When an NRI sells property in India, the buyer must deduct TDS on the entire sale price — about 13–15% for long-term (12.5% + surcharge + cess) or slab/30%+ for short-term — not on the gain. On a ₹1 crore sale that can lock up ₹13 lakh+ when the real tax is far less. The fix is a Lower/Nil-TDS certificate (old Form 13, now under Section 395) so TDS applies only to the actual capital gain. Then repatriate via Form 15CA/15CB.
This is the single most expensive mistake NRIs make when selling Indian property: they let the buyer deduct TDS on the full sale value and then wait a year for a refund. The law does require TDS on the whole consideration — but it also gives you a way out. By applying for a Lower/Nil-TDS certificate before the sale, you can have tax deducted on your actual capital gain instead of the entire sale price, freeing up lakhs of rupees at the moment of sale. Get this one step right and an NRI property sale is smooth; skip it and a large chunk of your money is stuck with the tax department for months.
When the seller is an NRI, the buyer deducts TDS under the withholding provisions of Section 393 (the old Section 195) on the full sale consideration, at rates that depend on how long you held the property:
Crucially, this is deducted on the sale price, not the profit. That is the whole problem — and the reason the lower-TDS certificate exists.
Suppose you sell a flat for ₹1 crore that you bought years ago for ₹70 lakh, so your actual long-term gain is about ₹30 lakh. Your real tax on that gain at 12.5% (plus surcharge and cess) is roughly ₹4 lakh. But without a lower-TDS certificate, the buyer must deduct TDS on the full ₹1 crore — around ₹13–14 lakh. So ₹13–14 lakh leaves your hands at sale, you carry the tax on just ₹30 lakh, and you must claim the ₹9–10 lakh excess back as a refund after filing your return — which can take months. That locked-up cash is exactly what the certificate prevents.
Before completing the sale, you apply to the Assessing Officer for a certificate for lower or nil deduction under Section 395 of the Income-tax Act, 2025 (the old Section 197, applied for on the old Form 13). In it, you show your actual capital gain — the sale price minus your indexed/allowed cost and expenses — and the officer authorises the buyer to deduct TDS on only that gain rather than the full value. In our example, the certificate would let the buyer deduct ~₹4 lakh instead of ~₹14 lakh. This is the highest-value step in the whole transaction, and it must be obtained before the sale deed, so plan for it early — the application takes time and the buyer needs the certificate in hand to deduct correctly.
Your taxable gain is the sale price less the cost of acquisition, the cost of any improvement, and transfer expenses (brokerage, legal). For long-term property, the rules changed from 23 July 2024: gains are taxed at 12.5% without indexation (resident individuals get a limited option to use the old 20%-with-indexation method for pre-July-2024 purchases, but that grandfathering choice is not available to NRIs). So as an NRI you compute the gain on a plain cost basis and apply 12.5%. Getting the cost, improvement and expense figures right is what keeps the gain — and therefore the certificate amount and the tax — as low as legitimately possible.
NRIs are entitled to the same capital-gains reinvestment exemptions residents get, and using them can reduce or eliminate the tax:
You can claim these in the lower-TDS application itself, so the certificate reflects a smaller (or nil) gain — meaning little or no TDS at source. This is where planning the sale with a CA pays for itself many times over.
Because the seller is an NRI, the buyer cannot use the simple Form 26QB route used for resident sellers. The buyer must obtain a TAN, deduct the TDS, deposit it with the government, and file a Form 27Q TDS return, then issue you a TDS certificate (Form 16A / the new Form 131). Many buyers don't know this and deduct wrongly, which creates problems for both sides — so it is worth guiding the buyer (or having your CA do it) to get the mechanics right, especially applying the lower-TDS certificate to the deduction.
After the sale, the proceeds land in your NRO account, and you can repatriate up to USD 1 million per financial year out of India. To remit, your bank needs Form 15CA (your declaration) and Form 15CB (a chartered accountant's certificate that the applicable tax has been paid) — now the new Form 145 and Form 146. So the full journey is: obtain the lower-TDS certificate → complete the sale with correct TDS → file your Indian return and pay/settle the gain → get the 15CB certificate → repatriate. Handled together, the money moves cleanly and compliantly.
You sell a Bengaluru flat for ₹1 crore, bought for ₹70 lakh, long-term. Without planning: the buyer deducts ~₹14 lakh TDS on the full value, you file later and claim ~₹10 lakh back as a refund months on. With planning: your CA computes the ~₹30 lakh gain, applies for a Section 395 lower-TDS certificate, and (say) you also park ₹20 lakh in Section 85 bonds — so the taxable gain drops to ₹10 lakh and the certificate authorises TDS of only ~₹1.3 lakh. You keep ~₹12.7 lakh that would otherwise have been locked up, and you repatriate the proceeds with a 15CB certificate. Same sale — a very different cash position.
The recurring ones: not applying for the lower-TDS certificate and letting full-value TDS lock up their cash; assuming indexation applies (it doesn't for NRIs post-July-2024); missing the reinvestment exemptions (Sections 82/85/86) that could wipe out the tax; letting the buyer deduct wrongly without a TAN or Form 27Q; and ignoring repatriation paperwork until the bank refuses the transfer. Each is avoidable with a plan made before the sale deed is signed.
The buyer deducts TDS under Section 393 (old 195) on the full sale value — about 13–15% for long-term (12.5% + surcharge + cess) or slab/30%+ for short-term. It is on the sale price, not the gain, unless you obtain a lower-TDS certificate.
Apply for a Lower/Nil-TDS certificate under Section 395 (old Section 197, Form 13) before the sale. It lets the buyer deduct tax on your actual capital gain instead of the full sale price, freeing up the excess that would otherwise be refunded much later.
Yes. NRIs can use Section 82 (old 54) by reinvesting in a house, Section 85 (old 54EC) bonds up to ₹50 lakh, and Section 86 (old 54F). These can reduce or eliminate the gain, and can be reflected in the lower-TDS certificate.
Up to USD 1 million per financial year can be repatriated from the NRO account, using Form 15CA (your declaration) and Form 15CB (a CA's certificate) — the new Forms 145 and 146 — after the applicable tax is settled.
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