NRI Selling Property in India

Why NRI property sales are different

When a resident sells property, the buyer deducts a flat 1% TDS under Section 194-IA. When a non-resident (NRI) sells, an entirely different and much heavier provision applies: Section 195. The buyer must deduct TDS on the sale proceeds at rates linked to the nature of the capital gain, not a token 1%, but potentially 12.5% to 20% of the gain, plus surcharge and cess.

This trips up both sides. Buyers often do not realise the seller is an NRI, or assume 1% applies, exposing themselves to liability. NRIs are shocked to see a large chunk of their sale withheld. Getting Section 195 right, ideally before the sale closes, is essential, and it is an area where our income tax & ITR filing service and NRI expertise saves clients real money.

The TDS rates under Section 195

The rate depends on how long the NRI held the property:

• Long-term (held over 24 months): TDS is deducted on the capital gain at 12.5% (post the 2024 rate change, without indexation) plus applicable surcharge and cess.
• Short-term (held 24 months or less): TDS at the NRI's applicable slab rate, effectively up to 30% plus surcharge and cess.
• Surcharge applies on top for high-value sales, pushing effective rates higher.

The lower-deduction certificate (Form 13)

This is the most important tool for an NRI seller. By applying to the Assessing Officer in Form 13, the NRI can obtain a lower (or nil) deduction certificate that directs the buyer to deduct TDS only on the actual capital gain, at the correct rate, not on the whole sale value.

The difference is enormous. On a ₹1 crore sale with a ₹20 lakh gain, TDS on the full value could withhold ₹12-20 lakh, whereas a Form 13 certificate limits it to roughly ₹2.5 lakh. The rest stays in the NRI's hands instead of waiting a year for a refund. Applying for Form 13 before the sale is one of the highest-value things an NRI seller can do.

A worked example

Priya, an NRI in Dubai, sells a Pune flat for ₹1,00,00,000 that she bought years ago for ₹70,00,000, a long-term gain of ₹30,00,000. Without a certificate, the buyer might deduct 12.5% plus surcharge and cess on the full ₹1 crore, well over ₹13 lakh withheld. With a Form 13 lower-deduction certificate, TDS is limited to the tax on the ₹30 lakh gain, roughly ₹3.9 lakh. She keeps nearly ₹9 lakh that would otherwise have been stuck until she filed her return and claimed a refund.

Repatriation, TAN and getting it right

Two more layers make NRI sales complex. First, the buyer needs a TAN (not just PAN) to deduct and deposit Section 195 TDS and file Form 27Q, unlike the PAN-based 26QB for resident sales. Second, repatriating the sale proceeds abroad requires compliance with FEMA rules, typically Forms 15CA and 15CB (the latter certified by a CA), and is generally capped at USD 1 million per financial year from an NRO account.

Between Section 195, Form 13, TAN, Form 27Q, and 15CA/CB, an NRI property sale is one of the most compliance-heavy transactions in Indian tax. Our team handles the entire chain, lower-deduction certificate, buyer-side TDS, and repatriation certificates. book a free consultation well before your sale closes, because Form 13 must be applied for in advance.

An NRI seller's action plan

If you are an NRI planning to sell Indian property, sequence it like this:

• Well before closing, apply in Form 13 to the Assessing Officer for a lower-deduction certificate so TDS is on the gain, not the whole value.
• Ensure the buyer has a TAN to deduct and deposit Section 195 TDS and file Form 27Q.
• Compute the gain correctly, holding period, cost, and the applicable rate.
• Plan repatriation under RBI FEMA rules, with Forms 15CA and 15CB (the latter CA-certified).
• File your Indian return on the income tax e-filing portal to claim any excess TDS as a refund.

The Form 13 certificate is the difference between a few lakh withheld and a dozen locked up for a year, so the single highest-value step is to start early, the certificate must be obtained before the sale, not after.