TDS When an NRI Sells Property in India: Rates, Certificates & Refunds

When a resident Indian sells a flat, the buyer withholds a token 1% of the price as tax and everyone moves on. When an NRI sells, the rules change completely, and the number nobody warns you about is this one: the buyer must deduct tax on your entire sale price, not your profit, unless you’ve done some paperwork in advance. On a ₹1.2 crore sale, that can mean well over ₹15 lakh parked with the tax department for a year or more, even when your actual tax bill is barely half of it.

This guide walks through what gets deducted and why, the one certificate that fixes most of the pain, and how to get your money back if the sale has already happened.

Why an NRI sale is treated differently

For a purchase from a resident seller, Section 194-IA of the Income Tax Act asks the buyer to deduct a flat 1% of the price (and only when the property costs ₹50 lakh or more). Simple, small, done through the buyer’s PAN.

When the seller is a non-resident, that section doesn’t apply at all. The buyer instead deducts under Section 195, which covers any payment to a non-resident , and it behaves very differently:

• There is no minimum threshold. TDS applies whatever the sale price.
• The rate is tied to your capital gains tax rate, not a token 1%.
• Unless you hold a certificate saying otherwise, the buyer must apply that rate to the full sale consideration, because the buyer has no legal way of knowing what your purchase cost or actual gain was.

That last point is the one that catches almost every first-time NRI seller.

The rates that actually apply

How long you’ve held the property decides everything. Hold it for more than 24 months and the gain is long-term; sell earlier and it’s short-term, taxed at your slab rate, with TDS deducted at 30% plus surcharge and cess, punishing enough that most NRIs simply wait out the two years if they can.

For a long-term sale, the base rate is 12.5% on the gain (without indexation , the indexation option was withdrawn for non-residents when the rules changed in July 2024). Surcharge and the 4% cess stack on top, and the surcharge tier is set by the sale value, which produces these effective TDS rates:

12.5% base plus applicable surcharge and 4% health & education cess, under the rules in force at the time of writing. Rates move with each year’s Finance Act, confirm the current figures with a chartered accountant before you rely on them.

One more NRI-specific wrinkle: resident sellers who bought before July 2024 can choose between the old 20%-with-indexation and the new 12.5%-without regimes, whichever taxes them less. Non-residents don’t get that choice, it’s 12.5% without indexation, full stop. If you bought long ago at a low price, this makes your paper gain (and your tax) larger than a resident’s would be on the same flat.

The part that hurts: TDS is charged on the price, not the profit

Here’s the arithmetic on a typical sale. Say you bought a flat in Ahmedabad for ₹60 lakh in 2015 and sell it today for ₹1.2 crore:

• Your long-term gain is ₹60 lakh, so your actual tax comes to roughly ₹8.6 lakh (≈14.3% on the gain).
• But without a certificate, the buyer must deduct ≈14.95% of the full ₹1.2 crore, about ₹17.9 lakh.

That’s over ₹9 lakh of your own money locked up with the tax department, doing nothing, until you file a return and wait for the refund. The gap gets worse the longer you’ve owned the property, because an older purchase means a bigger slice of the sale price is your original capital, money you’re being taxed on only because the buyer had no certificate telling them otherwise.

Fix #1: the lower-deduction certificate (Form 13)

The clean solution is to apply to the Income Tax Department before the sale completes for a certificate under Section 197, filed online as Form 13. You show the assessing officer your purchase deed and improvement costs, they compute the actual expected gain, and the certificate instructs your buyer to deduct tax only on that gain, or to deduct nothing at all if you’re reinvesting the gains into exemptions (more on those below).

Practical points that matter more than the form itself:

1. You need the buyer first. The application asks for the buyer’s details, so the realistic sequence is: agree the deal, sign an agreement to sell with the TDS mechanics spelled out, apply for the certificate, then register.
2. Budget weeks, not days. Timelines vary by jurisdiction; a couple of months is a safe planning figure. Don’t promise a registration date that assumes the certificate arrives quickly.
3. A CA who handles NRI cases regularly will file this in their sleep and knows what the local ward expects attached. This is the single best fee you’ll pay in the whole transaction.

Fix #2: the refund route

If the sale has already gone through with full TDS, the money isn’t lost, it’s sitting against your PAN. The buyer deposits the tax, files a quarterly TDS return, and issues you Form 16A as proof. After the financial year ends, you file an Indian income tax return declaring the actual gain, and the excess comes back as a refund with modest interest.

The catch is purely time: between the sale date, the return-filing window and processing, the excess can sit with the department for anywhere from several months to well over a year. If the sale hasn’t happened yet, the certificate route is almost always worth it.

Shrinking the gain itself

Two well-worn exemptions can reduce the taxable gain, and, if you get a certificate reflecting them, the TDS too:

• Section 54, reinvest the gain in another residential property in India (bought within one year before or two years after the sale, or built within three), subject to an upper cap on the exempt gain.
• Section 54EC, invest the gain in notified infrastructure bonds within six months, up to ₹50 lakh, locked in for five years.

Both come with conditions on how and where the money is parked in the meantime, so treat this as a conversation to have with your CA before the sale, not after.

What your buyer has to do, and why they get nervous

Deducting under Section 195 is real work for a buyer: they need a TAN (a tax deduction account number, most individuals have never owned one), they must deposit the TDS by the 7th of the month after each payment to you, file a quarterly return, and issue Form 16A. Get any of it wrong and the buyer is the one liable for shortfalls, interest and penalties.

This is why deals with NRI sellers sometimes wobble at the last minute, the buyer’s lawyer explains all this and cold feet set in. The sellers who close smoothly are the ones who arrive with the process already mapped: a CA engaged, the certificate applied for, and a one-page note for the buyer on exactly what to deduct and when. It’s also quiet negotiating leverage, a prepared NRI seller is a rarer, easier counterparty than buyers expect.

After the sale: getting the money out of India

The sale proceeds land in your NRO account, and repatriating them abroad is its own process, a CA certificate in Form 15CB, an online Form 15CA, and a limit of USD 1 million per financial year from NRO balances. That deserves (and will get) its own guide; for now, know that the TDS story above is step one of two, not the whole journey.

Tax rules change with every Finance Act and individual situations differ, treat the figures here as a map of how the system works, not as advice for your specific sale. A chartered accountant experienced with NRI transactions will earn their fee several times over.