Last reviewed: 30 September 2026. When an NRI sells property in India, the tax is usually manageable - but the TDS can be brutal, because buyers often deduct on the entire sale value rather than on the actual gain, locking up large sums until a refund comes through. This guide explains the capital gains tax, the non-resident TDS, how the lower-deduction certificate, exemptions and repatriation work, and shows the numbers on a ₹1.5 crore sale. For sales from 1 April 2026 the Income-tax Act, 2025 applies, and we cite its sections with the old 1961 section in brackets. Sales up to 31 March 2026 remain under the 1961 Act sections (195, 197, 54, 54EC, 54F). New from 1 October 2026: a resident individual or HUF buyer no longer needs a TAN to deduct on a purchase from an NRI; see our note on the new Form 141 Schedule E process.
At a glance
The capital gains position
For NRIs, long-term capital gain on property transferred on or after 23 July 2024 is taxed at 12.5% without indexation, regardless of the purchase date, plus surcharge and cess. The option to compute tax at 20% with indexation on property acquired before 23 July 2024 is available only to resident individuals and HUFs. Short-term gains (holding of 24 months or less) are taxed at slab rates. The gain is sale value minus cost of acquisition and improvement and transfer expenses.
Why the TDS hurts - and the fix
Under section 393(2) (old 195) the buyer deducts TDS on payments to an NRI seller. Without a certificate, buyers commonly deduct on the whole sale consideration, not just the gain, which can block far more cash than the real tax. The fix is a lower or nil deduction certificate under section 395(1)(a) (old 197), applied for in Form 128 (earlier Form 13) on TRACES - ideally 30 to 45 days before the sale - so TDS is deducted only on the actual gain. Existing certificates issued under section 197 continue for their validity.
Worked example: ₹1.5 crore sale
An NRI sells a Thane flat in November 2026 for ₹1.5 crore. It was bought in 2012 for ₹80 lakh, so the long-term gain is ₹70 lakh. She has no other Indian income.
| Item | Without certificate (TDS on sale value) | With lower-deduction certificate (TDS on gain) |
|---|---|---|
| Amount TDS is computed on | ₹1,50,00,000 | ₹70,00,000 |
| Base rate | 12.5% | 12.5% |
| Surcharge | 15% (payment above ₹1 crore) | 10% (income between ₹50 lakh and ₹1 crore) |
| Health and education cess | 4% | 4% |
| Effective rate | 14.95% | 14.30% |
| TDS deducted | ₹22,42,500 | ₹10,01,000 |
| Cash blocked until refund | About ₹12.4 lakh | Nil (TDS matches the expected tax) |
The certificate rate is set by the assessing officer and may differ slightly from this estimate. Without it, the ₹12.4 lakh comes back only after she files her return and it is processed.
Exemptions still available to NRIs
NRIs can use the same capital gains exemptions - reinvesting in a residential house in India (sections 82 and 86, old 54 and 54F) or in specified bonds (section 85, old 54EC, up to Rs 50 lakh) - subject to the conditions and the Rs 10 crore cap. Plan these before the sale to reduce the gain that TDS is computed on. In the example above, investing ₹50 lakh in specified bonds within six months would bring the taxable gain down to ₹20 lakh.
Refunds and repatriation
If TDS still exceeded your actual tax, claim the excess as a refund by filing your ITR. If you are resident in a treaty country, keep your tax residency certificate ready (section 159(8)(a), old 90(4)); see our guide to DTAA relief, TRC and Form 10F. Property gains are generally taxable in India under most treaties, so the TRC matters more for the foreign return than for the Indian rate.
| Source of the property | Repatriation route under FEMA |
|---|---|
| Residential property bought with foreign inward remittance or NRE/FCNR funds | Proceeds of up to two such properties repatriable, up to the foreign exchange originally paid |
| Inherited property, property bought from NRO funds, or proceeds above the original foreign exchange | Credit to NRO account, then remit within the USD 1 million per financial year limit |
For the remittance, the remitter files Form 145 (earlier 15CA) and, where required, a CA certificate in Form 146 (earlier 15CB) before the bank remits. Our guide to the USD 1 million repatriation scheme walks through the bank documentation.
The sequence that works
- Compute the gain and plan any bond or house reinvestment.
- Apply for the lower-deduction certificate in Form 128, 30 to 45 days before the sale.
- Share the certificate with the buyer. A resident individual or HUF buyer deducts under section 393(2) and reports through the PAN-based Form 141, Schedule E (from 1 October 2026, no TAN). Any other buyer obtains a TAN, deducts under section 393(2), deposits the TDS and files Form 144 (earlier 27Q).
- Receive the net proceeds in the NRO account.
- File Form 145 and Form 146 and remit through the bank.
- File the ITR for the tax year and claim any excess TDS as a refund.
For the wider picture, see our NRI tax hub.
Frequently asked questions
What TDS applies when an NRI sells property in India?
For a sale on or after 1 April 2026, the buyer deducts TDS under section 393(2) of the Income-tax Act, 2025 (old section 195). For long-term property (held over 24 months) the rate is 12.5% plus surcharge and cess; for short-term, the applicable higher rates. Crucially, without a lower-deduction certificate the buyer often deducts on the whole sale value, not just the gain. Sales up to 31 March 2026 fall under section 195 of the 1961 Act.
How is the capital gain on property taxed for an NRI?
For an NRI, long-term gains on property transferred on or after 23 July 2024 are taxed at 12.5% without indexation, plus surcharge and cess, whatever the purchase date. The option to pay 20% with indexation on property acquired before 23 July 2024 is available only to resident individuals and HUFs. Short-term gains are taxed at slab rates.
What is the lower TDS certificate and why does it matter?
An NRI seller can apply for a certificate authorising the buyer to deduct TDS on the actual gain instead of the full sale value. For applications from 1 April 2026 this is under section 395(1)(a) of the Income-tax Act, 2025 (old section 197), in Form 128 (earlier Form 13). This is the single biggest way NRIs avoid large amounts of cash getting blocked.
When should I apply for the lower TDS certificate?
Apply well before the sale - ideally 30 to 45 days ahead - because the certificate must be in place before the buyer deducts and pays the TDS.
Can I claim exemptions on the capital gain?
Yes. The exemptions for reinvesting in a residential house in India or in specified bonds are available to NRIs too: sections 82, 86 and 85 of the Income-tax Act, 2025 (old 54, 54F and 54EC) for sales from 1 April 2026, subject to the same conditions, the Rs 10 crore cap for house reinvestment and the Rs 50 lakh bond limit.
Can I get a refund of excess TDS?
Yes. If TDS exceeded your actual tax - common where it was deducted on the sale value - you claim the excess as a refund by filing your ITR for the year.
Does the buyer need a TAN?
It depends on the buyer and the date. From 1 October 2026 a resident individual or HUF buyer deducts tax on a purchase from an NRI without a TAN, using the PAN-based Form 141 with the new Schedule E (CBDT Notification 121/2026, G.S.R. 830(E), 22 September 2026). Companies, firms, LLPs and other buyers still need a TAN and file the quarterly non-resident statement in Form 144 (earlier 27Q). For payments made before 1 October 2026 the TAN route applies. The relief covers property purchases only, not rent or other payments to non-residents.
How is the sale money repatriated abroad?
Sale proceeds of up to two residential properties bought with foreign inward remittance or from NRE/FCNR funds can be repatriated up to the amount originally paid in foreign exchange. Other proceeds are credited to the NRO account and can be remitted under the USD 1 million per financial year limit. The remitter files Form 145 (earlier 15CA) and, where required, a CA certificate in Form 146 (earlier 15CB).
What documents are needed for the lower TDS certificate?
The purchase deed, proposed sale deed, capital gains computation, PAN and passport, and supporting proof of cost and any reinvestment intent.
What happens if the buyer deducts too little TDS?
The buyer can be treated as an assessee in default with interest and penalty, so buyers are cautious - which is exactly why the seller's lower-deduction certificate helps both sides transact smoothly.
We obtain your lower-TDS certificate, compute the gain and exemptions, and handle 15CA/CB and the refund.
NRI Lower TDS CertificateRefund & rectificationCA for NRIsTalk to CA Somesh Chandak & Associates - we manage NRI property-sale TDS, exemptions and repatriation.
WhatsAppLinkedInSchedule a callDisclaimer: This article is for general guidance only and is not a substitute for advice on your specific transaction and the latest law. Section and form references follow the Income-tax Act, 2025 and the Income-tax Rules, 2026 as amended up to Notification 121/2026 dated 22 September 2026. Please consult before acting.