NRI Selling Property in India (2026): TDS Under Section 195, the Lower-TDS Certificate, and Repatriation
By the CreditSmart editorial team, reviewed by a practising CA · September 2026
The 30-second version
When an NRI sells property in India, the buyer must deduct TDS under Section 195 — on the entire sale price, not the gain, at ~13–14.95% effective for long-term holdings. A lower-TDS certificate (Form 13; Form 128 under the new Act) obtained before the sale limits TDS to tax on the actual gain — routinely saving sellers ₹10–15 lakh in blocked refunds. From 1 October 2026, individual buyers can deposit this TDS with just their PAN — no TAN needed.
Why NRI property sales get over-taxed by default
In a resident-to-resident sale, the buyer deducts a flat 1% TDS under Section 194-IA. The moment the seller is an NRI, that section is replaced by Section 195 — and the game changes completely. The buyer must deduct tax at the capital-gains rate on the full sale consideration, because the buyer has no way to know the seller’s cost basis. Sell a ₹2 crore flat you bought for ₹1.5 crore, and the default deduction is roughly ₹27–30 lakh — against an actual LTCG tax of about ₹6.25 lakh on the ₹50 lakh gain. The excess is refundable, but only after filing the ITR and waiting out processing: your money frozen for a year or more.
2026 rates at a glance
| Holding period | Nature | Base rate | Effective TDS (with surcharge + 4% cess) |
|---|---|---|---|
| More than 24 months | LTCG | 12.5% (no indexation) | ~13% to ~14.95% depending on sale value |
| 24 months or less | STCG | Seller’s slab rate | Up to ~35.9% at the top slab |
Surcharge rises with the sale value (10% above ₹50L, 15% above ₹1 crore), which is why the effective rate isn’t a single number. For older properties bought before the 2024 changes, a grandfathered indexation comparison may apply — have a CA run both computations.
The fix: lower-TDS certificate (Form 13 / Form 128)
Section 197 lets the seller apply to the jurisdictional Assessing Officer for a certificate directing the buyer to deduct TDS only on the computed gain — or even nil, where reinvestment exemptions (Section 54/54EC-type) will absorb the gain. The application is filed online on the TRACES portal with sale agreement, purchase deed, cost computation and PAN. Processing typically takes 3–6 weeks, so start before signing the sale deed.
- Agreement stage: seller applies for the certificate on TRACES with draft agreement + capital-gains computation.
- AO issues certificate specifying the reduced rate/amount, valid for the named buyer and financial year.
- Buyer deducts as per certificate, deposits the TDS, and issues Form 16A to the seller.
- Seller files ITR, reports the gain, claims the TDS credit — no giant refund stuck in processing.
Buyer-side duties (read this if you’re buying from an NRI)
The compliance burden — and the penalty for getting it wrong — sits on the buyer:
- Confirm the seller’s residential status in writing; “the seller said resident” is not a defence if the department disagrees.
- Deduct under Section 195 at the correct effective rate on each payment instalment, including the advance.
- From 1 October 2026: individual/HUF buyers can deposit the TDS using their own PAN via challan-cum-statement — the earlier TAN registration requirement is gone for them. Company/firm buyers still need a TAN.
- Issue Form 16A to the seller after each quarter’s deposit.
- Shortfall consequences: the buyer is an “assessee in default” — tax, interest, and penalty are recoverable from the buyer personally.
Repatriating the money abroad
Sale proceeds land in the seller’s NRO account. Repatriation to an overseas account is allowed up to USD 1 million per financial year (across all NRO remittances), supported by Form 15CA and a CA-certified Form 15CB confirming taxes are paid. Two properties’ proceeds can be combined within the limit; amounts above it need RBI approval. If the property was bought as a resident, funds must flow NRO → abroad; if bought from NRE/foreign funds, refund of the original investment has a friendlier route.
The classic mistake: agreeing to a lower “1% TDS like normal” because the sale deed shows a resident Indian address. The department matches the seller’s PAN, passport and bank trail — and then pursues the buyer for the ~14% shortfall with interest.
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The NRI seller’s checklist
- Compute your expected gain and apply for the lower-TDS certificate before signing.
- Share the certificate with the buyer; verify each TDS deposit and collect Form 16A.
- Planning reinvestment? Lock the Section 54/54EC route before the sale to support a nil certificate.
- Keep purchase deed, improvement bills and the certificate — your ITR computation depends on them.
- Repatriation: 15CA + 15CB, within the USD 1M/year window.
- File the ITR even if TDS covered everything — it’s how excess comes back and scrutiny stays away.
FAQs
Can the buyer just deduct 1% like a normal purchase?
No. Seller NRI → Section 195 applies, on the full consideration, at capital-gains rates. The 1%/194-IA route is only for resident sellers.
What if the certificate arrives after the advance is paid?
TDS applies per payment. Instalments before the certificate follow the default rate; later instalments follow the certificate. Time the application early.
Is the money stuck if I skip the certificate?
Not permanently — excess TDS is refundable through the ITR, but expect the funds to be locked until the return is processed.
Do OCI cardholders follow the same rules?
Tax residency, not citizenship, decides. A non-resident OCI seller is treated the same as an NRI here. Buying-side rules: see our OCI property guide.
Related: NRI buying property in India · Capital gains on home sales · Repatriating funds · NRI taxation & DTAA
General information, not tax advice. Rates include indicative surcharge/cess ranges; exact liability depends on your figures — consult your CA.
Credit Smart India · IG: @creditsmart.in · FB/YT: @creditsmartindia · Last updated: September 2026
