When it comes to selling property in India, Non-Resident Indians (NRIs) face a unique set of tax implications. Among the most important of these is the Tax Deducted at Source (TDS). Often misunderstood, TDS on property sale is a mandatory requirement that can have serious legal and financial implications if not handled correctly.
Whether you’re an NRI planning to sell your inherited property in Ahmedabad or a buyer looking to purchase from an NRI, understanding the latest TDS rules is absolutely critical. In this long-form, in-depth blog, we’ll break down everything you need to know about TDS rules on property sale in India for NRIs, including calculations, exceptions, documentation, legal steps, and ways to reduce the TDS burden legally.
Understanding the Basics: What is TDS on Property Sale?
TDS stands for Tax Deducted at Source. It’s a mechanism through which the buyer deducts tax from the payment made to the seller and deposits it directly with the Indian government on the seller’s behalf.
- For Resident Indians: TDS is 1% if the property value exceeds ₹50 lakhs.
- For NRIs: TDS is deducted at a higher rate based on capital gains and not on the sale value.
This difference in treatment makes the NRI TDS process more complex and often misunderstood.
Applicability of TDS on NRI Property Sale
If the seller is classified as an NRI under the Income Tax Act, and they’re selling an immovable property (land, building, apartment), TDS must be deducted by the buyer.
- TDS is deducted on the total sale consideration, not just on the capital gain.
- The buyer must deduct TDS and deposit it with the Income Tax Department.
- Non-compliance by the buyer can result in penalties and interest.
TDS Rates for NRIs on Property Sale (As of FY 2024-25)
The applicable rate depends on whether the property is a short-term or long-term capital asset.
| Type of Gain | Holding Period | TDS Rate (including surcharge and cess) |
| Long-Term Capital Gain | More than 2 years | 20% + surcharge + 4% cess (Approx. 23.92%) |
| Short-Term Capital Gain | Less than 2 years | As per the NRI’s income tax slab (could go up to 30%) |
Note: These rates may change based on the latest budget updates, double taxation treaties, and applicable surcharges.
Why is the TDS Rate Higher for NRIs?
TDS for NRIs is calculated on the gross sale value, not just the capital gains. This is because the Income Tax Department cannot assess actual profit in real-time. To ensure tax collection, the law mandates a higher TDS deduction initially. However, NRIs can later claim a refund if the tax deducted exceeds their actual liability.
How to Reduce TDS on Property Sale for NRIs?
- Apply for a Lower Deduction Certificate (LDC):
- An NRI can apply to the Income Tax Department using Form 13 for a certificate under Section 197 to deduct TDS at a lower or nil rate.
- The department may issue a certificate based on estimated capital gains.
- Calculate Exact Capital Gains in Advance:
- Involve a chartered accountant to determine your cost of acquisition, indexation benefits, and improvement costs.
- Obtain TAN by Buyer:
- The buyer must obtain a TAN (Tax Deduction and Collection Account Number) to deposit TDS.
Step-by-Step Process for Buyer (When Purchasing from an NRI)
- Verify Seller’s NRI Status:
- Ask for overseas passport, visa, or tax residency certificate.
- Obtain TAN Number:
- Mandatory for depositing TDS on behalf of the seller.
- Determine Taxability:
- Consult a CA to determine whether the property qualifies for short-term or long-term gains.
- TDS Deduction:
- Deduct appropriate TDS (20-30%+ as applicable) from the sale value.
- Deposit TDS with the Government:
- Use Form 26QB and deposit the TDS within 30 days from the end of the month in which tax is deducted.
- Provide TDS Certificate (Form 16B) to the Seller:
- Essential for seller to claim credit.
Essential Documents for NRI Property Sale and TDS Compliance
For NRIs:
- PAN Card
- Passport and OCI/PIO card (if applicable)
- Property purchase documents
- Cost of improvement details
- Bank account in India (NRO/NRE)
- Form 13 application (if lower deduction is needed)
For Buyers:
- TAN Number
- Form 26QB filing confirmation
- Form 16B issuance
- Sale deed copy
- Agreement to sell
What Happens if TDS is Not Deducted or Paid?
- Penalty for Buyer:
- The buyer is treated as an “assessee in default” and must pay the TDS with interest and penalty.
- Interest:
- 1% per month for late deduction
- 1.5% per month for late payment
- Prosecution:
- In extreme cases, failure to deposit TDS can result in prosecution.
Refund of TDS for NRIs: How to Claim It
If excess TDS is deducted, NRIs can file an Income Tax Return (ITR) in India to claim a refund.
- Must have a valid PAN
- File ITR before the due date (usually July 31 for individuals)
- Attach Form 16B as proof of TDS deduction
- Refund is credited to Indian bank account (usually NRO)
Double Taxation Avoidance Agreement (DTAA): A Boon for NRIs
India has DTAA with over 90 countries. If you’re a tax resident of a country like the USA, UK, UAE, or Canada, DTAA provisions may apply.
- Lower TDS rates may be applicable
- Claim foreign tax credit (FTC) in your home country for tax paid in India
- Must submit Tax Residency Certificate (TRC) and Form 10F to avail DTAA benefits
TDS in Case of Joint Property Sale
If two sellers are involved (e.g., NRI husband and resident wife), TDS must be calculated based on proportion of ownership. The buyer must deduct TDS separately for each seller according to their tax residency.
Timeline of Compliance for NRI Property Sale TDS
| Activity | Timeline |
| TDS Deduction | At the time of payment |
| TDS Deposit via Form 26QB | Within 30 days of deduction |
| Form 16B Generation | Within 15 days of Form 26QB submission |
| ITR Filing for Refund | By July 31st of the Assessment Year |
Common Mistakes to Avoid
- Assuming 1% TDS applies to NRI (It doesn’t)
- Not obtaining TAN by buyer
- Not applying for lower deduction certificate
- Delaying Form 26QB filing
- Seller not having a PAN card
How Around Town Realty Helps NRIs With TDS Compliance
At Around Town Realty, we understand the tax stress that comes with selling property in India as an NRI. Our end-to-end legal and documentation assistance ensures:
- Proper calculation of capital gains
- Consultation with certified tax professionals
- Assistance with Form 13 (Lower TDS certificate)
- Coordination for TAN, Form 26QB, and Form 16B
- Help in filing ITR to claim refund
We simplify the complex, so you focus on what matters—your financial freedom and peace of mind.
READ THIS FOR MORE: Why NRIs Are Investing in Ahmedabad Real Estate in 2025
Conclusion: Stay Informed, Stay Compliant
The TDS rules on property sale for NRIs are stringent but manageable with the right knowledge and professional guidance. By staying compliant, NRIs can save on unnecessary tax deductions and avoid legal troubles.
Whether you’re an NRI seller or a buyer dealing with an NRI transaction, let Around Town Realty be your trusted advisor in navigating the TDS jungle.
FAQs
- Is TDS deducted on property sale for NRIs mandatory? Yes. TDS is compulsory and must be deducted by the buyer.
- Can NRIs get a refund of excess TDS deducted? Absolutely, by filing an income tax return in India.
- What if the buyer forgets to deduct TDS? The buyer is liable to pay the TDS along with interest and penalties.
- Can TDS be deducted at a lower rate for NRIs? Yes, by applying for a Lower Deduction Certificate (LDC) under Section 197.
- Do NRIs need a PAN card to sell property in India? Yes, it’s mandatory for both tax filing and to receive the TDS refund.
