EaseValueWhen an NRI sells property in India, the buyer must deduct TDS under Section 195 — and by default it applies to the entire sale value, not just the gain. For a long-term property (held over 24 months), capital gains are taxed at 12.5% (for transfers on or after 23 July 2024) plus surcharge and cess; short-term gains are taxed at slab rates. Because default TDS is deducted on the gross sale price, NRIs almost always over-pay unless they obtain a Lower / Nil Deduction Certificate under Section 197 before the sale. Exemptions under Sections 54 and 54EC are available to NRIs.
How the tax actually works
- Long-term (held > 24 months): LTCG taxed at 12.5% (transfers on/after 23 Jul 2024), plus applicable surcharge and 4% cess.
- Short-term (held ≤ 24 months): gains added to total income and taxed at slab rates.
- Gain = sale consideration − indexed/actual cost of acquisition − cost of improvement − transfer expenses.
The TDS problem — why NRIs over-pay
Unlike a resident seller (where the buyer deducts 1% under Section 194-IA on sales above ₹50 lakh), a buyer purchasing from an NRI must deduct TDS under Section 195. Critically, the default deduction is on the entire sale consideration at the applicable capital-gains rate plus surcharge and cess — not on the net gain. On a high-value property this locks up a very large sum with the department until you claim a refund in your return.
The fix: Section 197 Lower-Deduction Certificate
Before executing the sale, the NRI can apply to the Assessing Officer (Form 13) for a certificate under Section 197 directing the buyer to deduct TDS only on the actual capital gain (or nil, where exemptions cover it). This is the single most valuable step for an NRI seller — it prevents lakhs from being needlessly blocked. It should be obtained well before the transaction date.
Exemptions available to NRIs
- Section 54: reinvest the LTCG from a residential house into another residential house in India.
- Section 54EC: invest the gain (up to ₹50 lakh) in specified bonds (NHAI/REC) within 6 months.
Repatriating the money — 15CA / 15CB
To remit sale proceeds abroad, the NRI needs Form 15CB (a CA's certificate on the taxability and TDS) and Form 15CA. Banks will not process the repatriation without these. Remittances from an NRO account are subject to the applicable annual limit and documentation.
Common notices NRIs receive
NRIs frequently get scrutiny or reassessment notices on property sales — often due to TDS/AIS mismatches or where the return was not filed after the sale. Filing a return to claim the excess TDS as a refund is essential; ignoring it invites a Section 148 reassessment.
How EaseValue helps NRI sellers
We handle the whole chain: computing the real gain, obtaining the Section 197 certificate before the sale, claiming 54/54EC, issuing 15CB and filing 15CA for repatriation, and defending any notice — remotely, wherever you are.