Non-resident Indians (NRIs) travelling to India specifically to complete the sale of a property may be able to deduct eligible airfare and accommodation expenses while calculating capital gains tax. The Bengaluru bench of the Income Tax Appellate Tribunal (ITAT) has clarified that such expenses can qualify as expenditure connected with the transfer of a capital asset under Section 48 of the Income-tax Act, 1961, provided the taxpayer establishes that they were incurred wholly and exclusively for the transaction.
However, the ruling does not automatically allow every travel expense incurred during a visit to India. The tribunal rejected expenses connected with an earlier trip and sent the remaining travel claim back to the Assessing Officer for verification. The decision also allowed certain other expenses, including previously unclaimed home loan interest and property-related deposits, to be included in the property’s acquisition cost while calculating long-term capital gains.
What Did the Bengaluru ITAT Rule?
The case involved a US-based NRI who sold a residential property in Bengaluru for approximately ₹2.63 crore. The sale deed was executed on January 6, 2020.
While calculating long-term capital gains, the taxpayer claimed approximately ₹12.01 lakh towards foreign travel and accommodation expenses. He argued that the expenditure was necessary to travel to India and complete the property sale.
The Income Tax Department rejected the claim, arguing that the taxpayer had not established that the expenses were incurred wholly and exclusively in connection with the transfer of the property.
The dispute eventually reached the Bengaluru ITAT. In its order pronounced on May 20, 2026, the tribunal examined the travel records, hotel bills, sale documents and other supporting evidence.
It concluded that expenses incurred during a November 2019 visit could not be linked directly to the property transfer completed in January 2020. However, the January travel undertaken for registration of the sale deed had a connection with the transaction.
The tribunal therefore directed the Assessing Officer to examine the eligible expenses again and determine the amount that could be allowed.
Importantly, the ITAT did not approve the entire ₹12.01 lakh claim.
When Can NRIs Deduct Flight Expenses From Capital Gains?
The relevant provision in the case was Section 48(i) of the Income-tax Act, 1961.
Under this provision, expenditure incurred wholly and exclusively in connection with the transfer of a capital asset can be deducted from the sale consideration when calculating capital gains.
In simple terms, expenses that are necessary and directly connected with completing a property sale may qualify for deduction.
For example, an NRI living in the United States may need to travel to India to sign documents, complete registration formalities or fulfil other requirements necessary to transfer ownership of a property.
If the taxpayer can demonstrate that the journey was undertaken specifically for completing the transaction, the related airfare may qualify for consideration as a transfer expense.
However, travelling to India during the period of a property sale is not sufficient by itself.
The taxpayer must establish a clear connection between the expenditure and the actual transfer. Personal travel, family holidays and unrelated visits cannot automatically be included.
Why the ITAT Rejected the Earlier Travel Expenses
The taxpayer had undertaken a visit to India in November 2019, approximately two months before the property sale was registered.
The tribunal examined the travel documents and found that the sale deed was executed on January 6, 2020. It therefore concluded that the November travel expenses were not incurred in connection with the January property transfer.
The taxpayer also submitted flight tickets for travel between Chicago and Delhi in January 2020, along with a hotel invoice of ₹93,125 for accommodation in Bengaluru between January 5 and January 8.
These documents supported the argument that the January visit was connected with registration of the sale deed.
However, the flight records also included travel expenses for another family member. This created an additional requirement to establish which expenses belonged to the taxpayer and whether they were incurred exclusively for the property transaction.
The tribunal sent the matter back to the Assessing Officer to verify the supporting documents and determine the eligible deduction.
The decision highlights an important distinction: a trip connected with a property sale may qualify for consideration, but the taxpayer must still prove that the individual expenses satisfy the legal requirements.
ITAT Also Allows ₹21.60 Lakh Home Loan Interest as Acquisition Cost
Apart from the travel expenses, the tribunal provided relief on the treatment of home loan interest.
The taxpayer had paid interest on a housing loan used to purchase the property and claimed ₹21.60 lakh as part of the property’s cost of acquisition.
The Income Tax Department had rejected the claim because the taxpayer had not sufficiently established that the interest had not already been claimed as a deduction in previous years.
The taxpayer subsequently submitted income tax returns covering assessment years 2007-08 to 2020-21 to demonstrate that the interest had not been claimed under Section 24(b) while calculating income from house property.
After examining the documents and relevant judicial precedents, the tribunal allowed the interest amount to be included in the property’s cost of acquisition. It also permitted indexation on the eligible amount.
This is important because an expense already claimed as a tax deduction under another provision generally cannot simply be claimed again as part of the acquisition cost.
The ruling therefore highlights the importance of maintaining historical tax returns and home loan interest certificates when calculating capital gains.
Maintenance and Electricity Deposits Also Qualify
The tribunal also allowed two additional expenses to be included in the property’s cost of acquisition.
| Expense | Amount allowed |
|---|---|
| One-time maintenance deposit | ₹2.29 lakh |
| Electricity and water deposit | ₹1.71 lakh |
| Home loan interest | ₹21.60 lakh |
| Total | ₹25.60 lakh |
The tribunal considered the maintenance deposit necessary for obtaining possession of the apartment.
It also accepted the electricity and water deposits because there was no evidence that the taxpayer had separately recovered these amounts from the buyer.
These expenses were therefore allowed as part of the property’s acquisition cost, subject to the applicable computation and indexation rules.
The decision could be relevant to other property owners who have paid mandatory builder deposits or incurred eligible borrowing costs but have not previously included them in their capital gains calculations.
Documents NRIs Should Keep Before Selling Property in India
The ruling demonstrates why documentation is particularly important for NRIs selling property while living overseas.
Taxpayers should maintain records that establish both the amount of an expense and its direct connection with the property transaction.
Important documents include:
- Flight tickets: Evidence of travel dates, passenger names and routes.
- Hotel invoices: Bills showing accommodation dates and the location of the stay.
- Sale agreement and registration documents: Evidence establishing when the property transfer took place.
- Professional fee receipts: Invoices from lawyers, consultants and other professionals involved in completing the sale.
- Home loan certificates: Documents showing the interest paid on the loan.
- Previous income tax returns: Evidence that the same interest was not claimed earlier under another tax provision.
- Builder and utility receipts: Proof of maintenance, electricity and water deposits paid for the property.
NRIs should also maintain separate records for family members’ tickets and personal travel expenses.
A trip involving multiple cities, personal activities or unrelated family visits may make it harder to establish that the entire expenditure was incurred exclusively for the property sale.
The Bigger Picture: ITAT Clarifies Tax Treatment of NRI Property Sales
The ruling provides useful guidance for NRIs who own residential property in India but live abroad.
Selling property from overseas can involve additional expenses because owners may need to travel for documentation, registration and other legal formalities. The decision recognises that certain travel expenses can have a direct connection with completing a property transfer.
At the same time, the tribunal has reinforced the importance of the words “wholly and exclusively” in Section 48. Tax deductions depend on the actual purpose of the expenditure, not simply the fact that it was incurred during a property transaction.
The decision also provides clarity on previously unclaimed home loan interest and certain mandatory property deposits that may form part of the acquisition cost.
One important limitation is that this case concerned a property sale completed in 2020 and was decided under the Income-tax Act, 1961. NRIs undertaking transactions under the tax law applicable from April 2026 should confirm the corresponding current provisions and their applicability with a qualified tax professional.
Looking Ahead
The ITAT ruling could help NRIs understand which expenses may qualify when calculating capital gains from the sale of property in India. However, it does not create an automatic entitlement to deduct international airfare or accommodation costs. Taxpayers will need to maintain clear documentation, establish the direct connection between travel and the transaction, and separate personal expenses from costs incurred specifically to complete the sale.
For NRIs planning to sell property, the practical lesson is to organise travel records, loan documents, builder receipts and previous tax returns before filing the capital gains calculation. The tribunal’s decision offers relief on certain acquisition-related expenses while making clear that travel claims remain subject to verification. Proper documentation and accurate tax computation will remain essential to avoiding disputes with the Income Tax Department.
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