Are you an NRI selling property in India? Then this recent Delhi High Court judgment is a must-read. A Non-Resident Indian (NRI) based in the USA sold a property in Pune for ₹2 crore, only to face a tax demand notice of ₹46 lakh from the Income Tax Department—all due to a TDS filing mistake by the buyer.

This case highlights how small procedural errors during NRI property sale can lead to large-scale tax problems. It also shows why you need a specialized NRI property consultant in India who understands the nuances of capital gains tax, TDS compliance, and tax refunds for NRIs.

What Went Wrong in This NRI Property Sale?

• The NRI sold a Pune property for ₹2 crore.
• Buyer deducted 20% TDS on sale of property by NRI, amounting to ₹18.68 lakh.
• However, the buyer wrongly filed the TDS under Form 26QB, meant for resident sellers.
• As a result, the TDS did not reflect in the NRI’s Form 26AS or AIS.
• The Income Tax Department treated it as non-payment of capital gains tax and issued a tax demand of ₹46.81 lakh, also starting penalty proceedings.
• Despite paying ₹1.91 lakh as advance capital gains tax, the NRI couldn’t claim credit for the 20% TDS already deducted, all because it wasn’t correctly reported under his PAN due to use of the wrong TDS form.

Timeline: NRI’s Legal Journey From Pune Sale to High Court Victory

• 1998: NRI purchases property in Pune.
• 2015: Sells the property for ₹2 crore, buyer deducts 20% TDS but files Form 26QB instead of Form 27Q.
• 2015: NRI pays ₹1.91 lakh as advance tax on capital gains.
• 2023: Income Tax Dept. issues notice under Section 148, alleging income escaped assessment.
• 2025: Tax department demands ₹46.81 lakh + penalty under Section 270A.
• May 27, 2025: Delhi High Court rules in favor of NRI, orders full TDS credit and refund computation.

Delhi High Court's Landmark Ruling: A Win for All NRIs

In a significant ruling, the Delhi High Court ordered:

• Correction of TDS credit under the NRI's PAN
• Recognition of full 20% TDS deposited under wrong form
• Refund computation as per law
• All earlier tax demands and penalties to be treated as null and void

Key Takeaway:

The Court held that a procedural lapse by the buyer cannot be a ground to penalize a compliant NRI seller. Tax credit must be granted if tax has been deducted and paid, regardless of form errors.

What NRIs Can Learn: Essential Tax & Compliance Checklist

If you’re an NRI planning to sell property in India, here’s what you must ensure to avoid any legal or financial setbacks:

1. Use Correct TDS Form: Form 27Q
Applicable for TDS on sale of property by NRI.

Form 26QB is only for resident sellers—using it will cause problems in claiming tax credit.

2. Buyer Must Have a TAN (Tax Deduction Account Number)
Form 27Q requires the buyer to have a valid TAN. PAN is not enough for NRI transactions.

3. Collect Form 16A from Buyer
This is your proof that TDS was deducted and deposited. Insist on receiving it.

4. Check Your AIS and Form 26AS
Ensure the TDS is correctly reflected under your PAN before filing your Income Tax Return (ITR).

5. File ITR in India Within Deadline
To claim refund or credit, file your ITR on time, even if you are residing abroad.

Legal Insight: Substance Over Form in NRI Taxation

Indian tax law says:

“TDS paid by the payer on behalf of the payee is deemed tax paid by the payee.”

This case shows how NRI taxpayers must not suffer due to buyer’s procedural mistakes. Courts are increasingly ruling in favor of substance over form, but it takes legal support and proactive tax advisory to navigate such challenges.

Why You Need Expert NRI Property Consultants in India

The NRI in this case had to wait nearly 10 years to get tax justice due to a simple form filing error by the buyer. Such issues can be easily avoided with proper guidance.

At Dinesh Aarjav & Associates, we are India’s leading NRI property tax consultants, trusted by clients across the USA, UK, UAE, Canada, Australia, and more.

We specialize in:

• Sale of Property by NRI
• TDS Compliance & Form 27Q Filing
• Capital Gains Tax Computation
• NRI Tax Returns Filing
• Repatriation and DTAA Advisory
• NRI Refund Claims and Representation

Your Trusted Partner for NRI Taxation in India

Whether you’re planning to sell property in India, repatriate funds, or claim refunds, our dedicated NRI services team helps you stay compliant and stress-free.

• Schedule a consultation with our experts today.
• Visit www.dineshaarjav.com to learn more.
• Protect your tax rights. Don't let a form error cost you your refund.