TDS on sale of property by NRI

Selling property in India as a Non-Resident Indian (NRI) involves more than calculating capital gains tax. The buyer may be required to deduct substantial tax at source (TDS), and the seller must consider the applicable income-tax provisions, available exemptions and FEMA regulations before transferring the sale proceeds abroad.

TDS on sale of property by NRI is generally governed by Section 393(2), Table Serial No. 17, of the Income-tax Act, 2025, for transactions from 1 April 2026. This broadly corresponds to Section 195 of the Income-tax Act, 1961, applicable to earlier transactions.

For long-term capital gains on ordinary immovable property, the general applicable tax rate is 12.5%, plus applicable surcharge and cess. However, the TDS deducted by a buyer may be calculated on the gross sale consideration unless the appropriate tax determination or lower deduction certificate is available. This can result in significantly higher withholding than the seller’s final income-tax liability.

This guide explains the tax rules, lower TDS certificate procedures, responsibilities of buyers, capital gains exemptions, income-tax return requirements and repatriation of sale proceeds, including changes effective from 1 October 2026.

Key Tax Rules for NRIs Selling Property in India

Particulars	General position
Applicable withholding provision	Section 393(2) of the Income-tax Act, 2025; earlier Section 195
Long-term holding period	More than 24 months
General LTCG tax rate	12.5% plus applicable surcharge and cess
Short-term gains	Generally taxed at applicable normal rates
1% property TDS	Not applicable under the resident-seller property TDS provision where the seller is a non-resident
Rs. 50 lakh TDS threshold	The resident property TDS threshold does not apply to Section 393(2) withholding
Lower TDS certificate	Application under Section 395(1), generally through Form 128
Buyer reporting from 1 October 2026	Qualifying resident individual/HUF buyers may use Form 141, Schedule E, without obtaining TAN
Sale proceeds abroad	Subject to FEMA, RBI conditions, acquisition history and tax compliance

The applicable rate, taxable amount and compliance requirements should be determined for each transaction. The information above is a general summary, not a substitute for transaction-specific tax computation.

Can an NRI Sell Property in India?

An NRI or Overseas Citizen of India (OCI) may generally transfer eligible residential and commercial immovable property in India, subject to applicable FEMA regulations and restrictions concerning the transferee and type of property.

Agricultural land, plantation property and farmhouses require special examination because the permitted modes and recipients of transfer may differ from those applicable to ordinary residential or commercial property.

Before finalising a sale, the seller should establish the nature of the property, ownership history and permitted mode of transfer under FEMA.

Income-Tax Residential Status Versus FEMA Residential Status

Income-tax residential status and FEMA residential status are determined independently. An Indian passport, an overseas residential address or an NRE account does not, by itself, establish that a seller is non-resident under Indian income-tax law.

The seller’s residential status for the relevant tax year should be verified before deciding the buyer’s TDS obligations. Our NRI taxation advisory services cover residential-status reviews and related cross-border taxation matters.

TDS on Sale of Property by NRI: Which Rate Applies?

The buyer is generally responsible for examining tax deduction obligations when making a payment that is chargeable to tax in India to a non-resident seller.

Under the Income-tax Act, 2025, Section 393(2), Table Serial No. 17, deals with relevant payments to non-residents and specifies withholding at the rates in force.

For transactions governed by the Income-tax Act, 1961, the corresponding provision is Section 195.

Long-Term Property Sales

Where qualifying immovable property has been held for more than 24 months, the resulting capital gain is generally long-term. For relevant transfers occurring on or after 23 July 2024, the general LTCG rate is 12.5% without indexation, plus applicable surcharge and Health and Education Cess.

The final effective withholding rate depends on the relevant circumstances and the statutory rates in force. The seller should not assume that the headline 12.5% rate is the complete effective deduction rate.

Short-Term Property Sales

Where the property has been held for 24 months or less, capital gains are generally treated as short-term and taxable at the applicable normal income-tax rates.

The published withholding-rate framework for non-resident individuals generally specifies a 30% base rate for relevant short-term property gains, subject to applicable surcharge and cess. The seller’s final income-tax liability may differ from the amount withheld.

Why Is TDS Often Deducted on the Sale Consideration?

The seller’s taxable capital gain and the property’s sale consideration are different amounts. A buyer may not have verified evidence of the seller’s original purchase cost, improvement cost or eligible exemptions.

Consequently, substantial withholding can arise on the gross consideration in the absence of an appropriate lower deduction certificate or other legally valid determination of the chargeable amount.

The buyer should not independently reduce withholding merely because the seller provides an estimated capital gains computation. The correct statutory procedure should be followed.

Is TDS Only 1% When an NRI Sells Property?

No. The 1% TDS provision for qualifying immovable-property purchases from resident sellers is different from the withholding rules applicable when the seller is a non-resident.

The Rs. 50 lakh threshold associated with the resident-seller property TDS provision should also not be applied automatically to a non-resident seller.

For example, where an Indian resident purchases a property from a non-resident for Rs. 40 lakh, the buyer must still examine withholding under the non-resident payment provisions, even though the consideration is below Rs. 50 lakh.

How to Reduce TDS on NRI Property Sale

One of the most important planning opportunities is applying for a lower tax deduction certificate before the buyer makes the relevant payment.

Under the Income-tax Act, 2025, a lower deduction application may be made under Section 395(1), generally through Form 128. This broadly replaces the earlier Form 13 application under Section 197 of the Income-tax Act, 1961.

When Is a Lower TDS Certificate Useful?

A certificate can be valuable where the tax that would otherwise be withheld substantially exceeds the seller’s reasonably estimated final tax liability.

This can happen because the property has appreciated only modestly, the acquisition cost is high, eligible expenses are substantial or qualifying capital gains relief is available.

Illustrative Example: Sale for Rs. 2 Crore

Particulars	Amount
Sale consideration	Rs. 2,00,00,000
Eligible acquisition cost and transfer expenses (assumed)	Rs. 1,70,00,000
Illustrative long-term capital gain	Rs. 30,00,000
Illustrative tax at 12.5% on gain, before cess and surcharge	Rs. 3,75,000
Illustrative withholding at 12.5% of gross consideration, before cess and surcharge	Rs. 25,00,000

The example illustrates why advance tax planning matters. The two tax amounts differ substantially because one is calculated on the assumed gain and the other on gross consideration.

The actual computation and withholding may differ owing to stamp-duty valuation, statutory deductions, surcharge, cess, exemptions, other taxable income and any valid certificate issued.

Documents for a Lower TDS Application

• PAN and identification details of the NRI seller.
• Passport, travel and residential-status information.
• Original purchase deed or relevant inheritance documents.
• Proposed sale agreement and buyer particulars.
• Details of acquisition cost and eligible improvement expenditure.
• Transfer expense records, where available.
• Capital gains computation and supporting working papers.
• Details of qualifying exemptions or reinvestment proposals.
• Relevant income-tax returns and other information required by the tax authorities.

The application should be made sufficiently before completion of the sale and the relevant payment. Issuance of a lower or nil deduction certificate is subject to the tax authority’s examination and approval.

Capital Gains Tax on Sale of Property by NRI

Indian property is generally subject to Indian capital gains taxation when sold by a non-resident.

The basic computation is:

Full value of consideration – eligible transfer expenses – eligible cost of acquisition – eligible cost of improvement = capital gain

This simplified formula is subject to statutory adjustments, special valuation rules and exemptions.

Stamp-Duty Value

If the actual consideration is lower than the stamp-duty value, the capital gains provisions may require the stamp-duty value to be considered as the deemed consideration.

Under the Income-tax Act, 2025, Section 78 broadly corresponds to earlier Section 50C. The statutory tolerance and valuation provisions should be applied to the particular transaction.

Indexation for NRIs

Under the general LTCG regime for relevant property transfers from 23 July 2024, indexation is not available.

A special grandfathering comparison mechanism applies to qualifying resident individuals and HUFs for certain properties acquired before 23 July 2024. An NRI should not assume that this resident-specific benefit is available to a non-resident seller.

Capital Gains Exemptions Available to NRIs

NRIs may qualify for relevant capital gains exemptions where all statutory conditions are satisfied.

Relief	General purpose
Section 82, Income-tax Act, 2025 (earlier Section 54)	Eligible long-term gain from residential house invested in another qualifying residential house in India
Section 85 (earlier Section 54EC)	Qualifying long-term gains from land or building invested in specified bonds, subject to the statutory limit and deadline
Section 86 (earlier Section 54F)	Eligible long-term gains from assets other than a residential house, subject to prescribed residential-property investment conditions

For eligible Section 54-type relief, relevant purchase periods may include one year before or two years after the sale, while the construction period may extend to three years, subject to statutory conditions.

For specified Section 54EC-type bond investments, the relevant investment period is generally six months and the statutory monetary limit must be respected.

If qualifying reinvestment cannot be completed before the applicable income-tax return deadline, the Capital Gains Account Scheme may become relevant. The taxpayer must examine the correct deposit deadline and eligibility conditions.

What Happens When an NRI Sells Inherited Property?

Inherited property requires examination of the previous owner’s acquisition history.

The period for which the previous owner held the property can be relevant for determining long-term or short-term status. The applicable acquisition-cost rules may also require consideration of the previous owner’s cost rather than the property’s value on the date of inheritance.

NRIs should retain the original purchase deed, inheritance or succession documents, available improvement records and property valuation evidence.

Jointly Owned Property and Multiple Sellers

Where a property has more than one owner, the buyer should identify the ownership share and residential status of each seller.

A resident co-owner and a non-resident co-owner may be subject to different withholding provisions. Sale consideration, capital gains, deductions and tax credits should be allocated correctly according to the facts and legal ownership.

Incorrect allocation can lead to excess deduction, short deduction or mismatches in the seller’s tax records.

Buyer TDS Compliance for NRI Property Sales in 2026

Buyer compliance has changed significantly under the Income-tax Act, 2025.

Transactions Before 1 October 2026

Under the earlier procedure, a buyer deducting tax on purchase of immovable property from a non-resident generally had to obtain TAN and furnish the prescribed non-resident TDS statement.

Transactions From 1 October 2026: Form 141, Schedule E

From 1 October 2026, a resident individual or Hindu Undivided Family purchasing immovable property from a non-resident seller may use Schedule E of Form 141 to report and pay the relevant TDS under Section 393(2), Table Serial No. 17.

For qualifying buyers, obtaining a separate TAN is no longer mandatory for this transaction. The filing can be completed through the buyer’s PAN login, subject to the prescribed procedure.

This facility should not automatically be applied to company, LLP, partnership or other buyers outside its specified scope. Such buyers must follow the compliance procedure applicable to them.

The buyer should check the applicable due dates for deposit, reporting and issuance of the TDS certificate, as these depend on the relevant reporting route.

Refer to the Income Tax Department’s Form 141 FAQs for official guidance.

Practical Buyer Checklist

• Verify the seller’s income-tax residential status.
• Obtain and validate the seller’s PAN.
• Determine whether the payment is chargeable to tax in India.
• Identify the applicable withholding rate and certificate, if any.
• Deduct tax at the legally prescribed stage.
• Deposit and report TDS using the appropriate procedure.
• Provide the applicable TDS certificate to the seller.
• Coordinate tax records where multiple buyers or sellers are involved.

Income-Tax Return and Refund After NRI Property Sale

An NRI may need to file an Indian income-tax return to report capital gains, claim eligible relief and reconcile TDS deducted by the buyer.

Where the deducted tax exceeds the seller’s final tax liability, the excess can generally be claimed as a refund through the applicable income-tax return process.

The NRI should verify the tax credit in the relevant tax records and maintain supporting property sale documents.

Our NRI income-tax return filing services assist with capital gains reporting, tax-credit reconciliation and refund claims.

How Can NRIs Repatriate Property Sale Proceeds Abroad?

Repatriation is a separate regulatory question from income-tax liability. Even where tax has been paid, the amount transferable abroad depends on the property’s acquisition history, source of original funds, applicable FEMA regulations and authorised dealer bank requirements.

Property Purchased With Foreign Exchange or NRE/FCNR Funds

Specific repatriation facilities may apply where the property was acquired using qualifying foreign exchange remittances or permitted NRE/FCNR funds.

For residential property, the applicable RBI rules include restrictions concerning the number of qualifying properties and the amount eligible under the relevant facility.

Property Acquired Through Rupee Funds or Inheritance

Subject to the applicable conditions, eligible balances and proceeds may be considered under the NRO remittance facility, including the USD 1 million per financial year framework.

The USD 1 million limit should not be treated as an automatic right to remit every property sale receipt. The relevant conditions and aggregate remittances must be examined.

Tax Forms and Bank Documentation

Depending on the remittance and applicable exemptions, the bank may require tax declarations, relevant CA certification, source-of-funds evidence, sale documents and evidence of tax compliance.

For transactions governed by the Income-tax Act, 2025, the relevant remittance reporting framework includes Forms 145 and 146, which correspond broadly to earlier Forms 15CA and 15CB.

For detailed procedural guidance, see our article on remitting funds from an NRO account abroad and our guide to NRE, NRO and FCNR accounts.

Can an NRI Sell Property Without Visiting India?

An NRI may be able to complete a property sale through a legally valid Power of Attorney where permitted and accepted for the relevant transaction.

The document’s execution, authentication, registration, stamping and acceptance requirements should be checked with the applicable authorities and transaction professionals.

A Power of Attorney does not remove the seller’s tax obligations or the buyer’s withholding responsibilities.

Common Mistakes NRIs Should Avoid

• Assuming that the buyer needs to deduct only 1% TDS.
• Applying the Rs. 50 lakh resident-seller threshold to a non-resident transaction.
• Starting the lower TDS certificate process after receiving the sale payment.
• Using outdated tax rates, section numbers or TDS forms.
• Ignoring the distinction between income-tax and FEMA residential status.
• Overlooking stamp-duty valuation when computing capital gains.
• Failing to preserve purchase and improvement records.
• Claiming exemptions without meeting the statutory investment conditions.
• Assuming that the entire sale proceeds can automatically be remitted abroad.

How EzyBiz India Assists NRIs Selling Property

EzyBiz India Consulting LLP provides Indian tax and regulatory advisory assistance to NRIs selling property in India.

Our services include:

• Review of residential status and tax applicability.
• Capital gains tax computation and exemption planning.
• Lower TDS certificate application assistance.
• Advice on buyer-side TDS compliance.
• Income-tax return filing and excess TDS refund claims.
• FEMA and repatriation documentation support.
• Applicable remittance tax certification.
• Coordination with buyers and authorised dealer banks on tax-related matters.

We assist clients remotely, including NRIs based in the USA, UK, UAE, Canada, Australia, Singapore and other countries.

Frequently Asked Questions

What is the TDS rate on sale of property by NRI in 2026?

The applicable rate depends on the nature of the gain, the seller and the circumstances. The general LTCG rate for relevant property transfers is 12.5%, plus applicable surcharge and cess. Short-term gains follow the applicable rate framework. The actual withholding amount must be determined under the relevant legal provisions and any valid certificate.

Is the 1% TDS rule applicable when purchasing property from an NRI?

No. The separate resident-seller property TDS provision does not apply merely because the transaction involves immovable property. Payments to a non-resident seller must be examined under the applicable non-resident withholding provisions.

Can an NRI obtain a lower TDS certificate?

Yes, where the legal conditions are fulfilled. The application is made under the applicable lower deduction provisions and is subject to examination and approval by the tax authorities.

Can an NRI claim a refund of excess TDS?

Where the TDS credit exceeds the final income-tax liability, the excess can generally be claimed through the relevant income-tax return, subject to statutory conditions and verification.

Is a TAN required for buying property from an NRI after 1 October 2026?

A qualifying resident individual or HUF buyer can use Form 141, Schedule E, through the PAN-based procedure without obtaining TAN for the covered transaction. Other buyers must examine their separate requirements.

Is the old 20% LTCG rate with indexation available to an NRI?

The general regime for relevant property transfers from 23 July 2024 is 12.5% without indexation. The special resident-only grandfathering comparison should not be assumed available to NRIs.

Does a DTAA eliminate Indian tax on property sale?

Generally, no. Most relevant tax treaties permit India to tax gains arising from immovable property situated in India. The seller should separately examine the treatment in the country of residence and any available foreign tax credit. See our DTAA guidance for NRIs.

Can NRIs repatriate property sale proceeds abroad?

Repatriation may be possible through the applicable FEMA route, subject to the property’s acquisition and funding history, tax compliance, permitted limits and authorised dealer bank documentation.

Related NRI Tax Services

• Comprehensive NRI Taxation Services in India
• NRI Income-Tax Return Filing and Refund Assistance
• Repatriation of NRO Funds Abroad
• DTAA Benefits and Double Taxation Relief for NRIs

Contact EzyBiz India

For assistance with NRI property sale taxation, capital gains computation, lower TDS certificates or repatriation documentation, contact:

CA Anil Agrawal
Founder, EzyBiz India Consulting LLP
Chartered Accountant with over 20 years of professional experience.
Mobile / WhatsApp: +91 98992 17778
Email: anil@ezybizindia.in
Website: ezybizindia.in