NRI Capital Gains Tax on Shares 2026: Rates, TDS & How to Save Tax

If you’re an NRI holding Indian shares, selling them can trigger capital gains tax and TDS obligations in India. The tax treatment depends on factors such as how long you held the shares, whether the shares are listed, and whether the applicable conditions for concessional tax rates are met. This guide explains the everything you need to know about NRI Capital Gains Tax on Shares,  how TDS works when an NRI sells Indian shares, how to claim excess TDS back, and the legal ways to reduce your overall tax liability.

Do NRIs Have to Pay Tax on Indian Shares?

Yes. Capital gains arising from the sale of Indian shares can be taxable in India even when the seller is an NRI. For non-residents, capital gains from assets situated in India are generally taxable in India, subject to the applicable provisions of the Income-tax Act and any relief available under a relevant DTAA.

One important point for NRIs is that taxability does not depend simply on whether the sale proceeds are transferred outside India. The nature of the shares, holding period, residential status, applicable tax provisions and treaty benefits can all affect the final tax liability.

Your residential status must be updated on the income-tax e-filing portal because it can affect your return filing and tax treatment. 

How Capital Gains on Shares Are Taxed for NRIs in 2026

Capital gains on shares fall into two categories, and which one applies changes your tax rate substantially.

Short-Term Capital Gain (STCG)

For listed equity shares covered by Section 111A, the gain is generally treated as short-term when the shares are held for 12 months or less before sale, subject to the applicable conditions including Securities Transaction Tax (STT).

The tax treatment can differ for unlisted shares and other securities, so the holding period should always be checked based on the specific type of investment.

Long-Term Capital Gain (LTCG)

Applies when listed equity shares are held for more than 12 months before being sold.

The exact rate and rules also depend on whether the shares are listed on a recognised stock exchange with Securities Transaction Tax (STT) paid, or unlisted the two follow entirely different sections of the Income Tax Act, covered further down.

NRI Short-Term Capital Gains (STCG) Tax on Shares

STCG applies when you sell listed equity shares (or units of an equity-oriented mutual fund) within 12 months of buying them, through a recognised stock exchange, with STT paid on the transaction. Under Section 111A, this gain is taxed at a flat 20% — this rate was raised from 15% for transfers on or after July 23, 2024  plus 4% health and education cess, and surcharge if your total income crosses the applicable thresholds. Unlike some other categories, STCG under Section 111A generally doesn’t get the benefit of the basic exemption limit the way ordinary income does.

STCG Calculation Formula:
Sale Price − Cost of Acquisition − Eligible Expenses = Capital Gain

Example: Ankit, an NRI, buys 500 shares of an Indian listed company for ₹4,00,000 and sells them seven months later for ₹5,50,000, paying STT on both transactions. His gain is ₹1,50,000, taxed at 20% under Section 111A — ₹30,000, plus 4% cess (₹1,200), bringing his tax to ₹31,200 before any applicable surcharge.

NRI Long-Term Capital Gains (LTCG) Tax on Shares

This is where most of the search intent behind “NRI capital gains tax” sits, so it’s worth covering in full.

Under Section 112A, LTCG on listed equity shares held for more than 12 months, sold through a recognised exchange with STT paid, is taxed at 12.5% on gains exceeding ₹1.25 lakh in a financial year, for transfers on or after July 23, 2024 (the rate was 10% before that date). This exemption of ₹1.25 lakh applies across all your Section 112A-eligible LTCG combined for the year — not per transaction, and not per company. There’s no indexation benefit available on this 12.5% rate; the flat rate applies directly on the gain above the exemption threshold.

Shares bought before January 31, 2018 also benefit from a grandfathering rule the cost of acquisition is taken as the higher of the actual purchase price or the fair market value as on that date, which can meaningfully reduce the taxable gain for long-held holdings.

STCG vs LTCG for NRIs

NRI Capital Gains Tax Rates on Shares in 2026

All rates above are exclusive of applicable surcharge and 4% health and education cess. Note that the Income-tax Act, 2025 has renumbered these provisions for the Tax Year 2026-27 onward (111A, 112, and 112A become new section numbers), but the actual rates and thresholds carry over unchanged, so don’t be thrown off if you see a different section number quoted in a newer document.

How Is Capital Gains Tax Calculated for an NRI?

Step 1: Determine sale value
Step 2: Determine acquisition cost
Step 3: Deduct eligible transaction expenses (brokerage, STT where allowed, etc.)
Step 4: Classify as STCG or LTCG based on holding period
Step 5: Apply the applicable tax rate
Step 6: Add surcharge and cess where applicable
Step 7: Adjust against TDS already deducted / pay advance tax on the balance

Example: Suppose you purchased shares for ₹5,00,000 and sold them for ₹8,00,000, giving a capital gain of ₹3,00,000. If this qualifies as LTCG under Section 112A, the first ₹1.25 lakh is exempt, leaving ₹1,75,000 taxed at 12.5% — ₹21,875, plus cess. If instead the holding period makes this an STCG under Section 111A, the full ₹3,00,000 is taxed at 20% — ₹60,000, plus cess — since the ₹1.25 lakh exemption only applies to Section 112A gains, not STCG.

NRI TDS on Sale of Shares: How Much Is Deducted?

Under Section 195, tax may be required to be deducted from certain payments of taxable income to a non-resident. For capital gains on Indian shares, the applicable withholding treatment depends on the nature of the security, the type of capital gain and the applicable provisions.

For eligible listed equity shares, the statutory rates relevant to Section 111A and Section 112A are 20% for STCG and 12.5% for LTCG above the ₹1.25 lakh threshold, respectively, subject to applicable conditions, surcharge and cess. The actual TDS treatment should be checked against the transaction structure and the current Section 195 provisions.

Why Was TDS Deducted Even Though My Actual Tax Is Lower?

TDS is a withholding mechanism and may not reflect your final tax liability for the entire financial year. Your final liability can change after considering the applicable annual exemption, capital losses, other income, and any eligible treaty relief. The final position is determined when your income is reported and the TDS credit is reconciled in your ITR. 

Is TDS the Final Tax for NRIs?

No — and this is worth repeating because it changes how you should think about every sale. TDS is an upfront collection mechanism, not your final settled liability. Your real tax is worked out once your full-year capital gains, losses, exemptions, and applicable DTAA relief are all put together at the time of filing. If the TDS deducted across the year is more than what you actually owe, the difference comes back to you as a refund. If it’s less say, because you had a large gain late in the year you may owe additional tax along with your return. The same principle trips up NRIs redeeming equity mutual funds too TDS on mutual fund redemptions isn’t your final tax either, and spreading large redemptions across financial years, where practical, avoids wasting your annual LTCG exemption.

How NRIs Can Claim Excess TDS Back

1. Collect your Form 26AS and AIS to see exactly what TDS has been credited against your PAN.
2. Calculate your actual capital gain for the year across all share transactions.
3. Work out your real tax liability after applying the ₹1.25 lakh exemption, loss set-offs, and any DTAA relief.
4. File the applicable ITR reporting these gains.
5. Claim credit for the TDS already deducted.
6. If TDS exceeds your final liability, the refund is processed once your return is verified.

How to Report Share Capital Gains in an NRI ITR

Share capital gains are reported under Schedule CG, broken into the relevant sub-schedules for Section 111A STCG and Section 112A LTCG (and Section 112 for unlisted shares), along with Schedule TDS to reconcile what’s already been deducted. Which specific ITR form applies depends on your complete income profile for the year; it isn’t a one-size-fits-all answer, since factors like other income sources, foreign assets, or business income can change which form fits. 

Before filing, it’s worth making sure your bank account details and residential status on the e-filing portal are accurate, since a mismatch here is one of the more common reasons refunds get delayed. It also helps to have your demat and trading account KYC in the right non-resident category beforehand if you haven’t formally moved your accounts over yet, updating your KYC status from Resident to NRI is a one-time step that keeps every future transaction and filing consistent.

How to Legally Save or Reduce Capital Gains Tax

These are legitimate tax-planning tools available to NRIs not workarounds, just using the provisions the law already allows.

1. Use the LTCG Exemption Fully

The ₹1.25 lakh annual exemption under Section 112A resets every financial year. Selling large holdings in one go often wastes part of this exemption; spreading eligible sales across financial years, where practical, can meaningfully reduce your overall tax outgo.

2. Use Capital Losses

Short-term capital losses can be set off against both STCG and LTCG in the same year; long-term capital losses can only be set off against LTCG. Unabsorbed losses can be carried forward for up to eight assessment years, but only if you file your return before the due date for that year miss the deadline, and the carry-forward benefit is lost.

3. Use DTAA Benefits

Where India’s tax treaty with your country of residence provides relief, you may be able to claim a foreign tax credit or a reduced rate, depending on the specific treaty terms.

4. Plan the Timing of Transactions

Understanding whether a sale falls just inside or outside the 12-month STCG/LTCG line can materially change the applicable rate 20% versus 12.5% is a large gap. This is about being aware of holding periods, not engineering artificial transactions.

5. Claim Eligible Expenses

Brokerage and other legitimately incurred transaction costs reduce your taxable gain make sure these are properly recorded and deducted rather than left out of the calculation.

6. Ensure Correct TDS Treatment

Keeping your PAN verified and your broker KYC updated avoids the higher deduction rates that apply under Section 206AA when records are outdated or mismatched.

Can NRIs Use DTAA to Reduce Capital Gains Tax?

Most of India’s tax treaties give India the primary right to tax capital gains arising from Indian shares, since that’s where the asset is situated  Article 13 or its equivalent in most treaties covers this. What DTAA typically offers instead is relief in your country of residence, through a foreign tax credit for the tax already paid in India, so the same gain isn’t taxed twice at full rate in both countries. 

To claim treaty benefits, you’ll usually need a Tax Residency Certificate from your country of residence and, in some cases, Form 10F filed with Indian tax authorities. Treaty terms differ meaningfully by country, so it’s worth checking the specific provisions that apply to you rather than assuming your friend’s treaty benefit in a different country applies the same way to yours. This same FATCA/CRS and residency documentation trail also comes up whenever you’re onboarding fresh investments as an NRI for instance, restarting SIPs or fresh investments after moving abroad requires the same self-certification your DTAA claim relies on, so keeping it updated in one place saves duplicate paperwork later.

What Happens to Capital Losses for NRIs?

Short-term capital loss (STCL) can be set off against both STCG and LTCG within the same year. Long-term capital loss (LTCL) can only be set off against LTCG. Whatever remains unabsorbed can be carried forward for up to eight assessment years and adjusted against future capital gains of the matching type  but this carry-forward is only available if you file your ITR by the due date for that year. Filing late, or not filing at all because you assume TDS already covered everything, is one of the quickest ways NRIs lose this benefit without realising it.

NRI Capital Gains on Listed vs Unlisted Shares

NRI Shares Bought Before Becoming an NRI

A very common real-life scenario: you bought Indian shares while you were still a resident, moved abroad afterward, and are now wondering what changes at the time of sale. The answer is  less than you’d think. Your original acquisition date and cost remain exactly as they were; your holding period is still counted from your original purchase date, not from when your residential status changed. 

What does change is how the sale is taxed and processed going forward: TDS under Section 195 now applies because you’re a non-resident seller, and your resident demat account should typically have been converted to a non-resident (NRO non-PIS) demat account once your status changed. If that conversion never happened and you’re still holding shares in an old resident demat account, it’s worth sorting that out similar to converting a resident bank account to an NRO account after your status changes before you attempt to sell, since a mismatch between your declared residential status and an unconverted resident account can complicate both the transaction and your TDS reporting.

Example: NRI Selling Indian Shares — STCG

Rahul, an NRI in the US, buys shares worth ₹4,00,000 in March and sells them in July the same year for ₹5,50,000 — a holding period of about four months. His gain of ₹1,50,000 qualifies as STCG under Section 111A, taxed at 20%: ₹30,000, plus 4% cess (₹1,200) — ₹31,200 total, before surcharge. His broker deducts TDS on this amount at the time of sale; Rahul reconciles the exact figure when he files his ITR for the year.

Example: NRI Selling Indian Shares — LTCG

Priya, an NRI in the UAE, bought shares worth ₹6,00,000 three years ago and sells them now for ₹10,00,000, an ₹4,00,000 gain. Since she held them beyond 12 months, this is LTCG under Section 112A. After applying the ₹1.25 lakh annual exemption, ₹2,75,000 is taxable at 12.5% — ₹34,375, plus cess. If her broker had deducted TDS on the full ₹4,00,000 gain without accounting for her exemption, she’d be due a meaningful refund once she files her return and reconciles the actual figure.

Common Mistakes NRIs Make While Selling Indian Shares

1. Assuming TDS deducted at the time of sale is their final tax liability.
2. Not checking or updating their residential status before filing.
3. Ignoring DTAA relief they may be entitled to.
4. Not reconciling Form 26AS/AIS against what was actually deducted.
5. Not reporting capital gains at all, assuming TDS already “handled it”.
6. Missing the ITR due date and losing their capital-loss carry-forward benefit.
7. Overlooking surcharge and cess when estimating their tax.
8. Filing the wrong ITR form for their overall income profile.
9. Not maintaining clean purchase and sale records, especially for shares bought years ago.
10. Assuming listed and unlisted shares are taxed identically.

Conclusion

Capital gains on Indian shares follow a fixed, rate-driven structure once you know which bucket your sale falls into — STCG at 20%, LTCG at 12.5% above the annual exemption, and a completely different framework for unlisted shares. The part that actually determines whether you overpay or not isn’t the rate itself; it’s whether you reconcile the TDS deducted against your real full-year liability, use your exemption and loss set-offs properly, and file on time so nothing is lost by default. Treat TDS as a provisional number, not the final word, and the rest of the process is largely about good record-keeping.