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: 13% to 14.95% for LTCG

For long-term capital gains (property held more than 24 months), the effective TDS rate depends on the size of the capital gain — because the surcharge on LTCG is capped at 15% for all NRIs, the rate is 13% for gains below ₹50 lakh, 14.30% for gains between ₹50 lakh and ₹1 crore, and 14.95% for gains above ₹1 crore.

The calculation: 12.5% base rate + surcharge (0%, 10%, or 15% depending on gain size) + 4% cess. Before the surcharge cap, the effective rate on a ₹10 crore property could exceed 28%. The current structure 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.

NRIs have no choice between the old and new regime. The grandfathering clause in Finance (No. 2) Act 2024 — which gives resident Indians the option to use the old 20% + indexation calculation for pre-July 2024 purchases — applies only to "individual or HUF being a resident in India." NRIs are explicitly excluded. Regardless of when the property was purchased, the rate for NRIs is a flat 12.5% on the full nominal 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 instructs the buyer to deduct TDS only on your actual estimated tax liability. Your CA applies for it on your behalf — you can only apply once a signed Agreement to Sell is in place between buyer and seller. 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.

The TDS return and the TDS certificate

After deducting TDS, the buyer deposits it with the government by the 7th of the following month and files the quarterly TDS return for NRI transactions (Form 144, formerly Form 27Q — renamed from 1 April 2026) within 15 days of the quarter end. This is a different form from the one used for resident seller transactions, and buyers unfamiliar with NRI deals sometimes file the wrong one.

The buyer then issues you a TDS certificate (Form 16A) confirming the amount deducted and deposited. You need this certificate to file your Indian income tax return and to support your repatriation documentation. Ensure your advisor tracks this — delays in the TDS certificate 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 prepares a compliance certificate (Form 15CB) confirming that all taxes and foreign exchange regulations have been met, and files a self-declaration (Form 15CA) on the government's income tax website. Both go to your bank along with the sale deed, PAN, passport, and TDS certificate. 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 TDS filing obligations, following up on the TDS certificate issuance, and structuring the documentation for repatriation. You do not need to manage these moving parts from abroad.