TDS on Sale of Property by NRI: The ₹12 Lakh Mistake Most Sellers Discover After Signing

It’s 11:40 at night in New Jersey. You’ve just hung up with the broker in Mumbai — the flat your father bought in Andheri finally has a serious buyer. ₹2 crore. Token amount agreed. Society NOC underway. In your head, the money is already working: the down payment here, the loan gone, maybe something set aside for the kids.

Then the buyer’s CA sends one line on WhatsApp:

“Sir, we will be deducting TDS before transferring the amount. Please share your PAN.”

You’ve heard of this. It’s the 1% thing, right? Small deduction, adjusts later.

For a resident seller — yes. For you, an NRI — no.

For you it’s closer to 15%. And not on your profit. On the entire ₹2 crore.

That’s roughly ₹30 lakh, held back before a single rupee reaches your account.

If your stomach just dropped a little, good. That reaction, right now, while nothing is signed — is worth lakhs. Because this exact scene plays out in NRI families every single week, and the only thing that separates the sellers who lose a year’s access to their own money from the ones who don’t is when they learned what you’re about to read.

Why TDS on an NRI Property Sale Is 15x Higher Than You Expect

When a resident sells property, the buyer deducts a flat 1% TDS, and only if the price crosses ₹50 lakh. That’s the rule everyone has heard of. That’s the rule you’d naturally assume.

But the moment the seller is an NRI, that rule stops applying and a completely different one takes over — the buyer must deduct tax at full capital-gains rates, with no minimum threshold at all. Yes, even on a ₹25 lakh flat.

The 2026 rates, plainly:

Held more than 24 months (long-term): 12.5% + surcharge + 4% cess. Effectively 13% to 14.95% depending on the sale value. And since 23 July 2024, there’s no indexation — your gain is the raw difference between what it sells for and what it cost.

Held 24 months or less (short-term): slab rates. Buyers play it safe and deduct at the top — effectively up to ~35.9%.

(One small thing worth noticing: the Income-tax Act, 2025 took effect this April, so the old Section 195 is now Section 393(2), and Section 197 is Section 395. If the CA advising your buyer is still quoting only the old numbers, that tells you how current their advice is.)

The Part That Makes People Genuinely Angry

High rates are one thing. Here’s the actual trap: the buyer deducts TDS on your full sale price, not your profit.

Why? Because your buyer has no legal way to calculate your capital gain. They don’t know what your father paid in 2012, what exemptions you plan to claim, what your other Indian income looks like. And if they under-deduct, the penalty lands on them. So they do the only safe thing available: deduct on everything.

Put numbers on that ₹2 crore flat and you’ll feel it.

Say your father bought it in 2012 for ₹80 lakh, and you inherited it — the holding period and his purchase cost both carry over to you, a detail that matters in thousands of NRI sales.

Your actual long-term gain: ₹1.2 crore. Your actual tax on that gain: roughly ₹18 lakh. What the buyer must deduct without paperwork: roughly ₹30 lakh.

Sit with that gap for a second. ₹12 lakh of your own money — from a flat your family already paid for — parked with the Income Tax Department for months. Possibly more than a year.

And here’s the twist that stings most: if you reinvest the gains in another Indian property under Section 54, or in 54EC bonds, your actual tax could be close to zero. The ₹30 lakh gets deducted anyway. The very money you needed for the reinvestment.

Meanwhile, life doesn’t pause for a refund cycle. The down payment abroad. The tuition. The plans. Everything just… waits.

How to Reduce TDS on Sale of Property by NRI: The Lower TDS Certificate

Now the part almost nobody tells you until it’s too late — usually because there’s no one in the transaction whose job it is to tell you. The broker gets paid either way. The buyer’s CA protects the buyer. You’re the only person in the deal whose ₹12 lakh is on the line, and you’re 12,000 km away.

The law has always contained a fix for exactly this situation. You can apply to your Assessing Officer for a certificate that legally instructs your buyer to deduct TDS at your actual tax rate — or at nil, if exemptions wipe your liability out. Old-timers know it as Form 13. Under the 2025 Act it’s now Form 128, filed online through the TRACES portal. Same idea, new number.

With that one document, the math flips:

Without the certificate: ₹30 lakh deducted → ₹12 lakh stuck → refund lands in 8–18 months, if the filing goes perfectly. With the certificate: ~₹18 lakh deducted (or far less with Section 54) → everything else hits your account the day the money moves.

Same flat. Same buyer. Same law. One piece of paper.

What actually happens, step by step

Your real liability gets computed first. Actual gain, planned Section 54 / 54EC reinvestment, the DTAA position for your country — the honest number, not the panic number.

Form 128 is filed on TRACES. Sale agreement, purchase deed, PAN, past returns, income estimate. (A genuinely useful 2026 change: the department has started auto-approving straightforward applications against preset criteria, which is quietly speeding things up.)

Someone chases it. Certificates typically arrive in 3 to 6 weeks — and the difference between three and six is usually whether anyone is following up with the officer. Applications that sit are applications nobody chased.

Your buyer deducts at the certified rate. They deposit it against your PAN, and the rest of your money is yours. Immediately. Not in eighteen months.

The One Rule That Decides Everything: Timing

Here’s the sentence worth reading twice before you sign anything:

The certificate only protects payments made after it exists. TDS already deducted cannot be un-deducted — including on token amounts and advances.

So the moment a sale becomes realistic — before the agreement, ideally before the buyer is even final — the clock should start. Six weeks of lead time is quite literally the difference between ₹12 lakh in your account and ₹12 lakh in the government’s.

Catch it early enough and the midnight WhatsApp message reads completely differently. The application goes in while the NOC is still in process. The certificate lands in week five, before the registration payment. Your buyer deducts ₹18 lakh instead of ₹30 — and the balance arrives whole, on the day it should.

Catch it after the full payment, and you get the next section instead.

Already Sold and Lost the TDS? The Refund Route

If the deduction has already happened, breathe — the money isn’t gone. It’s parked.

You claim the excess back by filing your Indian income tax return after the financial year ends. The refund comes with modest interest. The catch is time: between the filing window and processing, expect 8 to 18 months. It also only works if the buyer did their side correctly — TAN, timely deposit, Form 27Q — so the credit actually shows against your PAN. This is where an alarming number of refunds silently die.

We handle these recovery cases end to end: verifying the credit trail, filing the return right, and pushing the refund through. Slower than the certificate. Still very much your money.

Getting the Money Out of India: Repatriation

The sale proceeds landing in your NRO account is the halfway point, not the finish line.

Moving them abroad has its own compliance layer: NRO repatriation is allowed up to USD 1 million per financial year, and your bank’s FEMA desk will want a CA-certified remittance certificate (the old Form 15CA/15CB pair, renumbered under the 2025 Act) plus proof the sale’s taxes are settled. With the file complete, funds reach your foreign account in days. With gaps, the bank simply sits on it — for weeks.

We run the entire repatriation process — certificates, portal filings, and speaking directly with your bank so you don’t have to explain FEMA to a relationship manager at midnight.

The 5 Mistakes NRI Sellers Make Again and Again

Telling the buyer “just deduct 1%.” The buyer wears the penalty for under-deduction, so either they refuse (deal friction) or comply and both of you inherit a mess.

Applying for the certificate after signing. By then, advances have often been paid — and those deductions are locked in forever.

Assuming a loss-making sale means no TDS. It doesn’t. Without a nil certificate, the buyer must still deduct. Your loss, ironically, needs paperwork.

Letting the buyer wing the TDS mechanics. No TAN, late deposit, wrong form — and suddenly the credit never appears against your PAN, and your refund has nothing to attach to.

Planning a Section 54 reinvestment but telling no one until return time. That plan, disclosed early inside a Form 128 application, is exactly what gets you a near-nil deduction. Held back, it’s worth nothing until the refund cycle.

Every one of these is avoidable with a single conversation held early enough. Which, not coincidentally, is the cheapest thing on this entire page.

TDS on NRI Property Sale: The Questions Everyone Asks

What is the TDS rate on sale of property by an NRI in 2026? For property held over 24 months: 12.5% plus surcharge and cess — effectively 13% to 14.95% of the sale price. For 24 months or less: slab rates, deducted at up to ~35.9%. By default it’s applied to the full sale consideration, not the gain.

Is there a minimum property value below which no TDS applies? No. The ₹50 lakh threshold is for resident sellers only. For NRI sellers, TDS applies from the first rupee — there is no exempt band.

Can TDS be avoided if I’m selling at a loss? Only with a nil deduction certificate. Your buyer can’t legally take your word for the loss — the certificate is what authorises them to skip the deduction.

How long does a lower TDS certificate (Form 13 / Form 128) take? Typically 3 to 6 weeks from filing on TRACES, depending on the Assessing Officer and how actively the application is followed up. Apply before any payment changes hands.

I already sold and TDS was deducted. Can I get a refund? Yes — by filing your Indian income tax return for that year. Expect 8 to 18 months, and make sure the buyer deposited the TDS correctly against your PAN, or the refund will stall.

Do I need to travel to India for any of this? No. The certificate, the sale-side computation, the return, the repatriation filings — every step is digital and can be completed entirely from abroad.

Two Versions of This Story. You Get to Pick One.

In the first version, you find out about NRI TDS from the buyer’s CA, after signing — with ₹30 lakh about to leave your control and an eighteen-month wait to recover the excess.

In the second, you have one conversation a few weeks earlier. The certificate is sitting in your buyer’s inbox before the big payment. The deduction matches your actual tax. The rest of your money arrives when the sale closes — and moves abroad cleanly after.

Same property. Same buyer. Same law. The only variable is when you pick up the phone.

At CA Chauhan & Co, NRI property sales, lower TDS certificates and repatriation aren’t a side offering — they’re daily practice, handled end-to-end and fully remote from Mumbai.

Message us on WhatsApp — we typically reply within the hour — or book a free consultation, or call +91-81698 20387.

And even if you never contact us: promise yourself one thing. Don’t let anyone pay you a rupee until you’ve had the TDS conversation. That single habit is worth more than everything else on this page.