NRI Selling Property in India: How TDS Under Section 195 Works, and How to Reduce It

By CA Vijay R Singh, FCA · Vijay R Singh & Co., Chartered Accountants, Mumbai · Last reviewed June 2026

Why an NRI sale is taxed differently from a resident sale

If a resident sells property, the buyer deducts just 1% TDS under Section 194-IA. Many NRIs (and their buyers) assume the same 1% applies to them. It does not.

When the seller is a non-resident, the transaction falls under Section 195, and the rules change completely:

• TDS is deducted on the entire sale consideration, not on the gain.
• The rate is the full capital-gains rate, plus surcharge and cess, not 1%.
• The buyer needs a TAN (Tax Deduction Account Number), files a different return (Form 27Q), and carries the liability if it is done wrong.

This single difference is where most NRI property sales go wrong, and where a large amount of your money gets locked up with the Income Tax Department for the better part of a year.

The TDS rate on an NRI property sale

The rate depends on how long you held the property.

For long-term sales by an NRI, the rate has been 12.5% without indexation for transfers made on or after 23 July 2024 (Finance Act 2024). The option that resident individuals got, to instead pay 20% with indexation on older property, is not available to non-residents.

Surcharge applies on top, but the surcharge on long-term capital gains is capped at 15%. With cess, the effective long-term rate at the highest surcharge slab works out to about 14.95%. At lower income levels the surcharge, and therefore the effective rate, is lower.

Rates here follow the Finance Act 2024 and apply to transfers on or after 23 July 2024. The exact surcharge depends on your total income, and rules change with each Budget, so confirm the figure for your specific sale before you sign anything. You can get a rough estimate with our NRI Property TDS Calculator, and we confirm the exact number for clients before the deal is registered.

The real problem: TDS on the sale price, not the gain

Here is what that means in practice. Suppose you bought a flat years ago and it has appreciated. The buyer is required to deduct TDS on the full amount they pay you, even though your taxable gain is only a fraction of that.

The excess does not disappear. You get it back as a refund, but only after the financial year ends, after you file your income-tax return, and after the Department processes it. That can mean ₹10–15 lakh or more sitting locked for 8 to 14 months, money you probably need for the very reason you sold.

There is a legal way to avoid this, and it has to be set up before the sale, not after.

The fix: lower-deduction certificate (Form 13, Section 197)

Section 197 lets a seller apply to the Income Tax Department for a certificate that tells the buyer to deduct TDS at a lower rate, calculated on your actual capital gain rather than the gross sale price. The application is made online in Form 13 on the TRACES portal, to the jurisdictional Assessing Officer (International Taxation).

What the application needs

• Your purchase deed and the proposed sale agreement.
• A working of the capital gain: cost of acquisition, cost of improvement, and expenses on transfer.
• PAN, passport and residential status details.
• Bank and prior-year return details.

How long it takes

Processing usually takes a few weeks once the file is complete, sometimes longer if the officer raises queries. This is why timing matters. The certificate has to be in the buyer’s hands at the time they make payment, so the application should go in well before registration. Leave it to the last week and you lose the benefit for that transaction.

A worked example

Sending the money abroad: Form 15CA and 15CB

Once the sale is done and proceeds are in your NRO account, repatriating them is a separate compliance step. Your bank will not remit the funds until it has:

• Form 15CB, a certificate from a Chartered Accountant confirming the nature of the remittance and that the correct tax has been accounted for, and
• Form 15CA, your own declaration filed on the income-tax portal, which refers to the 15CB.

These follow Rule 37BB. From an NRO account you can repatriate up to USD 1 million per financial year under the RBI scheme; beyond that needs RBI approval. We issue the 15CB and file the 15CA so your bank releases the funds without back-and-forth.

Avoiding double tax: the DTAA

India taxes the gain because the property is here. Your country of residence may also tax you on the same gain. India has a Double Taxation Avoidance Agreement (DTAA) with most countries where NRIs live, which prevents the gain being taxed fully in both places, usually through a credit for the tax paid in India.

To claim treaty benefits you generally need a Tax Residency Certificate (TRC) from your country of residence and Form 10F. If TDS was over-deducted, you recover the excess by filing an Indian income-tax return for the year. We prepare the return and track the refund with the CPC.

The buyer’s side: what your purchaser must do

The buyer is legally responsible for deducting and depositing the TDS, and they carry the risk if it is wrong. They must:

• Obtain a TAN before deducting (a PAN is not enough under Section 195).
• Deduct at the time of payment or credit, and deposit it by the 7th of the next month.
• File Form 27Q every quarter and issue you Form 16A.

A common and expensive mistake is the buyer deducting just 1% under Section 194-IA, treating you as a resident. If that is later corrected, the buyer faces the shortfall, interest and penalty. Sorting the structure out cleanly before the deal protects both sides.

The mistakes that cost NRIs the most

• Applying for Form 13 too late, or not at all, and accepting TDS on the full sale value.
• Letting the buyer deduct 1%, which creates a liability that surfaces later.
• Ignoring repatriation paperwork until the bank refuses to remit, then scrambling for 15CB.
• Not filing the Indian return, and writing off a refund that was recoverable.
• Missing the DTAA claim, and paying tax twice on the same gain.

Frequently asked questions

This guide is general information, not tax advice for your specific case. Rates and rules follow the Finance Act 2024 and may change with later amendments. Confirm the position for your transaction before acting. Vijay R Singh & Co., Chartered Accountants.