When an NRI sells property in India, the buyer must deduct tax at source at the rates that apply to the NRI's capital gains, calculated on the full sale consideration unless the NRI obtains a lower or nil deduction certificate from the Income Tax Department. For property held more than 24 months and sold after 23 July 2024, long-term gains are taxed at 12.5% plus surcharge and cess, without indexation. The buyer needs a TAN, deposits the tax and issues a TDS certificate; the NRI files a return to settle the final liability.
- Who deducts
- The buyer, before paying you
- Long-term rate
- 12.5% plus surcharge and cess
- Holding period
- More than 24 months
- Relief
- Lower deduction certificate
Why the deduction is so high
For a resident seller, the buyer deducts a flat 1% on property sales above the threshold. That simple rule does not apply when the seller is a non-resident. The buyer must instead deduct tax at the rate that applies to the income of the non-resident, which for a long-term sale is 12.5% plus surcharge and health and education cess, and for a short-term sale is the slab rate, generally applied at 30% plus surcharge and cess. The problem is the base: unless a certificate says otherwise, the buyer applies the rate to the entire sale consideration, because the buyer has no way of knowing your cost.
Take a flat bought for ₹60 lakh and sold for ₹1.2 crore. The actual gain is ₹60 lakh, but without a certificate the buyer deducts on ₹1.2 crore. Surcharge for capital gains is 10% where income exceeds ₹50 lakh and 15% where it exceeds ₹1 crore, and cess is 4% on top. The excess comes back to you only as a refund after you file your return, which can be more than a year after the sale.
Rates at a glance
| Item | Long-term (held more than 24 months) | Short-term (24 months or less) |
|---|---|---|
| Base rate | 12.5% for transfers on or after 23 July 2024 | Slab rates; TDS generally at 30% |
| Indexation | Not available to NRIs | Not applicable |
| Surcharge | 10% above ₹50 lakh; 15% above ₹1 crore | Slab-based, higher at high incomes |
| Cess | 4% on tax plus surcharge | 4% on tax plus surcharge |
| Base for TDS without certificate | Full sale consideration | Full sale consideration |
Before 23 July 2024, long-term gains on property were taxed at 20% with indexation of cost. The Finance Act 2024 moved to 12.5% without indexation. Resident individuals who bought land or buildings before that date may still compare the two methods, but that relief was given to residents only; NRIs compute gains at 12.5% without indexation. Inherited property counts the previous owner's holding period and cost, which often turns an apparently short-term sale into a long-term one.
Lower or nil deduction certificate
The single most useful step for an NRI seller is an application to the Assessing Officer for a certificate authorising the buyer to deduct tax at a lower rate, or not at all, based on your estimated capital gain rather than the sale price. The application is made online through the TRACES system with your PAN and needs the draft agreement or a sale estimate, the purchase deed and proof of cost, details of improvement costs, your residential status and details of any planned reinvestment.
The certificate is specific to the buyer, the transaction and the amount, so it is applied for once the buyer and price are agreed. Processing takes several weeks and the officer often asks questions, so we file as soon as the token or agreement is signed and build the timeline into the sale agreement. The Income-tax Act 2025 has carried this mechanism forward from the 1961 Act; we use the form and provision applicable on the date of the application.
What the buyer has to do
Buyers are often surprised that the TDS rules for NRI sellers are stricter than for resident sellers. The buyer must:
- obtain a Tax Deduction Account Number (TAN), because the simpler PAN-based challan route available for purchases from residents does not apply;
- deduct tax on each payment, including the advance and every instalment, at the rate in your certificate or otherwise at the full rate;
- deposit the tax by the due date and file the quarterly TDS return for payments to non-residents;
- issue you a TDS certificate (Form 16A) so that you get credit in your return.
If the buyer deducts too little, the buyer becomes liable for the shortfall with interest, and may face disallowance and penalty. Careful buyers therefore insist on the full deduction unless you hand them a certificate. We often act for the buyer as well when the seller is our client, so that the TAN, deductions and returns are done correctly and the registration is not held up.
Reducing the tax: reinvestment exemptions
NRIs can claim the same capital gains exemptions as residents on long-term gains from property. Under the 1961 Act these were sections 54, 54EC and 54F, and the Income-tax Act 2025 carries them forward with new numbering:
- Buying a residential house in India with the gain from a residential house, within one year before or two years after the sale, or constructing one within three years.
- Investing in specified bonds (such as NHAI or REC capital gains bonds) within six months, up to ₹50 lakh per financial year, with a five-year lock-in.
- Buying a residential house with the net sale consideration of other long-term assets, such as a plot or commercial property, subject to conditions.
Since 1 April 2023, the house-reinvestment exemptions are capped at ₹10 crore. The new house must be in India. If you have not reinvested by the return due date, the unutilised amount must be deposited in a Capital Gains Account Scheme account with a bank. Planned reinvestment should be disclosed in the lower deduction application so the certificate reflects it.
After the sale: return, refund and repatriation
The deduction is not the final tax. You file an Indian income tax return for the year of sale, reporting the gain and claiming credit for the TDS; any excess is refunded to your Indian bank account. Check that the TDS appears in your Form 26AS before filing, because a buyer who did not deposit or report it leaves you without credit. See our page on NRI income tax for residency and treaty points. Some tax treaties allocate gains from immovable property to the country where it is located, so India keeps the right to tax and your country of residence may give credit.
To send the proceeds abroad, your bank will require Form 15CA and, in most cases, a chartered accountant's certificate in Form 15CB confirming the tax has been paid. The FEMA limits are explained on our repatriation page. The legal side of the sale, including the power of attorney and registration, is covered in buying and selling property.
Mistakes NRI sellers make
- Signing the agreement before thinking about TDS. The certificate takes time, and the advance is also subject to deduction.
- Letting the buyer deduct only 1%. It is the buyer's default, but the department may later pursue both sides and refunds become complicated.
- Losing the purchase papers. Without proof of cost and improvements, the gain is overstated.
- Missing the reinvestment window or failing to deposit the unused gain in the capital gains account before the return due date.
- Not filing a return, which leaves the excess TDS with the government.
Documents you need
Scans are enough for the certificate application and the tax computation. Originals are needed only at registration.
- PAN card and passport with visa or OCI card
- Purchase deed, allotment letter and payment receipts showing your cost
- Bills or proof of improvement and construction costs
- Draft agreement to sell or token receipt with the buyer's details
- Buyer's PAN and TAN
- Proof of reinvestment or intended reinvestment
- Indian bank account details (NRO) for the sale proceeds
- Previous owner's documents if the property was inherited
How we handle it for you
Compute the gain
We work out the holding period, cost and estimated tax before you agree the price.
Apply for the certificate
Online application for lower or nil deduction with the supporting documents.
Guide the buyer
TAN, deduction on each payment, deposit, TDS return and Form 16A.
Plan reinvestment
House purchase, capital gains bonds or the capital gains account scheme within the time limits.
Return and remittance
Your return, the refund, and Form 15CA/15CB so the money can leave India.
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Frequently asked questions
How much TDS does a buyer deduct when an NRI sells property?
Without a certificate, tax at the NRI's applicable rate on the full sale price: for long-term gains, 12.5% plus surcharge and 4% cess. With a lower deduction certificate, the rate is applied according to your estimated gain.
Can an NRI seller ask for only 1% TDS?
No. The 1% rule applies only where the seller is resident. For an NRI seller, the buyer must deduct at the applicable rate unless a certificate permits less.
Does the buyer need a TAN to buy from an NRI?
Yes. The PAN-based challan route used for resident sellers is not available, so the buyer must obtain a TAN and file TDS returns.
Can NRIs claim indexation on old property?
No. For transfers on or after 23 July 2024, long-term gains are taxed at 12.5% without indexation. The option to compare with the old indexed method was given to resident individuals only.
How long does a lower deduction certificate take?
Usually several weeks, depending on the Assessing Officer and any queries raised. Apply as soon as the buyer and price are agreed.
Is there a limit on the reinvestment exemption?
Yes. The exemptions for buying a residential house are capped at ₹10 crore, and the capital gains bonds route at ₹50 lakh per financial year.
How do I get back excess TDS?
File an Indian income tax return for the year of sale claiming credit for the TDS. The excess is refunded to your Indian bank account after processing.
Do I need to be in India for the sale?
No. The sale can be executed through a registered power of attorney, and the tax steps are online. We coordinate both.