NRI Guide
NRI Selling Property in India: TDS Made Simple
A plain-English guide to how much TDS a buyer must deduct when you sell property in India as an NRI, the new 2026 PAN rule, and how to avoid having lakhs needlessly locked up.
Updated for Budget 2026 and the Income-tax Act 2025.
Buyers no longer need a TAN. From 1 October 2026, a resident individual or HUF buying property from an NRI can deduct and deposit TDS using their PAN and a challan-cum-statement, instead of obtaining a TAN and filing a separate quarterly return. This is a procedural relief only — the TDS rates and the buyer's responsibility to deduct correctly do not change. Company and firm buyers still need a TAN.
Why TDS on an NRI property sale is different
When a resident sells property, the buyer deducts a flat 1% TDS under Section 194-IA, and only if the value crosses ₹50 lakh. When an NRI sells, a completely different rule applies: the buyer must deduct TDS under Section 195, at capital-gains rates that are far higher, and with no minimum threshold. Even a ₹25 lakh flat triggers TDS.
The part that surprises most NRIs: by default, TDS is calculated on the entire sale price, not on your actual profit. On a ₹1 crore sale that could mean well over ₹12 lakh locked up with the tax department until you file a return and claim it back — unless you plan ahead. The rest of this guide is really about avoiding that trap.
How much TDS is deducted
The rate depends on how long you held the property. More than 24 months makes it a long-term capital asset; 24 months or less makes it short-term.
| Holding period | Gain type | Base TDS rate | Effective rate (with surcharge + 4% cess) |
|---|---|---|---|
| More than 24 months | Long-term (LTCG) | 12.5% (no indexation) | ~13% up to ₹50L gain, ~14.3% for ₹50L–1cr, ~14.95% above ₹1cr |
| 24 months or less | Short-term (STCG) | Slab rate (up to 30%) | Slab rate + applicable surcharge + 4% cess |
The 12.5% long-term rate (without indexation) applies to transfers on or after 23 July 2024. The alternative 20%-with-indexation option that residents get for older properties is a nuanced area for NRIs — confirm your specific case with a tax advisor. Surcharge on capital gains is capped at 15%, so the effective LTCG rate does not keep rising above roughly 14.95% however large the sale.
Remember: unless you obtain a lower-deduction certificate (below), the buyer applies these rates to the full sale consideration, not to your gain. That is why the certificate matters so much.
The single most important step: a lower TDS certificate
An NRI seller can apply to the Income Tax Department under Section 197 (using Form 13) for a certificate that tells the buyer to deduct TDS on your actual capital gain — or at a nil rate — instead of the whole sale price. Apply before the sale closes; once the buyer has deducted on the full value, your money is stuck until you file a return and wait for a refund.
For most sellers this is the difference between a few lakh and a few tens of lakh being withheld. Treat it as step one, not an afterthought.
Reduce the tax itself, not just the TDS
The certificate reduces what is withheld. To reduce what you actually owe, the same reinvestment exemptions available to residents apply to NRIs:
- Section 54: reinvest long-term gains from a residential house into another residential house in India.
- Section 54F: reinvest the proceeds from selling any other long-term asset into a residential house.
- Section 54EC: invest gains (up to ₹50 lakh) in specified bonds such as NHAI or REC within six months.
(These section numbers are being renumbered under the Income-tax Act 2025, but the benefits carry over.) A lower gain feeds directly into a lower Section 197 certificate, so the two work together.
The process, step by step
- Seller: get an Indian PAN (mandatory) and, ideally, apply for a Section 197 lower-TDS certificate before closing.
- Buyer: determine the holding period and whether the gain is LTCG or STCG.
- Buyer: deduct TDS at the applicable rate (or at the rate on the certificate) when paying the seller — including on any advance.
- Buyer: deposit the TDS by the 7th of the month after deduction. From 1 October 2026, individual/HUF buyers do this with their PAN; before that, a TAN is required.
- Buyer: file the TDS return and issue the TDS certificate to the seller. Note that Form 26QB (the resident-seller form) cannot be used for an NRI sale — a wrong form can make the seller's TDS credit disappear.
- Seller: file an Indian income tax return to claim any excess TDS back as a refund.
Getting the money out of India
Sale proceeds usually land in an NRO account. You can repatriate up to USD 1 million per financial year from your NRO balance, and the bank will ask for Form 15CA and a chartered accountant's Form 15CB certifying that taxes have been handled. Keep your TDS certificate and capital-gains computation ready — they feed straight into this paperwork.
Deadlines and penalties to keep in mind
TDS must be deposited within 7 days of the month-end in which it was deducted. Interest runs at 1% per month if TDS is not deducted and 1.5% per month if deducted but not deposited, plus a late-filing fee of ₹200 per day. The liability for all of this sits with the buyer, which is why buyers are understandably cautious — giving them a clean certificate and computation makes the whole deal smoother.
Double taxation
If your country of residence also taxes the gain, the DTAA between India and that country usually lets you claim credit for the Indian tax paid, so you are not taxed twice on the same profit. The exact relief depends on the treaty, so check your specific country.
Explore More Tools
Plan your India investments as an NRI
Use Wealth North's calculators and guides to estimate capital gains, understand NRI rules, and plan your investments in India with confidence.
NRI Guide
Frequently Asked Questions
Common questions about TDS when an NRI sells property in India, including the 2026 PAN rule, rates, lower-deduction certificates and repatriation.
For long-term gains (property held over 24 months), TDS is 12.5% plus surcharge and 4% cess. For short-term gains (24 months or less), TDS is at slab rates, up to 30% plus surcharge and cess. By default it is deducted on the full sale value, not just your profit.
Under Section 195 of the Income Tax Act, which applies to payments to non-residents. This is different from Section 194-IA (a flat 1%) that applies when a resident sells property.
No. Unlike the ₹50 lakh threshold for resident sellers, there is no minimum for NRI sales. TDS under Section 195 applies regardless of the sale value, even on a property worth ₹25 lakh.
From 1 October 2026, a resident individual or HUF buyer no longer needs a TAN and can deposit TDS using their PAN through a challan-cum-statement. Before that date a TAN is still required, and company or firm buyers continue to need a TAN.
No. The 2026 change is purely procedural. TDS rates, the holding-period rules and the buyer's legal responsibility to deduct correctly are all unchanged. Only the deposit mechanism becomes simpler.
By default Section 195 requires deduction on the entire sale consideration. The only way to have it deducted on your actual capital gain is to obtain a lower-deduction certificate under Section 197 before the sale.
It is a certificate you apply for using Form 13, asking the tax officer to let the buyer deduct TDS on your real capital gain, or at a nil rate, rather than the whole sale price. Apply before closing the sale, as it can save lakhs from being locked up until you file a return.
More than 24 months makes the property a long-term asset; 24 months or less makes it short-term. For inherited or gifted property, the previous owner's holding period is included when deciding long-term versus short-term.
Roughly 13% up to ₹50 lakh of gain, about 14.3% between ₹50 lakh and ₹1 crore, and about 14.95% above ₹1 crore. Surcharge on capital gains is capped at 15%, so the effective rate does not rise beyond around 14.95% however large the sale.
Yes. NRIs can use the same reinvestment exemptions as residents: Section 54 (reinvest in a residential house), Section 54F (reinvest proceeds of another asset in a house) and Section 54EC (invest up to ₹50 lakh in specified bonds). A lower gain also supports a lower Section 197 certificate.
The buyer files the TDS return for non-resident payments (Form 27Q, being renumbered under the Income-tax Act 2025) and issues a TDS certificate. Form 26QB, used for resident sellers, must not be used for an NRI sale, as it can cause the seller's TDS credit to be lost.
Within 7 days from the end of the month in which the deduction was made. Interest and late fees apply for delays, and the liability rests with the buyer.
Proceeds usually go to an NRO account, from which you can repatriate up to USD 1 million per financial year. The bank will require Form 15CA and a chartered accountant's Form 15CB confirming taxes are in order.
Usually not on a net basis. The Double Taxation Avoidance Agreement (DTAA) between India and your country of residence typically lets you claim credit for the Indian tax paid. The exact relief depends on the specific treaty.
Yes, if you want to claim back any excess TDS as a refund, or if your total Indian tax liability requires it. Since TDS is often more than your actual tax, filing a return is usually how NRIs recover the difference.
The buyer is treated as responsible and can face interest, penalties and demand notices. This is why buyers are cautious. Giving the buyer a clear capital-gains computation and a Section 197 certificate makes the transaction smoother for both sides.