NRI Selling Property in India: Why 14.95% Is Withheld — and the Form That Stops It
NRI Taxation · Property Sale · India, Tax Year 2026-27
NRI Selling Property in India: Why 14.95% Is Withheld — and the Form That Stops It
The registry clerk hands back the deed. The buyer’s payment lands. Then you check the balance and roughly ₹24 lakh of a ₹1.6 crore sale price is simply not there, even though your real tax bill on that sale is closer to ₹15.7 lakh. Nothing has gone wrong. The deduction is exactly what the law requires, and it will stay with the tax department for the better part of a year unless one specific application was filed before the deed was signed.
That is the whole story of an NRI property sale. The tax is modest. The withholding is not, because it lands on the entire sale consideration rather than on your profit. Everything worth knowing sits in the gap between those two numbers.
Quick Summary
When an NRI sells immovable property in India, the buyer must deduct tax at source at capital-gains rates on the full sale price, not the gain. For property held over 24 months the effective rate is 13% to 14.95%; for shorter holdings buyers commonly apply 31.2% to 35.88%. There is no minimum value threshold. The only way to have tax deducted on the actual gain is a lower-deduction certificate obtained on Form 128 (formerly Form 13) before the sale closes. Miss it and the excess comes back as a refund, typically 6 to 18 months later.
The scale of what is being withheld
NRI money is now a structural part of the Indian housing market rather than a sentimental corner of it. Industry trackers put the NRI share of Indian property purchases at roughly 18% to 20% for 2026, up from 7% to 10% a decade earlier, and Knight Frank recorded a jump of close to 35% in NRI property investment in FY24. The Reserve Bank’s remittance data shows India received USD 135.46 billion in inward remittances in FY25, a rise of about 14% year on year, with a growing share directed at property rather than household support.
Every one of those purchases eventually becomes a sale, often two decades later, by an owner who stopped tracking Indian tax law long ago. The rupee helped on the way in: above ₹90 to the dollar in 2026 against roughly ₹45 in 2010. On the way out, the same move inflates the rupee gain on which Indian tax is computed.
What the law actually says, and why it lands on the whole price
Most sellers arrive at this transaction with a number in their head: 1%. That figure comes from Section 194-IA of the 1961 Act, which applies to resident-to-resident sales above ₹50 lakh. It has nothing to do with an NRI sale, and the confusion is the single most expensive misunderstanding in this area.
Where the seller is a non-resident, the deduction happens under what was Section 195 of the Income-tax Act, 1961, and is now Section 393(2), serial number 17, of the Income-tax Act, 2025, effective from 1 April 2026. That provision requires the payer to deduct tax on any sum paid to a non-resident that is chargeable to tax in India, at the rate at which the income is taxable. It carries no monetary threshold, so a ₹25 lakh flat attracts the deduction just as a ₹25 crore penthouse does.
Here is where the mechanics bite. The buyer is legally responsible for deducting the right amount, faces interest under the late-deduction provisions at 1% per month and 1.5% per month for late deposit, and has no way of knowing what you paid for the property in 1998. Faced with that asymmetry, buyers do the only safe thing available to them: they apply the capital-gains rate to the entire consideration. It is not aggression. It is the rational response of somebody who is personally liable for an under-deduction.
Which rulebook applies to your sale
The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the 1961 Act. Section numbers, form numbers and even the phrase “assessment year” changed; the substantive rules on capital gains, withholding and exemptions did not. A sale completed in Tax Year 2026-27 falls under the new Act, one that closed by 31 March 2026 under the old. Any checklist citing only 1961 Act sections is describing repealed provisions.
The six stages, and the one that decides the number
An NRI sale has a shape that repeats almost identically across transactions. Understanding where each decision is locked in matters more than understanding any single rule, because four of the six stages are irreversible by the time you reach them.
Stage two is the whole game. Everything after it is administration. The sums below are what real transactions leave stranded when stage two is skipped, computed from the statutory rates against the tax that was actually due.
That chart inverts the intuition. The seller with the largest gain loses the least, because the deduction is close to the real liability anyway. The seller who reinvests and owes nothing loses the most. Planning that works on paper produces the worst cash-flow outcome if the assessing officer never hears about it.
The effective rate, band by band
The Finance (No. 2) Act, 2024 changed the long-term rate on immovable property from 20% with indexation to 12.5% without it, with effect from 23 July 2024. Resident individuals were given a grandfathering choice between the two methods for older properties. Non-residents were not, so 12.5% applies to your sale regardless of when you bought.
On top of the base rate sit surcharge and cess. Surcharge runs at 10% where the relevant amount exceeds ₹50 lakh and 15% above ₹1 crore, and Budget 2022 capped surcharge on capital gains at 15%, which is why the effective long-term rate stops climbing at 14.95% whether the sale is ₹1 crore or ₹10 crore. Health and education cess of 4% applies on tax plus surcharge.
Notice the cliff between the third and fourth columns. A property sold at 23 months carries about two and a half times the withholding of the same property sold at 25 months. If your holding period is near the 24-month line, the completion date outweighs any negotiating point in the agreement.
| Sale consideration | Long-term rate | TDS if long term | Short-term rate | TDS if short term |
|---|---|---|---|---|
| ₹40 lakh | 13.00% | ₹5,20,000 | 31.20% | ₹12,48,000 |
| ₹75 lakh | 14.30% | ₹10,72,500 | 34.32% | ₹25,74,000 |
| ₹1 crore | 14.30% | ₹14,30,000 | 34.32% | ₹34,32,000 |
| ₹1.5 crore | 14.95% | ₹22,42,500 | 35.88% | ₹53,82,000 |
| ₹2.5 crore | 14.95% | ₹37,37,500 | 35.88% | ₹89,70,000 |
| ₹5 crore | 14.95% | ₹74,75,000 | 35.88% | ₹1,79,40,000 |
Worked example: a Pune flat, sold without a certificate
Ravi, resident in Singapore, bought a flat in Pune in August 2013 for ₹52 lakh and sold it in June 2026 for ₹1.60 crore, paying ₹3.20 lakh in brokerage. His gain is ₹1,60,00,000 minus ₹52,00,000 minus ₹3,20,000, which is ₹1,04,80,000. Tax at 12.5% is ₹13,10,000. Surcharge at 15% adds ₹1,96,500. Cess at 4% on the total adds ₹60,260. His real liability is ₹15,66,760.
The buyer, holding no certificate, deducted 14.95% of the full ₹1.60 crore, which is ₹23,92,000. The difference of ₹8,25,240 is not a tax. It is Ravi’s own money, sitting with the department, earning him nothing, until his return for the year is processed.
When to file Form 128, and what happens if you are late
The application under Section 395 of the 2025 Act, formerly Section 197, is filed on TRACES using Form 128, formerly Form 13. It asks the assessing officer to certify a lower or nil rate based on your computed gain rather than the gross price. For an NRI it routes to the International Taxation charge covering your PAN, not the local resident ward, and that misrouting is a common cause of avoidable delay.
Published turnaround estimates cluster between four and eight weeks from complete submission, with two to three weeks reported on clean files and four to six where overseas income or losses are involved. Budget 2026 announced a simplified route for certain small taxpayers, categories still to be notified. Plan against the slow end.
Comfortable
Tight
Restructure
Assume full rate
Refund only
The instalment trap
A certificate only protects payments made after it is issued. If the buyer has already paid a 20% advance at full rate, that deduction stands and the certificate covers only the balance. Where the certificate is running late, renegotiate the payment schedule so the bulk of the consideration falls after the expected issue date.
Why the money gets stuck
Over-withholding is rarely caused by anything exotic. It is caused by five things, in roughly this order of frequency, and four of them are entirely within the seller’s control.
The third bar deserves its own warning. Where a buyer files the resident-seller route by mistake, the credit never attaches to the non-resident seller’s PAN. In a matter before the Delhi High Court reported in 2025, a buyer used the resident form on a Pune property bought from an NRI; eight years later the department raised a reassessment claiming ₹46.81 lakh even though the money had been deposited. The seller won after years of litigation. Confirm the form in writing before registration.
What to do, in order
- Establish your residential status for the year of sale. It is determined for the full tax year, not on the transaction date. If you are moving back to India, the timing of the sale changes which rulebook applies.
- Reconstruct the cost base before you list. Purchase deed, stamp duty receipts, registration charges, improvement evidence. For pre-2001 acquisitions you may substitute fair market value as on 1 April 2001, which needs a registered valuer’s report.
- Compute the gain and the tax honestly. Include transfer expenses, and decide now whether Section 54, 54F or 54EC relief will be claimed. The certificate application is where you tell the officer.
- File Form 128 on TRACES at least 75 days before registration, attaching the draft agreement, PAN, passport, residence proof, the computation and past returns.
- Write the certificate into the sale agreement. Specify that deduction will follow the certificate rate and that the buyer will file the non-resident TDS return quoting your PAN.
- Check the deposit and the credit. Confirm the deduction appears against your PAN in the annual tax statement before signing anything off.
- File the Indian return. It is what converts an over-deduction into a refund, and it is required even where your final liability is nil.
Getting the money out of India
Proceeds credited to a non-resident ordinary account can be remitted abroad up to USD 1 million per financial year, aggregated across all purposes rather than per property. Where the purchase was funded by inward remittance or from a non-resident external account, the original principal is treated as returnable foreign money and sits outside that ceiling, for up to two residential properties. The gain above it falls back inside.
The paperwork is Form 15CA, a self-declaration filed online, supported by Form 15CB, a chartered accountant’s certificate confirming the tax position and FEMA compliance. Where the taxable aggregate exceeds ₹5 lakh, the certificate route applies. Banks typically release funds in three to ten working days once the file is complete. Most rejections come from mismatches between the two forms, a wrong purpose code, or a deduction not yet visible in the department’s records.
The sequencing that saves a year
Repatriation depends on tax being settled, and tax settles fastest when the deduction was right the first time. An NRI holding the certificate can often remit the net proceeds within weeks of registration. Without it, you either remit a heavily reduced sum now and the refund much later, or wait for the return to be processed.
The renumbering decoder
Every reference point in this transaction was renamed on 1 April 2026. The rules did not change, but quoting an old number on a challan or return now triggers validation errors, and search results have not caught up.
| What you knew it as | Reference from 1 April 2026 | What it does | What to do about it |
|---|---|---|---|
| Section 195 | Section 393(2), Sl. 17, payment code 1057 | Withholding on any sum paid to a non-resident | Buyer quotes the new code on the challan |
| Section 197 | Section 395 | Lower or nil deduction certificate | Same application, new statutory reference |
| Form 13 | Form 128 | Application for that certificate | Filed on TRACES exactly as before |
| Form 27Q | Renumbered under the 2025 Act, reported as Form 144 | Quarterly non-resident TDS return | Confirm the buyer uses this, never the resident-seller form |
| Form 26AS | Form 168 | Annual tax credit statement | Check your deduction appears here before filing |
| Form 16 / 16A | Form 130 and successors | Certificate of tax deducted | Collect from the buyer after the quarterly return |
| Sections 54, 54EC, 54F | Renumbered in the capital-gains chapter; ClearTax maps Section 54 to Section 84 | Reinvestment exemptions | Verify the new reference before quoting it in a filing |
| Assessment Year | Tax Year, equal to the financial year | The period label on returns | Income of Tax Year 2026-27 is filed the following year |
Budget 2026 added one genuine change on top of the renaming. Section 397(1)(c) is amended so that from 1 October 2026 a resident individual or Hindu undivided family buying from a non-resident no longer needs a tax deduction account number, and deposits through a challan-cum-statement using their own PAN. Company and firm buyers still need one. Rates and liability are untouched; the barrier that made ordinary buyers wary of NRI sellers is not.
Eight checks before you sign anything
Frequently asked questions
Why is TDS deducted on the full sale price instead of my capital gain?
Because the buyer is personally liable for any under-deduction and has no reliable way to verify what you paid for the property or what improvements you funded. The provision requires deduction at the rate at which the income is taxable, and in the absence of an official computation the buyer applies that rate to the whole consideration. A certificate on Form 128 is the only instrument that authorises deduction on the gain instead.
What is the TDS rate for an NRI selling property in India in 2026?
For property held more than 24 months, 12.5% plus surcharge and 4% cess, giving 13% up to ₹50 lakh, 14.30% between ₹50 lakh and ₹1 crore, and 14.95% above that. Surcharge on capital gains is capped at 15%, so the rate stops rising there. For shorter holdings buyers commonly apply 30% plus surcharge and cess, reaching 35.88%.
Do NRIs get the 20% with indexation option that residents have for older properties?
No. The grandfathering choice introduced alongside the 2024 rate change was extended to resident individuals and Hindu undivided families for properties acquired before 23 July 2024. Non-residents are outside it, so the 12.5% rate without indexation applies regardless of when the property was bought. Confirm your specific facts with an adviser, particularly for inherited holdings.
Can I still claim Section 54 or 54EC exemptions as a non-resident?
Yes, on the same conditions as a resident. Section 54 covers reinvestment of the gain from a residential house into another Indian residential house, purchased one year before or two years after the sale or constructed within three. Section 54EC allows up to ₹50 lakh in notified bonds within six months, locked for five years. The exemption counted under Sections 54 and 54F is capped at ₹10 crore.
How long does a Form 128 lower deduction certificate take?
Commonly quoted turnaround is four to eight weeks from a complete submission, with clean files sometimes clearing in two to three weeks and complex ones taking six or more. Applications route to the International Taxation assessing officer, then upward for approval, which is why a query answered slowly costs a fortnight. File at least 75 days before your intended registration date.
Does the buyer still need a TAN to buy property from an NRI?
Not from 1 October 2026, if the buyer is a resident individual or Hindu undivided family. Budget 2026 amended Section 397(1)(c) so that such buyers deduct and deposit using their own PAN through a challan-cum-statement. Company and firm buyers still need one, and until that date the earlier requirement applies. Rates and liability are unchanged.
How much can I repatriate after selling property in India?
Up to USD 1 million per financial year from a non-resident ordinary account, aggregated across all remittance purposes rather than per property. If the purchase was funded by inward remittance or from a non-resident external account, the original principal is repatriable outside that ceiling for up to two residential properties. Form 15CA and a chartered accountant’s Form 15CB are required either way.
What happens if the buyer files the wrong TDS return?
The credit fails to attach to your PAN, so the annual statement shows no deduction against you even though the money reached the government. That produces a demand or a denied refund, and correcting it means persuading the buyer to file a correction statement years after they have moved on. Get the form confirmed in writing before registration rather than after.
How long does an excess TDS refund actually take to arrive?
Practitioners report six to eighteen months from the sale, since the refund follows the return, and the return for a sale in a given tax year is filed after that year closes. Filing the return promptly after the year end, e-verifying within 30 days, and reconciling the deduction against the annual statement beforehand are the three things that measurably shorten the wait.
The short version
An NRI property sale is taxed lightly and withheld heavily. The long-term rate is 12.5% on the gain, but the buyer must deduct 13% to 14.95% of the entire price, from the first rupee, because the law makes the buyer liable and gives them no way to verify your cost. What decides whether you keep that money or lend it to the government interest-free for a year is a single filing: Form 128, with the International Taxation officer, roughly 75 days before registration. Everything else is downstream.
