Who deducts, and on what
- The buyer deducts TDS when paying an NRI seller. Under the Income-tax Act, 2025 this is section 393(2) (formerly section 195).
- The 1% TDS that applies when buying from a resident seller does not apply — NRI sales follow the non-resident rules.
- In principle TDS is on the capital gain, but without a certificate from the tax department buyers usually deduct on the full sale price to protect themselves. That’s where most over-deduction comes from.
TDS rates
| Gain | Base rate | With surcharge and 4% cess |
|---|---|---|
| Long-term (held more than 24 months) | 12.5%, no indexation | 13% (no surcharge) · 14.30% (10% surcharge, gain over ₹50 lakh) · 14.95% (15% surcharge, over ₹1 crore) |
| Short-term (24 months or less) | Slab rates — typically 30% | Plus applicable surcharge and cess |
The option of paying 20% with indexation on property bought before 23 July 2024 is available only to resident individuals and HUFs — not to NRIs.
What changes on 1 October 2026
- Until 30 September 2026: the buyer needs a TAN, deposits TDS, files a quarterly TDS return (Form 144, formerly 27Q) and issues a certificate (Form 131, formerly 16A).
- From 1 October 2026 (CBDT Notification No. 121/2026, now in force): a buyer who is a resident individual or HUF no longer needs a TAN. TDS is deposited using the buyer’s PAN through Form 141 with a new Schedule E, within 30 days from the end of the month of deduction, and the buyer issues Form 132 to the seller.
- Schedule E asks for the NRI seller’s tax residency certificate, foreign tax identification number and overseas address — have them ready.
- Companies and firms buying from NRIs still need a TAN.
The lower-TDS certificate (Form 128)
- The NRI seller applies online on TRACES in Form 128 (formerly Form 13) before the sale, showing the actual capital gain.
- The tax officer issues a certificate for a lower or nil rate, and the buyer deducts at that rate.
- It’s most valuable when the gain is small compared to the sale price, or when you’re reinvesting to claim an exemption. Start early — it can take weeks.
Reducing the tax itself
- New residential house (section 82, formerly 54): reinvest the gain in a house bought within 1 year before or 2 years after the sale, or built within 3 years — capped at ₹10 crore.
- Specified bonds (section 85, formerly 54EC): invest up to ₹50 lakh within 6 months of the sale.
- Other assets into a house (section 86, formerly 54F), for gains on assets other than a house.
- Treaty relief: India generally keeps the right to tax gains on Indian property; your country of residence may give credit — check locally.
After the sale
- Check the TDS appears in your tax credit statement (Form 168, formerly 26AS).
- File your Indian income-tax return to report the gain and claim any refund — see NRI income tax return.
- Repatriate the proceeds within the USD 1 million annual limit — see repatriation.
Rates and slabs: income tax for NRIs in India — slabs, TDS and DTAA.
Frequently asked questions
What is the TDS rate on property sold by an NRI?
On long-term capital gains (property held more than 24 months), 12.5% plus surcharge and 4% cess — up to about 14.95% effective. Short-term gains are taxed at slab rates, so TDS is typically 30% plus surcharge and cess.
Does the buyer need a TAN to buy property from an NRI?
Until 30 September 2026, yes. From 1 October 2026, resident individual and HUF buyers can deposit the TDS using their PAN through Form 141 (Schedule E) without a TAN. Companies and firms still need a TAN.
How can an NRI reduce TDS on a property sale?
By applying online in Form 128 (formerly Form 13) for a lower or nil deduction certificate before the sale, based on the actual capital gain and any planned exemption.
Can NRIs use indexation on property bought before July 2024?
No. The option to pay 20% with indexation on land or buildings acquired before 23 July 2024 is available only to resident individuals and HUFs.
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.