

Somewhere in Australia right now, an NRI is staring at a TDS deduction on their property sale that's nearly a third higher than they expected. Not because the tax rate changed overnight. Because nobody told them TDS gets calculated on the full sale value, not the profit, unless you apply for a certificate in advance.

That single gap in knowledge costs Australian NRIs real money every single year. This is the guide that closes it.

Two Scenarios, Two Very Different Tax Treatments

If you own property in India, you're dealing with tax in one of two moments: while you're renting it out, or when you sell it. Most generic "NRI taxation" content blends these together. They shouldn't be blended — the mechanics, the forms, and the mistakes are completely different for each.

Figure out which situation applies to you before you read further. This guide handles both, in order.

If You're Renting Out Your India Property

Rental income from Indian property is taxable in India for NRIs. There's no exemption threshold and no grace period — it's taxable from the first rupee, every year you earn it.

The mechanics: rent gets credited to your NRO account (not NRE — this trips people up constantly). If your tenant is required to deduct TDS on rent above the applicable threshold, that happens before the money even reaches you. You then have to include the gross rental income in your Indian income tax return, claim the standard deduction (30% of net annual value, after municipal taxes), deduct home loan interest if applicable, and pay tax on the balance at slab rates.

Here's the part that catches Australian NRIs specifically off guard: while Australia taxes its residents' worldwide income, India taxes Indian-source property income. That does not mean you are taxed twice. It means you must properly report your rental income on the Foreign Income Schedule of your Australian tax return while paying Indian advance tax, then claim the Foreign Income Tax Offset (FITO) to offset your Australian liability.

If You're Selling Your India Property

This is where the real money is at stake, and where the confusion is worst.

TDS on sale is deducted by the buyer, on the entire sale value — not your gain. Under Section 195, this isn't optional for the buyer, and it isn't proportional to your actual profit unless you've done something about it in advance.

For property held over 24 months (long-term), the applicable capital gains rate currently sits at a flat 12.5% without indexation for property acquired on or after 23 July 2024. Property purchased before that date can fall under a different transition treatment — this is genuinely a "confirm your specific purchase date and structure with a CA" situation, not a guess-it-yourself one. Add applicable surcharge and cess, and on larger transactions the effective rate can land in the 13-15% range. Property held under 24 months is short-term and taxed at 30% plus cess — noticeably steeper.

Now here's the number that actually matters day-to-day: without any intervention, the buyer withholds TDS calculated against the full sale price, which is almost always far higher than 12.5-15% of your actual gain. If your flat sells for ₹1.5 crore and your actual taxable gain is ₹40 lakhs, a buyer withholding at the default rate against the full ₹1.5 crore locks up an amount that has nothing to do with your real tax liability — for months, until you file and claim the refund.

The fix is applying for a Lower Deduction Certificate (Form 13) before the sale closes. This lets the tax department certify a lower — often much lower — TDS rate based on your actual computed gain, so the buyer withholds closer to your true liability instead of a blunt percentage of the sale price. It takes time to process, which means it needs to happen before you're mid-negotiation, not after you've already signed.

One more procedural shift worth knowing: TDS filings for non-resident sellers go through Form 27Q — being renumbered Form 144 from April 2026 — not Form 26QB, which is restricted to resident-seller transactions. If your buyer's CA files the wrong form, expect delays.

How the Australia-India DTAA Prevents Double Taxation

Here's the honest version of what DTAA does and doesn't do for real estate, because most explanations get this wrong.

Under Article 6 and Article 13 of the Australia-India DTAA, rental income and capital gains from Indian immovable property are source-state taxed — meaning India retains primary taxing rights. On your Australian tax return, you claim the Foreign Income Tax Offset (FITO) to offset Australian taxes.

What protects you from double taxation is Article 23 of the Australia-India DTAA: taxes paid in India can be claimed as a Foreign Income Tax Offset (FITO) against your Australian income tax on the exact same income. You do not get taxed twice.

To formally substantiate your foreign income tax offset with the ATO, you will need your Indian Form 16A (TDS certificate), your Indian ITR acknowledgement (ITR-V), and proof of tax challan payments. Always consult a cross-border accountant to ensure proper reporting on the Foreign Income Schedule and your FITO claim.

This section explains the mechanism, not your specific filing position. Confirm your position with an Australian accountant alongside your Indian CA.

Step-by-Step: Filing Your Return as an Australian NRI

Here is the sequence that keeps things clean:

• Get your Indian PAN linked with your Aadhaar (if you have one) or marked as non-resident in the income tax portal database.
• Ensure your tenant deducts TDS under Section 195 (for rental income) and deposits it against your PAN using Form 27Q, generating Form 16A certificates.
• Check your Annual Information Statement (AIS) and Form 26AS on the e-filing portal before filing to reconcile all taxes withheld.
• File your Indian return (ITR-2) before the 31 July deadline for individual non-audit taxpayers.
• Report foreign rental property and income on the Foreign Income Schedule of your Australian tax return, declaring gross rent and allowable deductions.
• Compute your Foreign Income Tax Offset (FITO) to offset Australian taxes with taxes paid in India.

The Traps That Cause Real Problems

Across hundreds of NRI consultations, the same mistakes surface repeatedly:

• Letting the buyer withhold full 20%+ TDS on a sale when a Lower Deduction Certificate could have cut the upfront cash lockup to a fraction.
• Assuming a Lower Deduction Certificate can be requested after the sale agreement is signed. It can't meaningfully help you at that point; the TDS calculation is already locked to the transaction.
• Crediting rental income to an NRE account instead of NRO. It's the wrong account category for India-sourced income and creates a paper trail mismatch that tax authorities notice.
• Treating foreign tax status as an excuse not to file in India or the US. Both jurisdictions require compliant filings.

Getting This Right the First Time

The gap between what most Australian NRIs assume about property tax and what actually applies is exactly where money gets lost — either through over-withheld TDS sitting idle for a year, or through a filing gap that surfaces as a notice much later. Neither outcome is necessary once you know which of the two scenarios you're actually in.

This article is for informational purposes and does not constitute personalized tax advice. Indian tax rates, forms, and DTAA provisions referenced above are current as of 2026 and subject to change with Finance Act updates — confirm your specific filing obligations with a qualified CA experienced in NRI taxation, and confirm your Australian tax position with a licensed Australian tax agent or accountant (CPA or CA).