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FIRPTA for Indian and NRI Sellers of US Property

FIRPTA applies differently to Indian buyers depending on their status. An H-1B holder who has lived in their US home as a primary residence may qualify for the Section 121 primary residence exclusion — up to $250,000 in gains excluded (or $500,000 for married couples). An NRI investor selling a US rental property faces the full 15% withholding with no primary residence exclusion. Both situations benefit from the Form 8288-B withholding certificate and from the US-India DTAA that coordinates the US and Indian tax on the same gain.

H-1B Seller: The Primary Residence Advantage

H-1B holders who have lived in their US home as a primary residence for at least 2 of the 5 years before the sale may qualify for the Section 121 primary residence capital gains exclusion: (1) The exclusion amount: up to $250,000 in gains excluded from US capital gains tax for single filers. Up to $500,000 for married filing jointly. (2) The ownership and use test: must have owned the property for at least 2 years and used it as a primary residence for at least 2 of the last 5 years. (3) FIRPTA impact: even with the exclusion, the buyer still withholds FIRPTA at closing — but the seller receives the excess back through the Form 1040-NR filing or directly via Form 8288-B certificate. If the entire gain is excluded and the withholding certificate is obtained, FIRPTA withholding can be zero.

NRI Investor Seller: The Standard FIRPTA Process

NRI investors selling US property: (1) Standard FIRPTA withholding: 15% of gross sale price. No primary residence exclusion (the property was not the seller’s residence). (2) Apply for Form 8288-B early: the withholding certificate reduces the withheld amount to the actual tax owed. On a $700,000 sale with a $200,000 gain: standard FIRPTA = $105,000. Actual US capital gains tax at 15% = $30,000. Certificate saves $75,000 released at closing rather than via annual return. (3) The NRE repatriation: after FIRPTA compliance, net proceeds can be returned to India through the NRE account. This is the reverse of the LRS transfer — repatriation of foreign investment proceeds is permitted.

The US-India DTAA and Double Taxation

The US-India Double Taxation Avoidance Agreement (DTAA) coordinates the taxation of US property sale gains between the two countries: (1) Both countries tax the gain: the US taxes the capital gain through FIRPTA and the annual return. India taxes the same gain on the Indian ITR (if the seller is India-resident). (2) The foreign tax credit: US capital gains tax paid is credited against the Indian tax on the same income. This reduces (but may not eliminate) double taxation. (3) For H-1B holders: if the H-1B holder is a US tax resident at the time of sale, the US-India DTAA may reduce Indian tax exposure on the same gain. Work with a cross-border CPA for the specific calculation.

India / NRI Buyer Guides: H-1B Buyer Guide — NRI Mortgage — Sending Money from India — FIRPTA Guide — Find an Agent

Frequently Asked Questions

Do H-1B holders have to pay FIRPTA when selling their US home?

Potentially reduced or zero FIRPTA if the primary residence exclusion applies. H-1B holders who lived in their home for 2+ years may exclude up to $250,000 in gains ($500,000 married). The buyer still withholds at closing but the 8288-B certificate can reduce this to zero.

What is FIRPTA for NRI sellers of US property?

A US withholding requirement: the buyer withholds 15% of the gross sale price from NRI seller proceeds. Form 8288-B withholding certificate application before closing reduces this to actual tax owed.

Does India also tax the gain when an NRI sells US property?

Yes, if the seller is India tax-resident. US taxes paid are credited against Indian capital gains tax (DTAA credit). File both the US Form 1040-NR and the Indian ITR with a cross-border CPA coordinating.

Can an NRI repatriate the sale proceeds from the USA back to India?

Yes. Net proceeds (after FIRPTA compliance) can be repatriated through the NRE account without LRS limits. Repatriation of foreign investment proceeds is specifically permitted by RBI.