EaseValueWhen an NRI sells property in India, the buyer does not deduct tax on the profit. Under Section 393 of the Income-tax Act, 2025 (old Section 195), tax is deducted on the entire sale consideration — at 12.5% plus surcharge and cess for a long-term sale, and at 30% plus surcharge and cess for a short-term one. Your actual liability is only on the capital gain, which is usually a fraction of the sale price. The difference is real money, parked with the tax department until you file a return and claim a refund a year later. This calculator puts a rupee figure on that gap, and on what a lower-TDS certificate under Section 395 (old 197, Form 13) is worth to you.
How it’s calculated
- Capital gain = sale price − purchase price − cost of improvements − transfer expenses (brokerage, legal fees, stamp duty you bear on the sale).
- Immovable property held for more than 24 months is long-term. Long-term gains are taxed at 12.5% under Section 198 (old Section 112), plus surcharge and 4% health and education cess.
- An NRI gets no indexation benefit. The grandfathering choice between 12.5% without indexation and 20% with indexation applies only to resident individuals and HUFs, so an NRI computes the gain on plain historical cost.
- Held for 24 months or less, the gain is short-term and is added to your total income and taxed at slab rates — 30% is used here as the indicative top rate.
- The buyer deducts TDS under Section 393 (old Section 195) on the full sale consideration, not on the gain. The calculator applies surcharge on the sale value at 10% above ₹50 lakh and 15% above ₹1 crore, and then 4% cess on tax plus surcharge.
- The gap between that TDS and your real tax is the amount locked up. It comes back only as a refund after you file your return for the year, typically twelve months or more after the sale.
- A lower-deduction (or nil-deduction) certificate under Section 395 (old Section 197, Form 13) is applied for on the TRACES portal before the sale deed is executed. Once issued, the buyer deducts only the amount the certificate specifies, which is normally your actual tax.
- Exemptions under Sections 82, 85 and 86 (old 54, 54EC and 54F) can reduce or wipe out the gain entirely — and can be factored into the Section 395 application so the TDS drops accordingly.
Frequently asked questions
Why is the TDS so much higher than my actual tax?
Because Section 393 (old 195) requires the buyer to deduct on the whole sale consideration, while you are taxed only on the capital gain. If you sell for ₹1 crore a property you bought for ₹70 lakh, the buyer deducts on ₹1 crore but your gain is only ₹30 lakh. The tax on ₹1 crore is roughly four times the tax on ₹30 lakh, and that excess sits with the department until you claim it back.
What is a lower-TDS certificate and how do I get one?
It is a certificate under Section 395 (old Section 197), applied for in Form 13 on the TRACES portal. You submit the purchase deed, the draft sale agreement, a computation of the expected capital gain and any exemption you plan to claim. The Assessing Officer issues a certificate specifying a lower rate or a nil rate, and the buyer then deducts only that amount. Apply well before the sale deed is executed — once the buyer has deducted and deposited the tax, the certificate cannot be applied retrospectively.
Can an NRI claim indexation on a long-term property sale?
No. Long-term capital gains are taxed at 12.5% under Section 198 (old 112) without indexation. The option to instead pay 20% with indexation, preserved for property acquired before 23 July 2024, is available only to resident individuals and HUFs. An NRI computes the gain on plain historical cost, which is why the 12.5% rate matters so much.
Can I avoid the tax altogether by reinvesting?
Often yes. Section 82 (old 54) exempts the gain if you reinvest in another residential house in India within the prescribed period. Section 86 (old 54F) does the same where you sell a non-residential asset and buy a house. Section 85 (old 54EC) exempts up to ₹50 lakh invested in specified bonds within six months. These exemptions can be claimed in your Section 395 application too, so the buyer deducts a correspondingly lower amount rather than you claiming it all back later.
What happens if the buyer deducts the full amount anyway?
You file an income tax return in India for that year, compute the actual gain and tax, and claim the excess as a refund. The money does come back, but only after the return is processed — commonly a year or more after the sale, and the interest paid on refunds rarely compensates for the loss of use of the funds. If you are repatriating the proceeds, the delay also exposes you to exchange-rate movement on a large sum.
Does the buyer need a TAN, and what if they use Form 26QB?
Yes. A buyer purchasing from an NRI must obtain a TAN and deposit the tax under Section 393, filing a quarterly Form 27Q and issuing you a Form 16A. Form 26QB and the 1% deduction under Section 394 (old 194-IA) apply only where the seller is a resident. Buyers frequently get this wrong, which creates a liability for them and a mismatch in your Form 26AS — confirm the correct route before signing.
Want us to handle it for you?
CA-led filing, planning and compliance — EaseValue Advisors LLP, Jaipur.