Tools/NRI: Indians in the US/Selling Property in India: Tax in Both Countries✓ CHECKED · OCT 2, 2026
Selling property in India: what tax do I pay in each country, and what do I keep?
For a US citizen or resident selling land or a flat in India, bought or inherited: the Indian tax, the US tax after the foreign tax credit, and the dollars left.
Did you inherit it?
US cost and Indian cost are both what you paid.
US filing status
Indian surcharge
“By the gain” treats the gain as your only Indian income: 10% above ₹50 lakh, 15% above ₹1 crore (capped at 15% on gains, Finance Act 2026), as published on 2 October 2026; check with a Chartered Accountant.
Indian tax on the sale
Estimated from the rates above.
KEPT AFTER TAX IN BOTH COUNTRIESNO EXTRA US TAX
$141,785
Selling for ₹1,50,00,000 at 95.81 rupees per dollar ($156,560), you keep $141,785 after $13,209 of Indian tax and $0 of US tax. The US taxes the $53,557 gain in dollars: the credit for Indian tax covers all $8,034 of federal income tax, and $5,175 of unused Indian tax can be carried back 1 year or forward 10.
Indian tax
$13,209
US tax after credit
$0
Gain in dollars
$53,557
Credit used
$8,034
UNDERSTAND YOUR RESULT
Where the sale price goes
Of the $156,560 sale price, $1,566 goes to selling costs, $13,209 goes to Indian tax, $0 to US income tax after the credit, and you keep $141,785. All rupee amounts are converted at 95.81.
Taxed in India, and the extra US tax after the credit
If there were no creditWith the foreign tax credit
Taxed in India
$13k
$13k
US income tax
$8k
$0
Total
$21k
$13k
India takes $13,209. The US tax on the gain is $8,034 of income tax before the credit; the credit (Form 1116) uses $8,034 of the Indian tax, so the extra US income tax is $0. Total tax $13,209 instead of $21,243; $5,175 of Indian tax is not used this year.
What the rupee’s move did to your gain in dollars
If the rupee had not moved₹88,50,000 at 59.15
$150k
At each date’s ratewhat the US taxes
$54k
In rupees the gain over your US cost is ₹88,50,000. The rupee fell from 59.15 to 95.81 per dollar, so the gain in dollars is $53,557 instead of $149,620 (−$96,062). A falling rupee shrinks the dollar gain and can turn a rupee gain into a dollar loss; a rising rupee adds to it.
The tax in each country, line by line
| Line | Amount |
|---|---|
| Indian gain (sale − costs − Indian cost) | ₹88,50,000 |
| Indian tax at 12.5% (long-term) | ₹11,06,250 |
| Surcharge 10% and cess 4% | ₹1,59,300 |
| Indian tax, estimated | ₹12,65,550 = $13,209 |
| US gain (long-term) | $53,557 |
| US income tax before the credit | $8,034 |
| Foreign tax credit used | $8,034 |
| Unused Indian tax (carryover) | $5,175 |
| Net Investment Income Tax | $0 |
| State tax | $0 |
India taxes ₹88,50,000 of gain at 12.5% plus 10% surcharge and 4% cess; the US taxes $53,557 of long-term gain. The Indian rates are inputs, as published on 2 October 2026; check with a Chartered Accountant.
What moves the needle
Each row re-runs the calculation with one change. Click to apply.How it's computed
FORMULA
US gain = sale ₹ ÷ sale-date rate − costs ₹ ÷ sale-date rate − cost ₹ ÷ purchase-date rate (inherited: value at death ÷ that date’s rate)
India tax = (sale − costs − Indian cost) × rate × (1 + surcharge) × (1 + cess)
US income tax on the gain = tax on the return with the gain − tax without it; credit = the smaller of Indian tax in $ and that US tax
Kept = sale price in $ − costs − Indian tax − (US income tax − credit) − 3.8% investment income tax − state tax
- You are a US tax resident (citizen or resident alien), taxed on worldwide income. The dollar gain uses the exchange rate on each date (Rev. Rul. 54-105; the IRS says to use the rate prevailing when you pay or receive the item). Indian tax is converted at the sale-date rate; the IRS uses the rate on the day you pay it.
- The credit limit is simplified to the extra federal income tax the gain adds. Form 1116 computes it across all your foreign income in the same category (passive, or general if the gain is high-taxed) and adjusts capital gains for the lower US rate. Unused Indian tax carries back 1 year and forward 10. The credit is for Indian tax you owe, not TDS India would refund.
- The 3.8% Net Investment Income Tax applies above $200,000 (single) or $250,000 (married filing jointly) and counts only this gain as investment income. The foreign tax credit cannot reduce it under the IRS position, which the Federal Circuit upheld on 31 August 2026 (Christensen; Estate of Bruyea).
- India: long-term at 12.5%, surcharge 10%, cess 4%, as published on 2 October 2026; check with a Chartered Accountant. Not modelled: exemptions for reinvesting (the 2025-Act successors of sections 54 and 54EC), marginal relief on the surcharge, and other Indian income. The buyer withholds TDS (section 393(2) of the 2025 Act, formerly 195) on the payment, usually far more than the tax unless you get a lower-deduction certificate; the excess comes back as a refund when you file in India.
- Not modelled: depreciation recapture if you rented the property out, the home-sale exclusion if it was your main home for 2 of the last 5 years, using a dollar loss against other gains (a loss on personal-use property is not deductible), state credits for foreign tax, and the currency gain or loss on a rupee loan or on converting the proceeds.
WORKED EXAMPLE · SAMPLE NUMBERS
Dollars: ₹1,50,00,000 ÷ 95.81 = $156,560; costs ₹1,50,000 ÷ 95.81 = $1,566; cost ₹60,00,000 ÷ 59.15 = $101,437; gain $53,557. India: ₹88,50,000 × 12.5% = ₹11,06,250, plus ₹1,10,625 surcharge and ₹48,675 cess = ₹12,65,550, $13,209. US: $8,034 of income tax, less a $8,034 credit = $0; investment income tax $0; state $0. Kept: $156,560 − $1,566 − $13,209 = $141,785.
SOURCES
[1]Foreign currency and currency exchange rates (use the rate prevailing when you receive, pay or accrue the item)Internal Revenue Service[2]Rev. Rul. 54-105 (cost at the purchase-date rate, sale price at the sale-date rate), applied in Quijano v. United States, 93 F.3d 26 (1st Cir. 1996)Internal Revenue Service; U.S. Court of Appeals for the First Circuit
[3]26 U.S. Code § 1014: Basis of property acquired from a decedentLegal Information Institute, Cornell Law School[4]26 U.S. Code § 1223: Holding period of property (inherited property is held more than 1 year)Legal Information Institute, Cornell Law School[5]Instructions for Form 1116, Foreign Tax Credit (exchange rate, carryback and carryforward, taxes you do not owe)Internal Revenue Service[6]26 U.S. Code § 1411: Net investment income taxLegal Information Institute, Cornell Law School[7]Income-tax Act, 2025, sections 197 (long-term gains), 2(101) (holding period), 73 (cost to previous owner), 393(2) and 395 (TDS and lower deduction); Finance Act 2026 (surcharge and cess)Government of India, Income Tax Department
[8]U.S.-India income tax treaty (Article 13 capital gains, Article 25 relief from double taxation)Internal Revenue Service[9]India / U.S. foreign exchange rate (DEXINUS)Board of Governors of the Federal Reserve System, via FREDHSBuilt by Hussain Sehorewala · checked against worked examples · Oct 2, 2026
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Questions about this result
Yes. "The US doesn’t tax property in India" is a myth: a US citizen or resident is taxed on worldwide income, so the gain goes on your US return even if the money never leaves India. The Indian tax on the same gain is credited on Form 1116, up to the US income tax on that gain. On the example on this page, a flat bought for ₹60,00,000 and sold for ₹1,50,00,000, India takes $13,209, the US income tax of $8,034 is fully covered by the credit, and you keep $141,785.
Each amount is converted at the rate on its own date: the cost at the rate on the day you bought (or the day the owner died, for an inherited property) and the price at the rate on the day of the sale (Rev. Rul. 54-105). Because the rupee has fallen, the gain in dollars is usually smaller than the rupee gain converted at today’s rate, and it can be a loss. On the example, a ₹88,50,000 rupee gain is a $53,557 gain in dollars.
Its fair market value on the date of death (IRC §1014), converted at that date’s exchange rate, and the gain is always long-term. India uses the previous owner’s cost and holding period instead, so India can tax a much larger gain than the US does. A valuation as of the date of death supports the US figure.
For land or a building held more than 24 months: 12.5% without indexation (Income-tax Act 2025 §197, formerly §112), plus a surcharge of 10% above ₹50 lakh or 15% above ₹1 crore of income, plus 4% cess. The choice of 20% with indexation for property bought before 23 July 2024 is for residents only. Held 24 months or less, the gain is taxed at slab rates. The buyer withholds TDS on the payment (2025 Act §393(2), formerly §195); a lower-deduction certificate (§395, Form 128, formerly §197 and Form 13) brings it down to the expected tax. These are as published on 2 October 2026; check with a Chartered Accountant.
No, under the IRS position: the credit offsets regular income tax only. On 31 August 2026 the Federal Circuit upheld that position in Christensen v. United States and Estate of Bruyea v. United States, rejecting treaty-based credits against the 3.8% tax. It applies above $200,000 of modified adjusted gross income for a single filer and $250,000 for a married couple filing jointly.
Form 3520 is due for the year you receive an inheritance from a nonresident alien if bequests and gifts from foreign persons that year total more than $100,000; it is a report, not a tax. If the sale proceeds sit in Indian accounts, an FBAR is due when your foreign accounts together exceed $10,000 at any time in the year, and Form 8938 at higher thresholds.
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