Selling a property in India while you're based in the US, UK, UAE, Australia, Canada, or Singapore comes with one complication resident sellers rarely think about: TDS. Tax Deducted at Source rules for NRI property sales are stricter, higher, and far less forgiving of paperwork gaps than the rules that apply to resident Indians. Get the process wrong and the buyer's bank can withhold a third or more of your sale value before you ever see the money. Get it right, and you can bring that number down substantially, legally, before the deal even closes.
Why NRI property sales are taxed differently
When a resident Indian sells property, TDS is typically deducted at 1% under Section 194-IA, a flat administrative rate. When an NRI sells, Section 195 applies instead, and it doesn't work on a flat percentage of the sale price. It requires the buyer to estimate your capital gains and withhold tax on the gain, at a rate that depends on how long you've held the property.
- Long-term capital gains (property held 24 months or more): taxed at a base rate of roughly 12.5%, which works out to an effective 13-15% once surcharge and 4% health and education cess are added.
- Short-term capital gains (property held under 24 months): taxed at a steep 30% base rate, pushing the effective rate to 31-36% with surcharge and cess.
- The buyer, not you, is legally responsible for calculating and depositing this TDS with the Income Tax Department before the sale proceeds ever reach you.
Why buyers over-deduct almost every time
In theory, TDS should be deducted only on your actual capital gain, sale price minus indexed cost of acquisition and eligible expenses. In practice, most buyers deduct on the entire sale consideration, not just the gain. There are three predictable reasons this happens, and none of them are things a buyer will fix on your behalf.
- Buyers are uncomfortable calculating capital gains themselves and have no incentive to get it precisely right, since under-deduction makes them personally liable to the tax department.
- Sellers often can't produce clean documentation, original purchase deed, indexed cost workings, improvement invoices, quickly enough to give the buyer confidence in a lower number.
- Without a Lower or Nil TDS Certificate on file, the buyer has no legal cover to deduct anything less than the standard rate, so they default to the higher, safer number.
Form 13: the single most important document in this process
The fix for over-deduction is a Lower (or Nil) TDS Certificate, obtained by filing Form 13 with the Income Tax Department before the sale closes. This application asks the department to assess your actual expected tax liability on the sale and issue a certificate authorizing the buyer to deduct at that lower, calculated rate instead of the default statutory rate.
- Filed online through the TRACES/Income Tax portal, supported by acquisition documents, indexed cost calculations, and details of the proposed sale.
- Processing takes time, several weeks in many cases, so this needs to start well before you're at the registration table, not after.
- Once issued, the certificate is handed to the buyer, who is then legally entitled, and required, to deduct at the lower rate specified rather than the standard 13-36% range.
- Without it, you can still claim a refund of excess TDS when you file your India income tax return, but that means your money sits with the tax department for months instead of in your account.
What actually goes wrong for NRI sellers
Most of the friction in NRI property sales isn't about tax law itself, it's about coordination across time zones, incomplete records, and buyers who aren't sure how to handle an NRI transaction correctly. A few patterns show up repeatedly.
- An inactive or unlinked PAN that stalls TDS deposit and Form 13 processing at the worst possible moment.
- Buyers who have never transacted with an NRI seller before and default to over-caution, meaning over-deduction, because no one has explained the Form 13 route to them.
- Sale agreements that are silent on how and when TDS will be deducted and deposited, leading to disputes at registration.
- Missing or incomplete documentation to prove the original cost of acquisition, especially for inherited property or older purchases, which makes any lower-TDS calculation harder to support.
- No plan in place for repatriating sale proceeds abroad, which requires Form 15CA/15CB certification from a chartered accountant and needs to be lined up before, not after, the money lands in your NRO account.
A practical pre-sale checklist
Before you list or agree to sell, these are the items worth having in order. Doing this upfront is what separates a clean transaction from one where your money is stuck for months.
- Confirm your PAN is active and correctly linked, this is the first thing that blocks a transaction if it's not sorted.
- Start your Form 13 application early to get a Lower or Nil TDS Certificate before the sale is finalized.
- Verify the buyer understands their TDS obligations under Section 195 and is prepared to deduct and deposit correctly, not just at the default flat rate.
- Get the sale agreement to explicitly state the applicable TDS rate, timeline for deduction, and deposit responsibility.
- Gather acquisition documents, purchase deed, payment proof, improvement costs, early, since these drive your indexed cost of acquisition and your case for lower TDS.
- Line up your chartered accountant for Form 15CA/15CB well ahead of time so repatriation isn't the final bottleneck.
Where REvalu fits in
This is exactly the kind of transaction where having someone on the ground in Hyderabad, working only for you and not the buyer or a broker chain, changes the outcome. We verify that the buyer is genuinely TDS-ready before you sign anything, structure the sale agreement with explicit TDS clauses so there's no ambiguity at registration, coordinate Power of Attorney where you can't be present in person, manage registration end to end, and work alongside your CA on Form 13 and Form 15CA/15CB so the tax and repatriation pieces move in parallel instead of stalling the deal.
Selling from abroad doesn't have to mean losing a third of your proceeds to withholding you never needed to pay. The difference almost always comes down to how early the paperwork starts, not how complicated the law actually is.
This article is for general information only and does not constitute legal or tax advice. TDS rates, surcharge slabs, and procedural requirements can change and depend on your specific facts. Speak with a REvalu advisor and your chartered accountant before acting on any sale.
Common questions
How much TDS is deducted when an NRI sells property?
For a property held over two years, TDS is 20% plus surcharge and cess on the sale value, which works out between 20.8% and 23.92%. Held under two years, it is deducted at your income tax slab rate, up to 30% plus surcharge.
Can I reduce the TDS deducted on my sale?
Yes. Apply to the Income Tax Department using Form 13 for a lower or nil deduction certificate. It is assessed on your actual capital gain rather than the full sale value, so the deduction can drop substantially. Apply before the sale completes.
Can I bring the sale proceeds out of India?
Yes, subject to FEMA limits. You may repatriate up to USD 1 million per financial year from an NRO account, once taxes are paid and Forms 15CA and 15CB are filed by a chartered accountant.
