How Much TDS Does an NRI Lose on an Indian Property Sale — and Which Form Stops It?
NRI Taxation · Property Sale · India, FY 2026-27
How Much TDS Does an NRI Lose on an Indian Property Sale — and Which Form Stops It?
The buyer is ready and the sale deed is drafted. Then, a fortnight before registration, someone mentions that the buyer has to withhold tax on the entire sale price rather than on your profit. On a ₹2 crore apartment bought for ₹1.10 crore, that is ₹28.60 lakh deducted against a real liability of ₹12.87 lakh. The rate is not the problem. The base it applies to is, and the window to change that base closes the moment the deed is executed.
Quick Summary
When a non-resident sells Indian property, the buyer deducts tax on the full sale consideration, not on the gain, at an effective 13% to 14.95% where the property was held over 24 months, and roughly 31% to 39% where it was held for less. The actual long-term rate is 12.5% without indexation. That gap comes back either through a lower-deduction certificate obtained before the sale, or through a refund claimed months afterwards in an Indian tax return.
The deduction lands on the price, not on the profit
Sell to a resident buyer as a resident seller and the deduction is a flat 1%, and only once the deal crosses ₹50 lakh. Sell as a non-resident and a different provision governs the transaction entirely: the deduction runs at capital-gains rates, there is no minimum threshold, and the default base is the whole consideration. A ₹25 lakh studio attracts it. A ₹5 crore villa attracts it at the same percentage of the cheque.
The design is deliberate rather than punitive. The department cannot easily pursue a seller living in Toronto or Sharjah, so it collects first and refunds later, and places the obligation on the buyer, who is within reach. That is also why buyers rarely accept a seller’s word about what the gain was. Facing personal liability for a short deduction, they default to the highest rate they can defend.
What changed on 1 April 2026: same rules, new numbers
The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026, and the Finance Act, 2026 has already amended it. Almost nothing about non-resident property taxation changed in substance. Nearly every reference number did. If a chartered accountant, a buyer’s lawyer and a bank relationship manager are quoting three different section numbers at you, this renumbering is why.
The practical consequence is documentary rather than financial. Sale agreements, withholding undertakings and indemnity clauses drafted from older templates still cite the 1961 provisions. Those citations remain correct for transactions where the payment or credit fell on or before 31 March 2026. For a deal closing this quarter they read as stale, and the banks that handle the outward remittance have begun querying them.
| What you knew it as | Reference from 1 April 2026 | What it does | Who acts on it |
|---|---|---|---|
| Section 195 | Section 393(2), Table Sl. No. 17, Code 1057 | Withholding on any payment to a non-resident, sale proceeds included | Buyer |
| Section 194-IA | Section 393(1) | The 1% route, resident sellers only, above ₹50 lakh | Buyer |
| Section 197 | Section 395 | Certificate for a lower or nil rate of deduction | Seller applies |
| Section 203A | Section 397 | TAN, waived for individual and HUF buyers from 1 October 2026 | Buyer |
| Form 13 | Form 128 | The lower or nil deduction application itself | Seller |
| Form 27Q | Form 144 | Quarterly statement for non-resident payments | Buyer |
| Form 16A | Form 131 | Deduction certificate handed to the seller | Buyer |
| Form 26QB | Form 141 | PAN-based challan-cum-statement route | Buyer |
| Section 54 | Section 82 | Roll a house gain into another house, cost capped at ₹10 crore | Seller |
| Section 54EC | Section 85 | Specified bonds, ₹50 lakh ceiling, six-month window | Seller |
| Section 54F | Section 86 | Roll net consideration of another asset into a house | Seller |
| Forms 15CA and 15CB | Forms 145 and 146 | Remittance declaration and the accountant’s certificate | Seller and CA |
Form numbering under the new rules is still bedding down in practice. Confirm the live form name on the e-filing portal before your buyer deposits anything.
Working out the gain, and the rate that actually applies
Hold the property more than 24 months and the gain is long-term, taxed at 12.5% with no indexation, the position since 23 July 2024. Hold it for 24 months or less and it is short-term, taxed at slab rates that reach 30% for most sellers of a second property. There is no proportionate relief for missing the date by a fortnight, which makes the completion date a tax decision rather than a scheduling one.
One trap catches everyone who reads resident-facing guidance. Finance (No. 2) Act, 2024 offered residents a choice of the older 20% with indexation for property acquired before 23 July 2024. That option is resident-only. A non-resident computes at 12.5% flat whatever the acquisition date, which makes original cost documentation more valuable rather than less, because inflation adjustment can no longer rescue a thin paper trail.
Surcharge then sits on top of the tax: nil up to a ₹50 lakh gain, 10% between ₹50 lakh and ₹1 crore, and 15% above that, with the surcharge on capital gains capped at 15% however large the transaction. Cess adds 4% on the total. That is the arithmetic that turns a headline 12.5% into 13%, 14.30% or 14.95%.
The default deduction, deal size by deal size
The table assumes a gain equal to 30% of the sale price, a common shape for property bought a decade ago. The right-hand column is the one that matters. It is not tax. It is your own money sitting with the department until a return is filed, processed and refunded, typically well into the following financial year.
| Sale price | Gain at 30% | TDS on full price | Tax actually due | Cash blocked |
|---|---|---|---|---|
| ₹50 lakh | ₹15.00 lakh | ₹6.50 lakh | ₹1.95 lakh | ₹4.55 lakh |
| ₹1 crore | ₹30.00 lakh | ₹13.00 lakh | ₹3.90 lakh | ₹9.10 lakh |
| ₹1.5 crore | ₹45.00 lakh | ₹19.50 lakh | ₹5.85 lakh | ₹13.65 lakh |
| ₹2 crore | ₹60.00 lakh | ₹28.60 lakh | ₹8.58 lakh | ₹20.02 lakh |
| ₹3 crore | ₹90.00 lakh | ₹42.90 lakh | ₹12.87 lakh | ₹30.03 lakh |
| ₹5 crore | ₹1.50 crore | ₹74.75 lakh | ₹22.43 lakh | ₹52.33 lakh |
Worked example: Arun, Toronto
Arun bought a Bengaluru apartment in 2013 for ₹1.10 crore and sells it in September 2026 for ₹2 crore. The gain is ₹90 lakh and long-term. Because that gain falls between ₹50 lakh and ₹1 crore, a 10% surcharge applies, giving an effective 14.30%.
With no certificate in place, the buyer deducts 14.30% of ₹2 crore, which is ₹28.60 lakh. Arun’s real liability is 14.30% of ₹90 lakh, which is ₹12.87 lakh. The excess of ₹15.73 lakh returns only after he files a return for the year. At the statutory 0.5% a month, a twelve-month wait earns roughly ₹94,000 in interest on money that could have funded his next purchase.
Form 128 moves the tax from the price to the profit
An application under Section 395 asks the assessing officer to certify a lower or nil rate, computed on your actual gain rather than the headline consideration. It is filed online through TRACES, routed to the officer for the state and district you nominate, and cleared through a chain of the assessing officer, the Additional Commissioner and the Commissioner. Three desks, in sequence, is why the calendar matters more than the paperwork.
What the officer wants is arithmetic that survives inspection: the original purchase deed, proof of payment, improvement bills supported by invoices rather than estimates, brokerage and legal costs, and a computation showing any exemption you intend to claim. Weak cost evidence is the commonest reason an approved rate lands higher than the applicant expected, and it cannot be repaired after issue.
The calendar decides the outcome
Almost every avoidable loss in a non-resident property sale traces back to when the seller started, not to what the seller knew. Apply four months before registration and the certificate nearly always lands in time. Apply four weeks before and you are asking three officers to compress a review into a fortnight. Apply after the deed is executed and there is nothing left to certify, because the deduction event has already passed.
Plan calmly
File now
Push hard
Unlikely
Refund only
The exemptions survive the renumbering
Non-residents claim the same reinvestment reliefs as residents. Section 82 rolls the gain on a house into another Indian residential house bought one year before or two years after the transfer, or constructed within three years, with the qualifying cost capped at ₹10 crore. Section 86 does the same for other long-term assets, but demands the net consideration be reinvested, not merely the gain.
Section 85 is the fastest lever available late in a deal: up to ₹50 lakh of gain from land or building placed in REC, PFC, IRFC or HUDCO bonds within six months of transfer, locked for five years, paying 5.25% as of July 2026. That coupon is taxable and, for non-residents, tax is withheld on it. The exemption is worth several times the yield, which is the point most comparisons of these bonds miss entirely.
Where the reinvestment will not complete before the filing due date, the gain has to sit in a Capital Gains Account Scheme deposit with a public sector bank before that date. Money left in an ordinary NRO balance alongside a genuine intention to reinvest does not qualify, and this single omission produces the largest reassessments in this area.
Two traps that cost more than the tax
The first is the stamp duty value. Where the agreed price is more than 10% below the circle rate, the higher stamp duty value is substituted as your consideration for computing the gain, even though the deduction is still calculated on the money actually paid. A discounted sale within a family can therefore create tax on a profit nobody received.
The second is the PAN. If the seller’s PAN is not valid and linked, the buyer must deduct at a floor of 20%, no certificate can be issued, and nothing cures it retrospectively.
Getting the money out of India
Sale proceeds must land in an NRO account first, whatever funded the original purchase. From there, remittance runs against a ceiling of USD 1 million per financial year per person, aggregated across every purpose and every bank, not counted per property. A spouse holds a separate ceiling, which is one reason joint ownership is worth considering years before a sale rather than weeks.
Where the property was bought with foreign currency remitted through an NRE or FCNR account, the original principal can leave outside that ceiling, but only for a lifetime maximum of two residential properties. Anything above the original principal, and every further property, travels the ordinary NRO route.
If the deduction has already happened
Nothing is lost at that point, only delayed. The excess is recovered by filing an Indian return for the year of sale, and the department pays interest at 0.5% a month on the refund. The mechanics are unforgiving about small details rather than large ones, and four of the five steps below fail on administrative errors rather than tax positions.
- Confirm the deduction appears in your annual information statement and tax credit statement. If the buyer used the wrong PAN or quoted the resident provision, it will not, and no refund can issue against a credit that does not exist.
- Compute the gain properly, with cost, improvement and transfer expenses supported by documents you could still produce three years later.
- File the capital-gains return form by the July due date. A belated return remains possible until December, but it moves you into a materially slower processing queue.
- Pre-validate an Indian bank account able to receive the credit. An NRO account works, and a closed account is the most frequent cause of a failed refund.
- Claim treaty relief where your country of residence taxes the same gain, supported by a tax residency certificate and Form 10F filed online.
What sellers actually get wrong
The pattern across advisory practices is consistent, and almost none of it involves the tax computation. It involves dates, documents and assumptions carried over from a resident’s experience of selling a flat in India.
Frequently asked questions
How much TDS does a buyer deduct when an NRI sells property in India?
For property held over 24 months, the effective rate is 13% where the gain is up to ₹50 lakh, 14.30% between ₹50 lakh and ₹1 crore, and 14.95% above that, applied to the entire sale consideration. For shorter holdings it follows slab rates and commonly works out between 31.2% and 39%. A lower-deduction certificate restricts it to the real gain.
Is TDS deducted on the sale price or on the capital gain?
On the full sale price by default. That is the core difference from a resident sale, and the reason a ₹2 crore transaction can see ₹28.60 lakh withheld against a genuine liability of ₹12.87 lakh. Only a certificate issued under Section 395 shifts the base to the gain, and it has to be in the buyer’s hands before any payment is made.
What is Form 128 and is it the same thing as Form 13?
Yes. Form 13 under the 1961 Act became Form 128 from 1 April 2026 under the Income-tax Act, 2025. The purpose, the TRACES filing route and the supporting documents are unchanged. Search results and older articles still use the Form 13 name, so treat the two as interchangeable when reading anything published before April 2026.
How long does a lower TDS certificate take for an NRI property sale?
Commonly reported turnarounds run from about 15 days to 45 days once a complete application is filed, and practitioners cite up to eight weeks where the officer raises queries or the documentation is thin. Allow 90 days between filing and your intended registration date, and tell the buyer early so the closing date is not fixed before the certificate lands.
Can an NRI use the 20% with indexation option for property bought before July 2024?
No. That grandfathering choice, introduced by Finance (No. 2) Act, 2024, is open only to resident individuals and HUFs. A non-resident computes long-term gains at 12.5% without indexation whatever the acquisition date. It makes original purchase documentation more important, since inflation adjustment can no longer compensate for an unproven cost.
Can an NRI claim the Section 54, 54EC and 54F exemptions?
Yes, on the same conditions as residents. Under the renumbered Act these are Sections 82, 85 and 86. The reinvestment must be in Indian assets, the qualifying cost under Sections 82 and 86 is capped at ₹10 crore, and Section 85 bonds are limited to ₹50 lakh invested within six months of the transfer.
Does the buyer still need a TAN to purchase property from an NRI?
Until 30 September 2026, yes. From 1 October 2026, following the Finance Act 2026 amendment to Section 397(1)(c), a resident individual or HUF buyer can deposit the deduction through a PAN-based challan-cum-statement instead. Company and firm buyers continue to need a TAN, and the rates themselves are unchanged either way.
How much can an NRI repatriate after selling property in India?
Up to USD 1 million per financial year per person from an NRO account, aggregated across all purposes rather than per property. Where the purchase was funded through NRE or FCNR remittances, the original principal can leave outside that ceiling for a lifetime maximum of two residential properties. Larger sums need Reserve Bank approval through your authorised dealer bank.
What happens if the NRI seller does not have a valid PAN?
The buyer must deduct at the higher of the applicable rate or 20%, and cannot rely on a lower-deduction certificate, because one cannot be issued without a PAN. Getting the PAN active and linked before the agreement to sell is signed is the cheapest single step in the whole transaction.
Can excess TDS be recovered without filing an Indian income-tax return?
No. The return is the only mechanism for a refund. File it for the financial year in which the sale took place, claim credit for the deduction shown in your tax credit statement, and expect processing to take roughly four to nine weeks after e-verification for an on-time filing, and considerably longer for a belated one.
The short version
A non-resident selling Indian property faces a deduction on the whole sale price rather than the profit, at an effective 13% to 14.95% for long-term holdings and roughly 31% to 39% for short ones. The real long-term rate is 12.5% without indexation, and the difference is your money locked with the department for months. A lower-deduction certificate under Section 395, filed on Form 128 around three months before registration, moves the deduction onto the actual gain. Sections 82, 85 and 86 still shelter reinvested gains. From 1 October 2026 the buyer no longer needs a TAN, and repatriation runs on a USD 1 million annual ceiling out of an NRO account.
