TDS on Sale of Property by NRI: Rates, Buyer Steps and Refunds

General information, not tax or legal advice. Rules as of October 2026.

TDS is the single biggest reason NRI sellers receive less money than they expected on completion day. The tax is not extra. It is an advance payment against the capital gains tax you owe in India. The trouble is that the default calculation ignores what you actually paid for the property, so the amount withheld is often two or three times your real tax bill. This guide covers the rates, who deducts and how, how to bring TDS down legally, how to get excess TDS refunded, and what changed for buyers on 1 October 2026.

India's Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. Most of the TDS rules for NRI property sales carried over unchanged, but the section and form numbers did not. Where you see an old number in your sale agreement or from your buyer's adviser, the table below gives you today's equivalent.

How TDS works when an NRI sells property in India

The obligation sits with the buyer, not with you. Whoever pays a non-resident a sum that is taxable in India must withhold tax before paying. For property, that means every payment you receive: the token amount, the advance, each instalment and the final balance. Unlike a sale by a resident, there is no ₹50 lakh threshold. A ₹20 lakh plot attracts TDS exactly as a ₹5 crore apartment does.

What matters is your residential status for tax in the year of sale, not your passport. An Indian citizen working abroad, an OCI cardholder and a foreign national are all treated the same way if they are non-resident for that tax year. If you are unsure which side of the line you fall on, settle it before you sign, because it decides whether the buyer deducts 1% or up to 14.95% on the full price.

Whether the gain is short term or long term depends on how long you held the property. Land and buildings held for more than 24 months produce a long-term capital gain; 24 months or less is short term. The date usually runs from the registration of your purchase, with special rules for inherited and under-construction property, explained in our guide to the 2-year rule.

TDS rate for NRI sale of property: LTCG vs STCG

The base rate is set by the type of gain. Surcharge is then added according to the amount, and 4% health and education cess is added on top of the tax plus surcharge. In practice, buyers apply the surcharge slab by reference to the amount being paid to the seller.

• Long-term capital gain (held more than 24 months): 12.5% base rate, without indexation. For transfers on or after 23 July 2024, NRIs pay 12.5% with no indexation. The option of 20% with indexation on property bought before that date is available only to resident individuals and HUFs, not to NRIs.
• Short-term capital gain (held 24 months or less): taxed at slab rates, so the buyer withholds at the highest slab of 30%.
• Surcharge on long-term gains from property is capped at 15%, which is why the long-term rate stops rising above ₹1 crore.

Effective rate = base rate x (1 + surcharge) x 1.04. If the seller has no valid PAN, the buyer must deduct at the higher of the applicable rate and 20%, unless the seller provides the alternative details the rules allow (such as a Tax Residency Certificate and foreign tax identification number). Make sure your PAN is active and shows non-resident status before the deal.

Older articles quote LTCG TDS of up to 17.81% or 20.8%. Those figures used the 20% rate or an uncapped surcharge and no longer apply to NRI property sales. To work out the figure for your own deal, use our TDS calculator.

TDS on sale of property by NRI below ₹50 lakh and above ₹50 lakh

₹50 lakh matters in two different ways, and they are often mixed up. For a resident seller, ₹50 lakh is the point at which the buyer starts deducting 1% TDS. That threshold does not exist for NRI sellers: TDS applies at full rates on any value, even a small plot. For an NRI seller, ₹50 lakh is instead where surcharge begins, so the effective rate steps up above it.

Illustrative figures, applied to the full sale price with no Form 128 certificate and assuming the new tax regime for short-term gains. Above ₹1 crore the long-term rate stops rising at 14.95% because surcharge on these gains is capped at 15%. In every row the withholding is likely to exceed the real tax on the gain, which is why the certificate described below usually pays for itself.

Why TDS is charged on the full sale price

Strictly, the law asks the buyer to withhold tax on the part of the payment that is income chargeable to tax. But a buyer has no reliable way to verify your purchase cost, improvement costs or exemptions, and the buyer, not you, carries the penalty if too little is withheld. So, without a certificate from the tax department, almost every buyer and every bank lawyer insists on applying the rate to the entire consideration. That is the gap Form 128 exists to close.

TDS calculation for NRI property sale: an illustrative example

Illustrative figures only. Rounded, ignoring cost of improvement, and assuming the seller has no other Indian income.

• An NRI bought a flat in 2015 for ₹40 lakh and sells it in October 2026 for ₹1.2 crore. Brokerage and transfer costs are ₹2 lakh.
• Holding period is over 24 months, so the gain is long term: ₹1.2 crore minus ₹40 lakh minus ₹2 lakh = ₹78 lakh.
• Actual tax on the gain: 12.5% of ₹78 lakh = ₹9,75,000, plus 10% surcharge (income between ₹50 lakh and ₹1 crore) = ₹10,72,500, plus 4% cess = about ₹11,15,400.

In the last row, tax on ₹28 lakh is 12.5% = ₹3,50,000 plus 4% cess, with no surcharge because income is below ₹50 lakh. Without a certificate, the same seller would still lose ₹17,94,000 at the closing table and wait for more than ₹14 lakh to come back. The exact rate in a certificate is set by the Assessing Officer and can differ from your own computation. Run your own numbers through our Form 128 estimator before you apply.

How to reduce TDS on sale of property by an NRI: Form 128

You cannot legally skip TDS on a taxable sale. You can make it match the tax you actually owe, or reduce it to nil where there is no taxable gain, by applying for a lower or nil deduction certificate under Section 395 (earlier Section 197) on Form 128 (earlier Form 13). The full walkthrough is in our Form 128 guide; the essentials are below.

1. 1Apply online through the TRACES portal once the deal is agreed, ideally as soon as the agreement to sell is signed, with the buyer's details in hand.
2. 2Attach the agreement to sell, your purchase deed and payment proof, a capital gains computation, proof of any improvement costs, and evidence of planned reinvestment if you are claiming an exemption.
3. 3The Assessing Officer issues a certificate naming the buyer and the rate (or nil). It is specific to that buyer and that tax year.
4. 4Give the certificate to the buyer before any payment, including the token amount. TDS already deducted at the default rate is not reversed by a certificate issued later.

Timing is the risk. Applications have commonly taken four to six weeks. The government announced a more automated, rule-based process for these certificates from 1 April 2026, which may shorten turnaround, but it is too early to rely on that. Build the wait into your sale timeline rather than asking the buyer to delay the final payment at the last minute.

›Can an NRI avoid TDS completely?

Only where no tax will be due on the sale, and only with a nil deduction certificate on Form 128 issued before the buyer pays. A typical case is a sale at a loss, or at a gain small enough to be absorbed by the cost of the property and allowable expenses. Inheriting the property, holding an OCI card or living in a country with a tax treaty does not by itself switch TDS off. If the officer will not issue a nil certificate, the fallback is to recover any excess through your Indian return after the year ends.

›Other legitimate ways to reduce the tax itself

• Reinvest in a residential house in India under Section 82 (earlier Section 54) for sale of a house, or Section 86 (earlier Section 54F) for sale of other property, within the prescribed time limits.
• Invest up to ₹50 lakh of the gain in specified bonds (earlier Section 54EC) within six months of the sale; the bonds have a five-year lock-in.
• Claim every allowable cost: purchase price, stamp duty and registration paid on purchase, documented improvement costs, and brokerage and legal fees on the sale.
• If you hold more than one property, sequence the sales so that exemptions and surcharge slabs work in your favour.

Compare the reinvestment exemptions in our Section 54 vs 54F explainer and the bond route in our 54EC bonds guide. If you are deciding between the 12.5% and 20% LTCG rates, note again that the 20% indexed option is not open to NRIs, as explained in our 20% vs 12.5% comparison.

›Jointly owned property: TDS is worked out for each seller

When a property is owned jointly, each co-owner is a separate seller for tax. The buyer deducts TDS separately on the share paid to each NRI co-owner, and each co-owner reports their own share of the gain and claims their own exemptions. Because the surcharge band is applied to the amount paid to each seller, a jointly held property can attract a lower combined TDS than the same property held by one person. This follows the title deed. You cannot create a co-owner just before a sale to split the TDS, and a resident co-owner's share follows the resident rules instead.

Illustrative example: two NRI spouses each own half of a flat sold for ₹1.6 crore, held for more than 24 months. Each receives ₹80 lakh, so the buyer deducts 14.3% from each, ₹11,44,000 apiece or ₹22,88,000 in total. Had one spouse owned it outright, the buyer would have deducted 14.95% of ₹1.6 crore, which is ₹23,92,000. Either way, a Form 128 certificate for each co-owner, based on their real gain, is what brings the deduction down to the actual tax.

›Deductions that cut the gain, and so the tax

Your capital gain is the sale price minus the cost of acquisition, any documented cost of improvement and the expenses of the transfer itself. Expenses commonly allowed include brokerage on the sale, legal and documentation fees and the costs of advertising the property. Stamp duty and registration you paid when you bought count towards the cost. These deductions do not change what the buyer withholds by default, but they flow into the capital gains computation behind a Form 128 application and into your return, so keep the invoices. For a full planning view, see our capital gains tax playbook and the reinvestment tax planner.

TDS on property purchase from an NRI: the buyer's step by step

If you are buying from an NRI, the compliance burden is yours. The 1% rule and Form 26QB route for resident sellers never applied to NRI sellers. From 1 October 2026 there are two routes, depending on who you are.

›Route 1: resident individual or HUF buyer, PAN-based (from 1 October 2026)

CBDT Notification 121/2026 (dated 22 September 2026) added a new Schedule E to Form 141 (earlier Form 26QB) for purchases from non-resident sellers. Resident individuals and HUFs no longer need a TAN or quarterly returns for these purchases.

1. 1Confirm the seller's residential status, PAN, overseas address, and Tax Residency Certificate and foreign tax number if the seller has no PAN.
2. 2Collect any Form 128 certificate from the seller before the first payment; otherwise apply the full rate on each payment.
3. 3Deduct TDS, including surcharge and cess, from every payment, including the token and each instalment.
4. 4Deposit the TDS and report the deal on Form 141 using your PAN, within 30 days from the end of the month of deduction. Each joint buyer files separately for their share.
5. 5Download the TDS certificate in Form 132 from TRACES and give it to the seller.

›Route 2: all other buyers, TAN-based

Companies, firms and other buyers still use the traditional route, and a resident individual who completed a purchase before 1 October 2026 will have used it too.

1. 1Obtain a TAN (Tax Deduction and Collection Account Number) before the first payment; allow a week or two.
2. 2Deduct TDS on each payment at the applicable rate, or at the certificate rate if the seller produces Form 128.
3. 3Deposit the TDS with Challan 281 by the 7th of the following month (30 April for deductions made in March).
4. 4File the quarterly TDS return on Form 144 (earlier Form 27Q).
5. 5Download and issue the TDS certificate on Form 131 (earlier Form 16A) to the seller after the return is processed.

Under both routes, pay the balance to the seller's NRO account or an account the seller can lawfully receive into, and keep the challan, the certificate and the bank trail. The seller will need them to repatriate the money and claim credit.

›What happens if the buyer gets it wrong

• Interest of 1% a month for failing to deduct and 1.5% a month for deducting but not depositing.
• A late fee of ₹200 a day for a delayed TDS statement, capped at the TDS amount, plus a separate penalty for not filing.
• A penalty of up to the amount of TDS not deducted, and the buyer being treated as an assessee in default for the tax itself.
• Delays for the seller: without a matching TDS credit, the seller cannot claim the tax paid or easily get the CA certificate needed for repatriation.

Is TDS refundable for NRIs? How to claim excess TDS back

Yes. TDS is only an advance. If more was withheld than your actual tax on the sale and any other Indian income, the excess is refunded, but only after you file an Indian income tax return for the tax year of the sale. There is no shortcut application for a refund outside the return.

1. 1Check that the TDS appears against your PAN in your Annual Information Statement and Form 168 (earlier Form 26AS). If it does not, the buyer has filed incorrectly and must correct it.
2. 2File the return (usually ITR-2 for capital gains) after the tax year closes on 31 March, by the due date, normally 31 July, reporting the gain, exemptions and TDS credit.
3. 3E-verify the return within 30 days.
4. 4Pre-validate an Indian bank account, typically your NRO account, so the refund can be credited.
5. 5Track processing on the e-filing portal and respond quickly to any notice.

How long does it take? A return cannot be filed until the tax year ends, so a sale in May 2026 can only be claimed after 1 April 2027. Processing then usually takes a few weeks to a few months, longer if a refund is large or questioned. In practice, excess TDS on a sale can sit with the government for 12 to 18 months. Interest is paid on refunds, at 0.5% a month, but that rarely compensates for the currency and opportunity cost.

That is the main argument for Form 128. A certificate keeps the money in your hands at completion instead of turning it into a long-dated refund, and it also simplifies the remittance: with a certificate in place, only Part B of Form 145 is generally needed and a CA certificate on Form 146 is not.

DTAA and TDS on NRI property sales

Almost every tax treaty India has signed lets India tax gains on immovable property located in India. A DTAA therefore does not reduce the TDS on a property sale. What it does is let you claim credit for the Indian tax in your country of residence, using a Tax Residency Certificate and the Indian TDS certificates and return. See our DTAA guide for how the credit works in practice.

TDS on NRI rent and interest

A property sale is not the only place TDS hits NRIs. Two other deductions catch people out, especially in the year they sell:

When you become an NRI, update your residential status with your bank and convert resident savings accounts to NRO. A mismatch can lead to wrong deductions that you then have to chase through your return. For the full treatment of rental TDS, deductions and the tenant's obligations, read our NRI rental income tax guide.

Getting the sale money out of India

After TDS, the proceeds land in your NRO account. You can repatriate up to USD 1 million per financial year from NRO balances, including property sale proceeds, after filing Form 145 (earlier Form 15CA) and, where required, a CA certificate on Form 146 (earlier Form 15CB). The CA will ask for the TDS certificates and proof that tax has been paid, which is another reason to get the TDS right at the start. Our repatriation guide covers the process and limits.

Common TDS mistakes NRI sellers make

• Taking the token or advance without TDS. TDS applies to every payment, including the first one, and a certificate obtained later does not reverse TDS already deducted.
• Letting the buyer use the resident 1% route. A buyer who deducts only 1% under the resident rules remains liable for the shortfall, and the mismatch usually surfaces when you try to repatriate the money or file your return.
• Applying for Form 128 too late. If the certificate is not in the buyer's hands before the payments start, you lose the main benefit and wait for a refund instead.
• Keeping an inactive PAN or one still marked resident. An inoperative PAN can push the rate up to the higher no-PAN rate and creates credit mismatches in your tax records.
• Not filing an Indian return after the sale. Without a return there is no refund of excess TDS, and the reinvestment exemptions must be claimed in the return.
• Losing the purchase papers. Without the original purchase deed, payment proof and improvement bills, neither a lower TDS certificate nor a correct capital gains computation is possible.

Several of these also trip up a sale at the bank stage. Our guide to repatriating property sale proceeds covers what the bank checks before it releases the money abroad.

Documents checklist for TDS on an NRI property sale

• Seller: PAN with non-resident status, passport and visa or OCI card, overseas address, Tax Residency Certificate if claiming treaty benefits.
• Purchase evidence: original sale deed, payment proof, stamp duty and registration receipts, improvement bills.
• Sale evidence: agreement to sell, payment schedule, buyer's PAN (and TAN if on the TAN route).
• Tax documents: Form 128 certificate if obtained, buyer's challans, Form 132 or Form 131 TDS certificates.
• Bank: NRO account details for receiving the balance and any refund.

The full property-side list, including power of attorney and society clearances, is in our documents checklist. If you would rather hand the whole sale over, our property team handles the TDS planning, the certificate application and the closing.

Your buyer has their own set of obligations, and getting them wrong is their problem rather than yours — though it is your sale that stalls. Send them the buyer's guide to [TDS on property purchase from an NRI](/blog/tds-on-property-purchase-from-nri-complete-guide).