Section 195, Form 144 (formerly Form 27Q), the lower deduction certificate, Budget 2024 and 2026 changes, and how repatriation actually works. Everything an NRI seller needs to understand before the transaction.
For informational purposes only. Consult a qualified CA for advice specific to your transaction.
Recent changes — we keep this updated
Budget 2026 (effective 1 October 2026): Buyers purchasing property from NRI sellers will no longer need to obtain a TAN. They can use their PAN to deduct and deposit TDS — the same simplified process that already applies to resident-to-resident transactions. Until 1 October 2026, TAN is still required.
Income Tax Act 2025 (effective 1 April 2026): Form 27Q has been renumbered as Form 144. The process and filing obligations remain the same — only the form number has changed.
When an NRI sells property in India, the buyer is legally required to deduct TDS (Tax Deducted at Source) from the sale consideration before making payment. This obligation falls under Section 195 of the Income Tax Act — not Section 194-IA, which applies only when a resident Indian sells property. This distinction matters: the forms, rates, and process are different.
The TDS is deducted on the full sale consideration — not just the capital gain. So on a ₹10 crore sale where your actual gain is ₹4 crore, TDS is calculated on ₹10 crore. The excess can be reclaimed by filing a tax return, but that process takes 6–18 months and ties up a significant amount of cash. This is why applying for a lower deduction certificate beforehand — almost always worth the effort.
The rate depends on how long you have held the property. The holding period is measured from the date of the original purchase registration to the date of sale.
| Type | Holding period | Base rate | Surcharge | Effective rate |
|---|---|---|---|---|
| Long-term (LTCG) | More than 24 months | 12.5% | 15% (capped) | 14.95% |
| Short-term (STCG) | 24 months or less | 30% | 10–37% (by income) | 33–42% |
All rates include 4% education and health cess. LTCG surcharge is capped at 15% for all property values since Budget 2022 — see below.
Before Budget 2022, the surcharge on long-term capital gains escalated with the sale value — reaching 37% on properties above ₹5 crore, which pushed the effective TDS rate above 28%. That has changed.
Since Budget 2022, the surcharge on long-term capital gains on property is capped at 15% regardless of sale value. This means the effective LTCG TDS rate is the same whether you are selling for ₹3 crore or ₹30 crore:
Effective LTCG TDS rate (post-Budget 2022)
12.5% (base rate) + 15% surcharge on that + 4% cess on the total = 14.95% flat — at every sale value
On a ₹10 crore sale: TDS = ₹1.495 crore. On a ₹25 crore sale: TDS = ₹3.7375 crore. The percentage does not increase with the sale value.
For short-term capital gains, the surcharge is still income-slab-based and can reach 37% on high incomes, making STCG significantly more expensive. Holding for more than 24 months before selling has a meaningful financial advantage.
Effective July 23, 2024, the Union Budget made two significant changes that affect NRI property sellers:
01
LTCG rate reduced from 20% to 12.5%
The headline rate for long-term capital gains on property dropped from 20% to 12.5% for all sales after July 23, 2024. At first glance this looks like a tax cut — but it came at a cost.
02
Indexation benefit removed for NRIs
Indexation allowed you to adjust your original purchase price for inflation using the government's Cost Inflation Index (CII), reducing the taxable gain. This benefit has been removed for NRIs on all sales after July 23, 2024. For properties held for many years, this removal often outweighs the rate reduction.
03
A choice for pre-July 2024 purchases
If you purchased the property before July 23, 2024, you have a choice: (a) 12.5% on the full gain without indexation, or (b) 20% on the reduced indexed gain. For properties held 10+ years, the indexed calculation almost always results in a lower total tax. Your CA should run both calculations before advising.
Worked example — property purchased 2012 for ₹2 crore, sold 2025 for ₹8 crore:
Option A (12.5%, no indexation): Gain = ₹6 crore × 12.5% = ₹75 lakh tax
Option B (20%, with indexation): Indexed cost ≈ ₹5.2 crore → Gain = ₹2.8 crore × 20% = ₹56 lakh tax
In this case, Option B saves ₹19 lakh — but the calculation varies by property and year of purchase.
Because TDS is applied to the full sale consideration — not just the gain — the default deduction often far exceeds your actual tax liability. A lower deduction certificate lets the buyer deduct TDS at your actual tax rate instead of the standard rate.
To obtain one, your CA files Form 13 on the TRACES portal (traces.gov.in), providing a calculation of your capital gains and estimated tax liability. The Income Tax Department reviews this and issues a certificate specifying the reduced TDS rate — typically just on the actual gain, not the full sale value.
Why it matters
On a ₹10 crore sale where your actual gain is ₹3 crore, the standard TDS is ₹1.495 crore (14.95% of ₹10 crore). With a lower certificate, TDS might be ₹45 lakh (15% of ₹3 crore). The difference — over ₹1 crore — either stays in your account or would otherwise take 6–18 months to come back as a refund.
Step 1
Engage a CA experienced in NRI property transactions — ideally 3 months before your planned sale date
Step 2
CA registers on TRACES portal and files Form 13 with your purchase documents, gain calculation, and ITR history
Step 3
The Income Tax Department reviews and issues the certificate within 15–45 days (processing time varies by jurisdiction)
Step 4
You provide the certificate to the buyer before registration. The buyer deducts TDS at the reduced rate
Once TDS is deducted, the buyer has obligations. Understanding these is important — if the buyer defaults, your tax filing and repatriation are complicated.
Form 144 (formerly Form 27Q)
Filed by the buyer
The quarterly TDS return for payments made to non-residents — now called Form 144 (renamed from Form 27Q under the Income Tax Act 2025, effective 1 April 2026). Filed on the TRACES portal under Section 195. Until 1 October 2026, buyers must obtain a TAN to file this return. From 1 October 2026 (Budget 2026 change), buyers can use their PAN instead — TAN will no longer be required. The buyer deposits the TDS via e-challan by the 7th of the following month, then files Form 144 within 15 days of the quarter end.
Not to be confused with Form 26QB, which applies only to purchases from resident Indian sellers.
Form 16A
Issued to you (the NRI seller) by the buyer
The TDS certificate confirming the amount deducted, deposited, and the challan reference. The buyer must issue Form 16A within 15 days of their Form 144 filing. You will need Form 16A to file your Indian income tax return and to support any refund claim.
Grey Beard follows up with the buyer's side to ensure Form 144 is filed on time and Form 16A is obtained.
Selling the property and getting the proceeds into your overseas account are two separate processes. The sale gets you rupees in India. Repatriation moves those rupees abroad — and it requires separate compliance under FEMA (Foreign Exchange Management Act).
01
Proceeds must go into your NRO account
The buyer deposits the net sale consideration (after TDS) into your NRO (Non-Resident Ordinary) bank account in India. Depositing into an NRE account is a FEMA violation. The NRO account is the mandatory first stop.
02
The USD 1 million per year limit
RBI allows each NRI to repatriate up to USD 1 million per financial year (April–March) from their NRO account. This covers all repatriations combined — not just property sales. For properties above approximately ₹8–9 crore (at current exchange rates), you may not be able to repatriate all proceeds in one financial year. Amounts beyond USD 1 million require prior RBI approval — a process that takes several months.
03
Form 15CB: your CA's certificate
Before repatriation, a Chartered Accountant must issue Form 15CB — a certificate confirming that applicable Indian taxes have been correctly deducted and paid, and that the remittance is compliant with income tax and FEMA rules. This is not optional. No bank will process the repatriation without it.
04
Form 15CA: your self-declaration
You (or your CA on your behalf) file Form 15CA on the Income Tax portal — a self-declaration accompanying the CA certificate. Both Form 15CA and 15CB are submitted to the bank along with your sale deed, PAN, passport, and Form 16A. The bank processes the foreign remittance typically within 5–10 working days of receiving complete documentation.
Not applying for a lower deduction certificate
On a ₹10 crore sale with ₹3 crore in actual gains, the difference between standard TDS and the correct lower-certificate rate can be over ₹1 crore in blocked cash. The application takes 2–3 months, so it must be initiated well before the planned sale date.
Confusing Form 26QB with Form 144 (formerly Form 27Q)
Form 26QB is for resident seller transactions (1% TDS). NRI sales fall under Section 195 and require Form 144 (formerly Form 27Q). Some buyers are unaware of this distinction, resulting in incorrect filings that complicate the NRI's tax return and repatriation.
Assuming the buyer will handle everything correctly
The buyer must deduct the right amount, deposit by the 7th of the following month, file Form 144 quarterly, and issue Form 16A. If they fail on any step, you feel it — delayed TDS certificates mean delayed ITR filings and delayed repatriation. Ensure your advisor follows up on each step.
Not comparing the 12.5% vs 20% options for older properties
For properties purchased before July 23, 2024, you have a choice between 12.5% (no indexation) and 20% (with indexation). Many NRI sellers do not realise this. For properties held 10+ years, the indexed calculation frequently saves a significant amount of tax.
Underestimating the USD 1 million repatriation limit
At current exchange rates, USD 1 million is roughly ₹8–9 crore. If your net sale proceeds exceed this, you cannot repatriate everything in the same financial year without RBI approval. Plan your repatriation timeline before the sale, not after.
Filing ITR in India late or not at all
Many NRI sellers assume that because TDS has been deducted, no further Indian tax filing is needed. It is still mandatory to file an ITR in India for the year of sale — both to claim any refund and to keep your tax compliance record clean for future transactions.
A valid PAN is required to complete the sale. Without it, TDS is deducted at a higher rate and you cannot file an ITR or claim a refund. If you do not have a PAN, apply early — the process takes several weeks and involves submitting identity documents through the Indian tax authorities. Grey Beard will guide you through this if needed.
Grey Beard manages the full process — lower deduction certificate application, TDS coordination with the buyer, FEMA documentation, and repatriation. You do not need to be in India.