TDS on NRI property sales: the complete guide

For informational purposes only. Consult a qualified CA for advice specific to your transaction.

Selling Indian property from abroad involves one tax obligation that takes most NRI sellers by surprise: TDS deducted not on your profit, but on your entire sale price — before you receive a single rupee. Understanding how it works, what your options are, and what changed in Budget 2024 determines how much of your sale proceeds you actually keep.

Section 195: the buyer deducts before they pay you

When an NRI sells property in India, the buyer is legally required under Section 195 of the Income Tax Act to deduct TDS from the sale consideration before remitting payment. This is not the same as Section 194-IA — which applies to purchases from resident Indians at a flat 1% — and confusing the two is one of the most common errors in NRI property transactions.

Under Section 195, the default TDS rate for long-term capital gains (property held more than 24 months) is applied to the full sale value — not just the capital gain. These procedural differences from a standard resident-seller purchase mean that buyers unfamiliar with NRI transactions can make costly filing errors.

The rate: 14.95% flat for LTCG

For long-term capital gains (property held more than 24 months), the effective TDS rate since Budget 2022 is 14.95% — the same regardless of the sale value. This is because the surcharge on LTCG on property was capped at 15% for all property values.

The calculation: 12.5% base rate × 1.15 (surcharge) × 1.04 (cess) = 14.95%. Before this cap, the surcharge escalated with property value and the effective rate on a ₹10 crore property could exceed 28%. The current uniformity is a meaningful simplification.

For short-term capital gains (property held 24 months or less), the base rate is 30% and the surcharge is income-slab-based — making the effective rate 33% to 42% depending on your total taxable income in India that year. The financial case for holding property beyond 24 months before selling is significant.

What Budget 2024 changed — and why it matters for older properties

Effective July 23, 2024, the Union Budget changed the LTCG calculation for NRIs in two ways: the headline rate dropped from 20% to 12.5%, and the indexation benefit was removed. Indexation allowed you to inflate your original purchase cost using the government's Cost Inflation Index, reducing the taxable gain. For properties held many years, this reduction was substantial.

The important nuance: if you purchased the property before July 23, 2024, you have a choice. You can apply the new 12.5% rate on the full nominal gain, or the old 20% rate on the reduced indexed gain. For properties held 10+ years — which describes most South Delhi property owners — the indexed calculation frequently produces a lower total tax. Your CA should run both numbers before advising.

Properties purchased on or after July 23, 2024 have no choice: 12.5% on the full gain, no indexation.

The lower deduction certificate: do not skip this

Because TDS is deducted on the full sale consideration — not just the gain — the default deduction is almost always higher than your actual tax liability. On a ₹10 crore sale, the standard 14.95% TDS is ₹1.495 crore. If your actual gain-based tax liability is ₹50 lakh, the excess ₹1.045 crore sits with the government until you file your ITR and wait 6–18 months for a refund.

A lower deduction certificate (applied for via Form 13 under Section 197) instructs the buyer to deduct TDS only on your actual estimated tax liability. Your CA files the application on the TRACES portal (traces.gov.in), providing your gain calculation and documentation. The Income Tax Department typically takes 15–45 days to issue the certificate.

The certificate must be obtained before registration. Start the process 2–3 months before your planned sale date.

Form 144 (formerly Form 27Q) and Form 16A

After deducting TDS, the buyer must deposit it with the government by the 7th of the following month and file Form 144 (formerly Form 27Q, renamed under the Income Tax Act 2025 from 1 April 2026) — the quarterly TDS return for payments to non-residents — within 15 days of the quarter end. This is different from Form 26QB, which is used for resident seller transactions.

Form 16A is the TDS certificate the buyer issues to you after filing Form 144. You need Form 16A to file your Indian income tax return and to support your repatriation documentation. Ensure your advisor tracks this — delays in Form 16A mean delays in everything downstream.

Repatriation: getting the money to your overseas account

The net sale proceeds (after TDS) must first land in your NRO (Non-Resident Ordinary) account in India. From there, you can repatriate up to USD 1 million per financial year (April–March) without RBI approval. Amounts above this limit require a separate RBI application.

To repatriate, your CA must obtain Form 15CB — a certificate confirming tax compliance and FEMA compliance — and file Form 15CA on the Income Tax portal as a self-declaration. Both go to your bank along with the sale deed, PAN, passport, and Form 16A. The bank processes the foreign remittance in 5–10 working days once documentation is complete.

For South Delhi properties at current market values, the USD 1 million limit (roughly ₹8–9 crore at current rates) means that proceeds from larger sales may span two financial years. Plan the timeline before you finalise the sale.

Grey Beard's role in this

Grey Beard coordinates the TDS process on every NRI mandate — initiating the lower deduction certificate application with your CA, ensuring the buyer understands their Form 144 obligations, following up on Form 16A issuance, and structuring the documentation for repatriation. You do not need to manage these moving parts from abroad.