NRI · Money · The Propah POV
TDS when an NRI sells property in India, and how Form 13 reduces it
When an NRI sells property in India, tax is deducted at source on the entire sale value, not on the profit. On a ₹1.5 crore sale where you made ₹60 lakh, roughly ₹19–22 lakh is withheld against a real liability nearer ₹8–9 lakh. A lower-deduction certificate fixes it — but only if you apply before the sale completes.
Why the number is so much larger than your tax
For a resident seller, TDS on property is 1% of the sale value. For a non-resident it is a different provision entirely, and it works on a different base.
The buyer is required to deduct at the applicable capital gains rate — but applied to the whole consideration, because at the point of deduction nobody has established what your gain actually is. The department is not guessing in your favour. It withholds as though your entire sale price were profit.
You are not being taxed on the full sale value. You are being withheld on it. The difference is roughly a year of your money.
The arithmetic, worked
Long-term gains on property held more than 24 months are taxed at 12.5% without indexation. Add surcharge, then 4% cess on the total.
| Surcharge band | Effective rate | Applies when |
|---|---|---|
| Nil | 13.00% | Total income under ₹50 lakh |
| 10% | 14.30% | ₹50 lakh to ₹1 crore |
| 15% | 14.95% | Above ₹1 crore |
Surcharge on capital gains is capped at 15%. The higher 25% and 37% bands that apply to other income do not apply here. So 14.95% is the ceiling on long-term property gains, whatever your total income. This is worth knowing, because plenty of published guidance quietly applies the higher bands and produces a frightening number that is simply wrong.
That ₹13.4 lakh is not lost. It is unavailable — through the rest of the financial year, through the return filing, through the refund cycle. If you were selling in order to buy something else, or to move funds abroad, it is unavailable exactly when you needed it.
Short-term is worse
Sell within 24 months and the gain is short-term, taxed at slab rates, with TDS deducted at 30% plus surcharge and cess — again on the full consideration. Effective deduction runs to roughly 34–36%. On the same ₹1.5 crore sale that is over ₹50 lakh withheld.
The 24-month line is worth planning around. Selling at 23 months to catch a price can cost more in withholding and tax than the price movement gained you.
The fix: a lower-deduction certificate
The remedy is an application to the assessing officer for a certificate authorising deduction at a lower rate — computed on your actual gain rather than the sale value. The buyer then deducts the certified amount and nothing more.
The application has traditionally been known as Form 13. Under the Income Tax Act 2025 framework and the rules made under it, this has been renumbered as Form 128, in the same way that section 195 now appears as section 393(2). Most professionals and much of the published material still say “Form 13”, and you will hear both. If a chartered accountant refers to either, they mean the same application.
The one thing that determines whether this works
- Apply before the sale completes. The certificate governs what the buyer deducts. Once the money has been deducted and deposited, there is no certificate to obtain — there is only a refund claim in your annual return, months later.
- Allow four to eight weeks from a complete submission. Some applications clear faster; incomplete ones do not clear at all.
- The certificate is specific to the buyer. Change buyers and you need a fresh one.
What the application involves
You are asking an officer to accept your computation of the gain, so you are effectively proving it in advance: the purchase deed and the sale agreement, evidence of cost and of any improvements, your PAN, the buyer’s details, and a computation showing the gain and the tax on it.
The process runs through the TRACES portal. Realistically it takes a few days to prepare, then a cycle of the officer raising observations and you responding, before approval and issue. Anyone promising it in a week is describing a best case, not a plan.
What the buyer has to do — and one change worth noting
Buying from an NRI carries obligations that buying from a resident does not. The buyer deducts under the non-resident provision, deposits it, and files the relevant quarterly statement, then issues you the deduction certificate you will need to claim credit.
Historically that required the buyer to obtain a TAN, which surprises individual buyers who have never needed one. From 1 October 2026, resident individual and HUF buyers are relieved of the TAN requirement, moving instead to a PAN-based challan in place of the quarterly return. If your sale straddles that date, confirm which regime applies before assuming either.
This matters commercially and not only administratively: buyers who discover mid-transaction that purchasing from an NRI is more procedurally demanding sometimes renegotiate or walk. Raise it early, and have the answer ready.
Reducing the tax itself, not just the withholding
A lower-deduction certificate changes what is withheld. Three provisions change what is actually owed, and all three are available to NRIs:
- Reinvestment in one residential property — the old section 54, now section 82 — within the prescribed timelines.
- Capital gains bonds — the old 54EC, now section 85 — up to ₹50 lakh a year, invested within six months, locked for five. The clean option if you do not want to buy property again.
- Sale of a non-residential asset reinvested in a residential one — the old 54F, now section 86.
If you intend to claim one of these, say so in the certificate application. The officer can then certify a lower rate reflecting the exemption, rather than certifying tax you are about to be exempt from.
Then there is getting the money out
Tax and repatriation are separate gates, and clearing one does not clear the other. Remitting sale proceeds from an NRO account is capped at USD 1 million per financial year and requires Forms 15CA and 15CB, the latter certified by a chartered accountant confirming taxes are paid.
On a large sale this can mean planning the remittance across two financial years. That is not a problem if you know in April. It is a problem if you discover it in March.
What we would do
- Start the certificate before you market the property, not after you find a buyer. You can prepare the computation and documents in advance and file as soon as the buyer is identified.
- Check the 24-month line before agreeing a completion date.
- Tell the buyer early what their obligations are, and which side of 1 October 2026 you are on.
- Decide on exemptions before you sell, not after — the bond window is six months and it runs from the sale.
- Map the repatriation against the USD 1 million limit before you commit to what the money is for.
What this does not cover
- Your surcharge band depends on total income, not on the gain alone. The figures here assume the capital gains cap of 15% applies.
- Properties acquired before 2001, inherited assets and gifted assets have specific cost-of-acquisition rules not addressed here.
- Tax payable in your country of residence, and relief under the applicable double taxation treaty, is a separate question.
- India’s tax law has been substantially renumbered under the Income Tax Act 2025 and further amended in Budget 2026. Section and form references are given in both old and new form where we could establish them. Confirm the current position before you act.
- This is general information, not tax advice. Engage a chartered accountant for your transaction.
Is TDS on an NRI property sale deducted on the gain or the sale value?
On the full sale value. That is the entire problem. At the point of deduction the buyer has no way to establish your cost of acquisition, so the deduction is applied to the whole consideration. A lower-deduction certificate is the mechanism that corrects it, and it has to be obtained before completion.
What is the current TDS rate for an NRI selling property?
For long-term gains — property held more than 24 months — the base rate is 12.5% without indexation, plus surcharge and 4% cess. That gives an effective 13% with no surcharge, 14.30% at the 10% band, and 14.95% at the 15% band. Short-term is 30% plus surcharge and cess. All applied to the full sale value.
Is Form 13 now Form 128?
Yes. Under the Income Tax Act 2025 framework the lower-deduction application has been renumbered from Form 13 to Form 128, alongside a wider renumbering — section 195 now appears as section 393(2). Both names remain in common use. If a professional says either, they mean the same application.
Can I apply for the certificate after the sale?
No, and this is the single most expensive mistake in this area. The certificate instructs the buyer how much to deduct. Once deduction has happened, your only route is to claim a refund in your income tax return, which means waiting through the return and refund cycle to recover money that need never have left you.
How long does the certificate take?
Realistically four to eight weeks from a complete application, through the TRACES portal. The officer will typically raise observations that need responding to. Start it before you go to market rather than after you have a signed agreement.
Does the buyer need a TAN to buy from me?
Until recently, yes, which catches out individual buyers. From 1 October 2026 resident individual and HUF buyers are relieved of the TAN requirement and use a PAN-based challan instead. Confirm which side of that date your transaction falls on, and tell the buyer early — some walk when they discover the extra obligation late.
Can I avoid the tax altogether by reinvesting?
You can reduce or eliminate it using the reinvestment provisions — the former sections 54, 54EC and 54F, now 82, 85 and 86 — all available to NRIs. The bond route is capped at ₹50 lakh a year, must be invested within six months, and locks for five. Declare the intention in your certificate application so the certified rate reflects it.
Rates, forms and section references checked across multiple sources in September 2026 and reflect the position under the Income Tax Act 2025 as amended by Budget 2026. Where old and new section or form numbers are both in circulation, both are given. Sources vary in how they present surcharge; the 15% cap on capital gains surcharge is applied here and produces the 14.95% ceiling. This is general information and not tax advice — confirm your own position with a qualified chartered accountant before transacting.
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The certificate is worth more than the price negotiation.
On a ₹1.5 crore sale it is the difference between ₹9 lakh leaving and ₹22 lakh leaving. Start it before you go to market.
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