WhatsApp
Call Us
Email Us
Whatsapp Community
Would you like to schedule a call back
Selling property in India as a Non-Resident Indian (NRI) involves significant tax and FEMA compliance obligations. One of the most important aspects of such transactions is TDS on sale of property by NRI, which impacts:
With the implementation of the Income Tax Act, 2025 effective from 1 April 2026, several provisions, forms, and procedural references relating to TDS on NRI property transactions have changed.
This updated and comprehensive guide explains:
If you are:
this guide is for you.
Yes.
NRIs are permitted to hold and sell immovable property in India in accordance with FEMA regulations and Indian tax laws.
NRIs commonly sell:
However, sale transactions involving NRIs attract special tax provisions under the Income Tax Act, 2025.
TDS (Tax Deducted at Source) is a mechanism under which the buyer deducts tax before making payment to the seller and deposits the same with the Income Tax Department.
Under Section 393(2) of the Income Tax Act, 2025, when a person purchases immovable property from an NRI, the buyer is legally responsible for deducting TDS on the payment made to the seller.
The deduction is required on every payment made to the NRI seller irrespective of:
This is one of the most important differences between:
No.
Unlike transactions involving resident sellers, there is no minimum threshold for deduction of TDS when purchasing property from an NRI.
Even if the property value is:
TDS provisions under Section 393(2) still apply.
This is a critical compliance point that many buyers miss.
Case 1 – Buying Property from Resident Seller
Where the seller is a Resident Indian:
TDS Rate
1% of:
whichever is higher.
Threshold
Applicable only if property value is ₹50 lakh or more.
Relevant Provision
Section 393(1) of the Income Tax Act, 2025.
Compliance
Case 2 – Buying Property from NRI Seller
Where the seller is an NRI:
Threshold
No minimum threshold.
Relevant Provision
Section 393(2) of the Income Tax Act, 2025.
TDS Rates
TDS depends upon:
If the NRI seller has held the property for more than 24 months, the gains are treated as Long-Term Capital Gains.
TDS Rate on LTCG
| Particulars | Less than ₹50 Lakhs | ₹50 Lakhs – ₹1 Crore | ₹1 Crore – ₹2 Crore | ₹2 Crore – ₹5 Crore | Above ₹5 Crore |
| Base TDS Rate | 12.50% | 12.50% | 12.50% | 12.50% | 12.50% |
| Surcharge | Nil | 10% | 15% | 15% | 15% |
| Health & Education Cess | 4% | 4% | 4% | 4% | 4% |
| Effective TDS Rate | 13% | 14.30% | 14.95% | 14.95% | 14.95% |
Important: The maximum effective TDS rate for NRIs selling property in India is 14.95%, including surcharge and cess.
If the property is held for 24 months or less, gains are treated as Short-Term Capital Gains.
TDS Rate on STCG
Short-Term Capital Gains are taxable at applicable slab rates.
In practical scenarios, buyers usually deduct TDS at:
as a conservative measure because the buyer generally does not know the overall taxable income of the NRI seller.
This is one of the most searched questions by NRIs globally.
In case of property sale by an NRI, TDS is generally deducted on the entire sale consideration and not merely on the capital gains amount.
Example
| Particulars | Amount |
| Sale Consideration | ₹2 Crore |
| Actual Capital Gain | ₹15 Lakh |
| TDS may still apply on | ₹2 Crore |
This often leads to:
Hence, obtaining a Lower/Nil TDS Certificate becomes extremely important for NRIs.
To avoid excessive deduction of TDS, NRIs can apply for a Lower or Nil TDS Certificate under Section 395(1) of the Income Tax Act, 2025.
This is one of the most important NRI tax planning mechanisms available to NRIs selling property in India.
Form 13 Replaced by Form 128
One of the biggest procedural changes introduced under the Income Tax Act, 2025 is:
Earlier Form 13 → replaced by → Form 128
Effective from 1 April 2026:
Applications for Lower/Nil TDS Certificates are now required to be filed using Form 128.
Step 1 – Capital Gains Computation
Detailed computation of:
is prepared.
Step 2 – Filing Form 128
Application is filed electronically with:
Step 3 – Verification by Income Tax Department
The department examines:
Step 4 – Issuance of Certificate
If satisfied, the department issues:
specifying the applicable rate of deduction.
Step 5 – Buyer Deducts TDS Accordingly
The buyer deducts TDS only at the rate mentioned in the certificate.
Obtaining a Lower/Nil TDS Certificate helps NRIs:
Without proper tax planning, a substantial amount of money may remain blocked until refund processing is completed.
If TDS deducted is higher than actual tax liability:
The NRI seller can claim refund by filing Income Tax Return in India.
However:
Hence, proactive Lower TDS planning is generally advisable.
Many buyers rely solely on seller declarations and incorrectly treat the transaction as a resident transaction.
This can have serious consequences.
Under the Income Tax Act, 2025:
Therefore, buyers should independently verify:
before completing the transaction.
Improper TDS compliance can create significant issues for the NRI seller:
Banks generally require:
before allowing outward remittance abroad.
NRIs may repatriate sale proceeds outside India subject to:
Generally:
Commonly required documents include:
Yes.
PAN is practically mandatory for:
Without PAN:
Q.1 Who is responsible for deducting TDS?
Ans: The buyer is responsible for deducting and depositing TDS.
Q.2 Can NRIs reduce TDS on property sales?
Ans: Yes. NRIs can apply for Lower/Nil TDS Certificate using Form 128.
Q.3 Is there any minimum threshold for TDS on NRI property sale?
Ans: No. TDS applies irrespective of property value.
Q.4 Can NRIs claim refund of excess TDS?
Ans: Yes. Refund can be claimed by filing Income Tax Return in India.
Q.5 Can NRIs repatriate sale proceeds abroad?
Ans: Yes, subject to FEMA regulations and tax compliance.
At Dinesh Aarjav & Associates, we assist NRIs across:
with:
We specialise in handling complex NRI property transactions and cross-border tax matters under the updated Income Tax Act, 2025.
Budget 2026: Major Relief for NRIs Selling Property in India – TDS Compliance Simplified
TDS on Property Purchase from an NRI: Avoid Penalties and Ensure Compliance
Stay in the loop, subscribe to our newsletter and unlock a world of exclusive updates, insights, and offers delivered straight to your inbox.
.webp)
