NRI Property Sale TDS: 20%+ Rate, Net Proceeds and Form 13 Lower-Deduction Certificate

When an NRI sells Indian property, the buyer must deduct TDS on the full sale consideration under s.195 ITA 1961 — not on the capital gain. The only practical way to cut TDS down to the actual gain is a Form 13 lower-deduction certificate from the Assessing Officer (AO), applied for 2–3 months before the sale completes.

⚠ Verify the rate before quoting. For LTCG on immovable property, Finance (No.2) Act 2024 changed the general LTCG rate from 20% with indexation to 12.5% without indexation for transfers on or after 23 July 2024. The 20%-with-indexation option was preserved (via a proviso to s.112) only for resident individuals/HUFs on immovable property acquired before 23 July 2024 — that option is NOT available to non-residents. So the s.195 TDS rate on an NRI's LTCG on immovable-property sale post-23-Jul-2024 should be checked against the current CBDT guidance: it likely follows the new 12.5% base rate, not the 20% figure used through this article. STCG (holding < 24 months) continues at slab rates. Confirm the current position with your CA before quantifying withholding.

TDS With and Without Form 13

Without Form 13, the buyer withholds on the gross amount. Since the gain is usually far smaller than the consideration, the default TDS is far larger than the tax actually payable — and the NRI recovers the excess only by filing an Indian ITR and claiming a refund.

The Rate and Surcharge Breakdown

The TDS rate on an NRI's long-term capital gain on immovable property is 20% of the consideration, to which surcharge and health and education cess (4%) are added. The surcharge is based on the amount of the consideration:

If the property is jointly owned with one resident and one NRI co-owner, the buyer deducts 1% TDS under s.194-IA on the resident's share and the higher s.195 TDS on the NRI's share — a split that is frequently done wrong.

Worked Example: Arjun's Bengaluru Flat

Arjun, an NRI in the US, sells his Bengaluru apartment for ₹1,20,00,000 in FY 2025-26. His indexed cost of acquisition is ₹68,00,000, giving a long-term capital gain of ₹52,00,000.

Without Form 13 — what the buyer must deduct:

• TDS: 20% × ₹1,20,00,000 = ₹24,00,000


• Surcharge: consideration ₹1.2 Cr > ₹1 Cr → 15% × ₹24,00,000 = ₹3,60,000


• Cess: 4% × ₹27,60,000 = ₹1,10,400


• Total TDS = ₹28,70,400

Arjun's actual tax (FY 2025-26): LTCG on property at 12.5% (no indexation) on ₹52,00,000 = ₹6,50,000, or 20% with indexation = ₹10,40,000 — he can choose the lower figure. Taking the 12.5% route:

• Tax withheld: ₹28,70,400
• Actual tax: ₹6,50,000 (+ applicable surcharge on his total income)
• Refund due: ₹22,20,400 — recovered only by filing ITR

With Form 13: if Arjun obtained a lower-deduction certificate before the sale, the buyer withholds on the gain of ₹52,00,000 at 20% = ₹10,40,000 + surcharge + cess — reducing the TDS by roughly ₹18 lakh and shrinking the refund chase.

Form 13: How to Get TDS on the Gain, Not the Price

Form 13 is an application for a certificate under s.197 for nil or lower deduction of tax at source. For an NRI property sale:

• Compute the capital gain with the buyer — indexed cost, sale expenses, holding period.
• File Form 13 on the income-tax e-filing portal with the AO having jurisdiction over the property, well before the sale — 2–3 months is a realistic lead time.
• The AO issues a certificate specifying the rate or amount for lower/NIL deduction.
• The buyer withholds only per the certificate; any shortfall is the seller's advance-tax responsibility.

Form 13 is worth it when the gain is a small fraction of the consideration. If the gain is close to the full price (e.g., a recently inherited property), the certificate saves little.

Buyer's Obligations (Form 27Q)

The buyer must:

• Deduct TDS at the applicable rate before making payment to the NRI.


• Deposit the TDS with the government within 30 days of the end of the month of deduction.


• File quarterly TDS returns on Form 27Q for payments to non-residents.


• Issue the TDS certificate to the seller, which reflects in the seller's Form 26AS / AIS.

The buyer is personally liable for TDS they fail to deduct or deposit — the tax can be recovered from the buyer, not just the seller.

Seller's Obligations

The NRI seller must:

• Obtain a PAN (mandatory for the sale to register).


• Pay advance tax on any gain in excess of what TDS covers (quarterly, if the shortfall is material).


• File the Indian ITR (ITR-2) to report the capital gain, claim credit for the TDS in Schedule TDS, and claim the refund of the excess withheld.


• Check Form 26AS/AIS to confirm the buyer deposited the TDS.

Changed FY 2025-26: For transfers on or after 23 July 2024, long-term capital gains on immovable property are taxed at 12.5% without indexation (or 20% with indexation for property acquired before 23 July 2024). The s.195 TDS rate for NRI sellers, however, remains 20% of the full consideration — so most NRI property sales now generate a substantial refund, making a timely ITR essential.

FAQ

Q1: Does the buyer deduct TDS on the sale price or the profit?
On the full sale consideration, not the gain — unless the NRI seller obtains a Form 13 lower-deduction certificate from the AO. Without it, 20% + surcharge + cess applies to the entire price.

Q2: What is the TDS rate for NRI property sale?
20% of the consideration for long-term capital gains, plus surcharge (10% to 37% depending on consideration) and 4% cess. The surcharge slabs are based on the sale consideration.

Q3: How do I get TDS deducted only on the gain?
Apply for a Form 13 (s.197) lower-deduction certificate from the AO with the full capital-gain computation. File 2–3 months before the sale so the certificate is issued before the buyer pays.

Q4: Who files Form 27Q in an NRI property sale?
The buyer files Form 27Q (the quarterly TDS statement for payments to non-residents) and deposits the TDS within 30 days. The buyer is personally liable if they fail to deduct or deposit.

Q5: I paid TDS of ₹28 lakh but my actual tax is ₹6.5 lakh. How do I get the refund?
File your Indian ITR (ITR-2) for the year of sale, report the long-term capital gain, and claim the TDS credit from Form 26AS. The excess is refunded after processing — but only if you file.

Q6: My property is jointly owned with my resident brother. What TDS applies?
The buyer deducts 1% TDS under s.194-IA on your brother's resident share and the higher s.195 rate (20% + surcharge + cess) on your NRI share. The shares must be separated correctly in the sale deed.

Q7: Do I need a PAN to sell property in India as an NRI?
Yes. A PAN is mandatory for the sale registration, for the buyer to deduct TDS, and for you to file the ITR and claim the refund.

Use our NRI Property TDS Calculator to compute the exact TDS and refund on your sale.

Sources

• Section 195, Income-tax Act 1961 — deduction of tax on payments to non-residents.
• Section 197 and Rule 28AA, Income-tax Act 1961 / Income-tax Rules 1962 — Form 13 lower/nil deduction certificate.
• Section 194-IA, Income-tax Act 1961 — 1% TDS on resident property sales.
• Section 27Q read with Rule 31A, Income-tax Rules 1962 — quarterly TDS statement for non-resident payees.
• Finance (No. 2) Act 2024 — 12.5% LTCG rate on immovable property, w.e.f. 23 July 2024.
• Rates in force, FY 2025-26 — surcharge slabs on s.195 TDS.

Get Form 13 before you sign the agreement, not after the buyer has already deducted the higher TDS. Book a consultation at harunraaj.com.

Need help with this?

Our team handles the paperwork. You focus on your business.