TDS on Sale of Property by NRI: Rules, Rates & Process Explained (2025)

TDS on Sale of Property by NRI: Rules, Rates & Process Explained: When a Non-Resident Indian (NRI) sells a property in India, the transaction is not only subject to capital gains tax but also involves a crucial compliance step — the deduction of TDS (Tax Deducted at Source). TDS ensures that the Indian government collects tax on the capital gain at the source itself before the seller receives the proceeds. This article explores the applicability, rate, deduction process, and implications of TDS on property sales by NRIs.

Applicability of TDS on Sale of Property by NRI

Under Section 195 of the Income Tax Act, any buyer (resident or NRI) making a payment to a Non-Resident must deduct TDS on the capital gains portion of the sale consideration. This rule applies regardless of the transaction value, unlike the rule for resident sellers where TDS applies only if the value exceeds ₹50 lakhs under Section 194-IA.

Thus, whenever an NRI sells property in India, TDS must be deducted by the buyer before remitting the payment.

TDS Rate for NRIs

The rate of TDS depends on the nature of the capital gain — short-term or long-term:

Short-Term Capital Gains (held for less than 2 years): Taxed as per the applicable income slab of the NRI (usually 30% + surcharge + cess).
Long-Term Capital Gains (held for more than 2 years): Taxed at 20% (plus surcharge and 4% health & education cess), effectively around 20.8% to 23.92% depending on the sale value.

It is important to note that TDS is calculated on the total sale value, not just on the capital gains, unless a lower TDS certificate is obtained from the Income Tax Department.

Obtaining Lower or NIL TDS Certificate (Form 13)

Since TDS is deducted on the entire sale amount, this can often result in excess tax deduction. To avoid this, the NRI seller can apply for a Lower or Nil TDS Certificate from the Assessing Officer under Section 197 by submitting Form 13.

Documents required typically include:

PAN of seller
Sale agreement
Property purchase documents
Estimated capital gains calculation
Proof of NRI status
Tax return of previous years

Upon review, the tax officer may issue a certificate specifying the applicable TDS rate based on actual capital gains, helping avoid over-deduction.

TDS Deduction & Payment Process for Buyer

The buyer must:

Deduct the TDS at the applicable rate.
Obtain a TAN (Tax Deduction Account Number), as it’s mandatory for deducting TDS under Section 195.
Deposit the TDS amount with the Income Tax Department using Form 26QB.
File a TDS return (Form 27Q) for the quarter.
Issue a TDS Certificate (Form 16A) to the NRI seller.

Failure to comply with any of these steps can lead to penalties for the buyer.

TDS on Sale of Property by NRI:

Conclusion

TDS on sale of property by NRIs is a complex but critical aspect of tax compliance. While the law mandates TDS deduction on the total sale amount, obtaining a lower TDS certificate can significantly ease the financial burden for the NRI seller. Both buyers and NRIs must ensure timely documentation and filing to stay compliant and avoid unnecessary litigation or financial losses. Seeking help from a tax advisor or chartered accountant is advisable to navigate this process smoothly.

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