NRIs selling property in India do not fall under the simple 1% property TDS rule. If the seller is a non-resident, the buyer usually has to follow section 195, which brings higher withholding, stricter compliance, and no â‚ą50 lakh threshold.
This TDS Guide for NRI Property Sale in India explains the current rates, buyer duties, lower TDS options, repatriation steps, and the major procedural change starting October 1, 2026.
Why TDS for NRI Property Sales Is Different From Regular Property Deals
The first question is simple: Is the seller a resident or a non-resident? That single fact changes the entire tax process.
When the seller is a resident, the buyer usually follows section 194-IA. That is the simplified property TDS rule. It generally requires deduction at 1% of the consideration or stamp-duty value, whichever is higher.
When the seller is an NRI, the buyer usually moves to section 195. This is the wider withholding rule for payments to non-residents. It is not a flat 1% system. It is stricter. It also carries surcharge and Health and Education Cess at 4%, wherever applicable.
That is why many NRI sellers get surprised. The common statement that “property TDS is 1%” applies to many resident-seller cases. It does not automatically apply when an NRI sells property in India.
What TDS Rates Apply to an NRI Property Sale in India
The tax treatment depends on whether the sale creates long-term capital gains or short-term capital gains.
Long-term capital gains: property held for more than 24 months
For sales after the capital gains change on July 23, 2024, the base rate for long-term capital gains is 12.5% without indexation, plus applicable surcharge and 4% cess.
- 10% surcharge for income from â‚ą50 lakh to â‚ą1 crore
- 15% surcharge for income from â‚ą1 crore to â‚ą2 crore
- 25% surcharge for income from â‚ą2 crore to â‚ą5 crore
- 37% surcharge for income above â‚ą5 crore
For sales before July 23, 2024, long-term capital gains were taxed at 20% with indexation, plus surcharge and cess.
Short-term capital gains: property held for 24 months or less
Short-term capital gains are taxed at the NRI seller’s slab rates, up to 30%, plus applicable surcharge and 4% cess.
What buyers usually deduct TDS on
In practice, buyers in NRI property deals often deduct tax on the full sale consideration unless a lower or nil deduction route is in place. That happens because section 195 applies to a “sum chargeable under the provisions of the Act”, not the simplified resident-property formula under section 194-IA.
This point matters. A buyer should not assume that they can calculate the seller’s net capital gains on their own and deduct only on that reduced amount. Buyers usually seek a formal determination or certificate when they want certainty.
The 1% TDS Rule: When It Applies and When It Does Not
You will often hear that property buyers deduct 1% TDS. That is true only in the resident-seller framework under section 194-IA.
Under that resident rule:
- TDS is 1%
- It applies on the higher of sale consideration or stamp-duty value
- The threshold is â‚ą50 lakh
- Since October 1, 2024, the â‚ą50 lakh threshold must be checked after aggregating amounts across multiple buyers or sellers for the same property
- A person deducting tax under section 194-IA can use PAN instead of TAN
That resident model does not carry over to NRI property sales. For an NRI seller, section 195 applies instead.
What Buyers Must Do When Purchasing Property From an NRI
If you are buying from an NRI, the compliance burden is mostly on you. The law treats the buyer as the tax deductor.
These are the main duties under the current system.
- Confirm the seller’s residential status before payment.
- Determine the correct TDS rate based on long-term or short-term treatment and any lower certificate.
- Deduct TDS at the time of payment, including advances and instalments.
- Deposit the TDS by the 7th of the next month.
- File the required TDS return and keep complete records.
Under the current section 195 process, buyers commonly need to handle a stricter reporting framework than a resident-property deal. That is why NRI property transactions often become technical and document-heavy.
Is TAN required right now?
Yes, under the current framework. The simplification that removes the separate TAN requirement for certain buyers starts later.
Effective October 1, 2026, a resident individual or HUF buyer will no longer need a separate TAN for TDS deduction under section 195 on NRI property sales. The buyer will be able to deduct and deposit TDS using the buyer’s PAN through a challan-cum-statement mechanism similar to Form 26QB. That system will also remove the need for a quarterly Form 27Q return in those covered cases.
Until October 1, 2026, buyers should follow the existing section 195 process.
No Minimum Threshold for NRI Property TDS
This is another major difference from resident-seller cases.
For purchases from an NRI, there is no â‚ą50 lakh threshold under section 195. TDS obligations can apply regardless of the sale amount if the payment is chargeable to tax in India.
That means even smaller property deals can trigger withholding and reporting duties when the seller is a non-resident.
Lower TDS Certificate: One of the Most Important Tools for NRIs
If the tax that should finally be paid is lower than the amount likely to be deducted, the NRI seller should act early. A lower or nil deduction certificate can prevent excess withholding.
How the lower deduction route works
The NRI seller can apply under section 197 through Form 13. This route matters when the seller expects that the real tax liability will be much lower than the TDS on the gross sale value.
The buyer should receive the certificate before payment. Then the buyer can deduct tax at the lower rate stated in the certificate.
Documents usually needed
- Property purchase deed
- Proposed sale agreement
- Computation of expected capital gains
- PAN and identity details
- Prior tax and property records, if required
There is also a payer-side determination path. The official framework for section 195(2)/(7) applications allows the payer to apply in Form 15E for determination of the appropriate proportion of the sum chargeable in the case of a non-resident recipient.
That matters when the buyer wants official certainty on how much of the payment is actually chargeable. It reduces the risk of over-deduction and under-deduction.
How the Income-tax Act, 2025 Affects NRI Property TDS Planning
The transition to the Income-tax Act, 2025 starts on April 1, 2026. The withholding structure for lower or nil deduction continues in substance.
That means the planning principle stays the same. If your actual tax is lower than the gross withholding, do not wait until after the sale to fix it. Apply early for lower deduction relief.
This is especially important in transactions tied to migration, inheritance, studies abroad, family settlement, or repatriation planning. Delays in TDS planning can hold up payments and remittance.
Repatriating Sale Proceeds Outside India
After the sale, many NRIs want to move the money abroad. That step has its own paperwork.
To repatriate sale proceeds, you generally need:
- Form 15CA
- Form 15CB, which includes a Chartered Accountant’s certificate
- TDS records
- Sale documents
- Bank documents requested by the authorized dealer bank
The repatriation limit is USD 1 million per financial year.
If TDS is deducted incorrectly, repatriation often gets delayed. Banks regularly ask for tax compliance proof before remitting funds outside India.
How NRIs Can Claim Credit for TDS or Get a Refund
Deducted tax is not the end of the story. The NRI seller still needs to match that TDS with the final tax liability.
To claim TDS credit:
- File an income tax return in India
- Report the property sale correctly
- Match the TDS credit in tax records
- Claim a refund if excess tax was deducted
From FY 2023-24, TDS credit is available only if the deductor has deposited the tax and filed the TDS return. This is why buyer compliance is so important for sellers.
Penalties Buyers Face for Wrong TDS Deduction
Buyers who get NRI property TDS wrong can face serious consequences.
- Interest at 1% per month if tax was not deducted
- Interest at 1.5% per month if tax was deducted but not paid
- Late filing fee of â‚ą200 per day, capped at the TDS amount
- Penalty from â‚ą10,000 to â‚ą1 lakh under section 271H
- Penalty equal to the TDS amount in certain default situations
- Being treated as a deemed assessee in default
- Problems with property registration in places that ask for TDS proof
- Difficulty for the seller in repatriating funds
In severe cases, prosecution under the Income-tax Act can also follow.
What to Do if There Is a TDS Dispute
Disputes are common when buyers follow the wrong section, use the wrong rate, or deduct too much.
If there is a dispute:
- Raise it with the buyer first and provide the relevant papers.
- Seek correction or rectification in the TDS reporting system.
- Escalate to the Commissioner of Income Tax (Appeals) if needed.
- Appeal to the Income Tax Appellate Tribunal as the next level.
Many disputes start because the buyer mistakenly applies the resident-seller rule to an NRI transaction. That basic error can affect the rate, forms, timing, and the seller’s credit.
Resident Seller vs NRI Seller: Quick Comparison
| Factor | Resident Seller | NRI Seller |
|---|---|---|
| Applicable section | 194-IA | 195 |
| Basic TDS rate | 1% | 12.5% for LTCG after July 23, 2024, or slab rates for STCG, plus surcharge and 4% cess |
| Threshold | â‚ą50 lakh | No minimum threshold |
| Basis | Higher of consideration or stamp-duty value | Section 195 chargeability framework; buyers often deduct on full sale value unless lower relief is in place |
| TAN requirement | No separate TAN for section 194-IA | Current system requires section 195 compliance; resident individual or HUF buyers get PAN-based simplification from October 1, 2026 |
Practical Steps NRIs Should Take Before Signing the Sale Agreement
If you are an NRI seller, do these things before the first payment is made:
- Confirm your residential status for tax purposes
- Work out whether the gain is long-term or short-term
- Calculate the expected tax liability
- Apply for Form 13 under section 197 if the actual tax will be lower than normal withholding
- Tell the buyer in writing that section 195 applies, not section 194-IA
- Prepare repatriation documents early, including Form 15CA and Form 15CB if you plan to remit money abroad
- Keep every payment and TDS record for return filing and refund claims
If you are a buyer, do not rely on property-market shortcuts. Verify the seller’s status first. Then apply the correct section.
Official Compliance Dates You Should Watch
- July 23, 2024: Long-term capital gains rate structure changed
- October 1, 2024: â‚ą50 lakh threshold aggregation rule tightened for resident-seller section 194-IA cases
- April 1, 2026: Transition to the Income-tax Act, 2025
- October 1, 2026: PAN-based TDS deduction process starts for resident individual or HUF buyers in covered section 195 NRI property cases, removing the separate TAN requirement and quarterly Form 27Q filing in those cases
- 7th of the next month: Usual deadline to deposit TDS after deduction
Your next step is practical: work out the holding period, identify whether section 195 applies, and file for lower deduction before the buyer releases funds. For the forms and filing process, use the Income Tax Department portal and your authorized dealer bank’s remittance checklist.
