Many Indians living in India or elsewhere abroad buy U.S. real estate: a condo near a child at university, a rental house, or a long-term investment. The U.S. lets foreigners own property, but it taxes the rent, the sale and, in some cases, the estate. This page is for people who are not U.S. tax residents. If you live in the U.S. on an H-1B visa or a green card, you are probably a resident, and the residency rules apply instead. Moving money out of India, RBI and FEMA limits and reporting overseas assets in India are Indian-law matters for your Indian CA.
Rent: two ways to be taxed
By default, U.S. rent is fixed or determinable income taxed at 30% (or a lower treaty rate) on the gross amount, with no deductions. A tenant or property manager withholds it and reports it on Form 1042-S. Article 6 of the US-India treaty lets the U.S. tax rent from U.S. property and gives no lower rate.
You can elect to treat the rent as effectively connected with a U.S. business. Then you deduct expenses such as mortgage interest, property tax, insurance, repairs and depreciation, and you are taxed only on net income at graduated rates. You make the choice with a statement attached to a timely Form 1040-NR, and it continues in later years until you revoke it. To claim deductions you must file on time. See Form 1040-NR.
Selling: FIRPTA
The Foreign Investment in Real Property Tax Act (FIRPTA) makes the buyer responsible for withholding when a foreign person sells U.S. real property.
| Sale | Withholding |
|---|---|
| General rule | 15% of the amount realized |
| Residence for the buyer, amount realized over $300,000 up to $1 million | 10% |
| Residence for the buyer, amount realized $300,000 or less | None |
The amount realized includes cash, the value of other property and debt the buyer assumes. The buyer must plan to live in the property for at least half of the days it is used in each of the first two years for the reduced treatment. The buyer files Forms 8288 and 8288-A and pays the IRS by the 20th day after the transfer. The IRS stamps the seller's copy of Form 8288-A, and the seller attaches it to Form 1040-NR to claim credit.
FIRPTA withholding is a deposit against your actual tax. The gain is taxed as effectively connected income. If the withholding is too high, you can apply to the IRS for a withholding certificate on Form 8288-B before closing, which the IRS normally acts on within 90 days after receiving complete information, or claim the difference as a refund on your return. The treaty does not exempt U.S. property gains.
Estate and gift tax
U.S. real estate is U.S.-situated property. At death, an executor must file Form 706-NA if the nonresident's U.S. assets exceed $60,000, which is not adjusted for inflation. By comparison, U.S. citizens and residents have an exclusion of $13,990,000 for 2025 and $15,000,000 for 2026. The IRS list of estate and gift tax treaty countries does not include India, so there is no treaty relief on this tax. Gifts of U.S. real estate by a nonresident can also be subject to gift tax, while gifts of stock in U.S. corporations generally are not.
For that reason, some buyers hold property through a company. Each structure has tradeoffs, including corporate-level tax and extra reporting. A single-member LLC owned by a foreign person is treated as a corporation for limited reporting purposes and files a pro forma Form 1120 with Form 5472 in a year with reportable transactions with its owner or related parties. The Form 5472 instructions impose a significant penalty for missing it. Get advice before you buy, because ownership is hard to change later. See beneficial ownership reporting for the status of that separate rule.
Taxpayer numbers and other issues
Most nonresident owners are not eligible for an SSN, so they apply for an ITIN with Form W-7. The IRS processes an ITIN requested with a withholding certificate application within 10 days. See ITIN for spouses and dependents for the process.
States and counties have their own income, property and transfer taxes. If you later move to the U.S. and become a resident, you will be taxed on worldwide income and will report your Indian accounts and assets.
How we can help
We compare the withholding and net-income election, prepare Form 1040-NR, plan FIRPTA withholding and certificates, and review ownership options with your attorney. See our real estate tax services and real estate investors.
Frequently asked questions
Do NRIs pay U.S. tax on rental income?
Yes. Rent is taxed at 30% of the gross through withholding, unless you elect to be taxed on net rental income and file Form 1040-NR.
Can I avoid FIRPTA withholding?
You can reduce or eliminate it with a withholding certificate on Form 8288-B, or it may not apply if the buyer is buying a residence for $300,000 or less.
Is there a U.S. estate tax on a condo I own as an Indian resident?
It can apply. The filing threshold for U.S. assets is $60,000, and India is not on the IRS list of estate and gift tax treaty countries.
Do I need an ITIN to buy a house?
You do not need one to buy, but you need a taxpayer number to file Form 1040-NR and for the withholding certificate.
Official sources
- IRS: FIRPTA withholding
- IRS: Instructions for Form 8288
- IRS: Publication 519, U.S. Tax Guide for Aliens
- IRS: Some nonresidents with U.S. assets must file estate tax returns
- IRS: Estate and gift tax treaties
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.