When an NRI sells property in India, the buyer must deduct tax at source (TDS) before paying, and for a non-resident seller there is no ₹50 lakh threshold. For long-term property held over 24 months, the rate is 12.5% plus surcharge and cess, and by default it applies to the whole sale price, not just the gain. A lower deduction certificate from the Income Tax Department, applied for on Form 128 (earlier Form 13), lets the buyer deduct only what your actual tax requires.
Key takeaways
- TDS on payments to non-residents moved from section 195 of the old Act to section 393(2) of the Income-tax Act, 2025 from 1 April 2026.
- Long-term gains: 12.5% plus surcharge and cess. Short-term gains: normally 30% plus surcharge and cess.
- Without a certificate, the buyer usually deducts on the full sale consideration, which can lock up a large amount until you file your return.
- Apply for a lower or nil deduction certificate on Form 128 (section 395, earlier section 197) through TRACES before the sale.
- From 1 October 2026, resident individual and HUF buyers can deposit this TDS using their PAN instead of obtaining a TAN.
How NRI property TDS differs from a resident sale
| Point | Resident seller | NRI seller |
|---|---|---|
| Provision (old Act) | Section 194-IA | Section 195 (now section 393(2) of the 2025 Act) |
| Threshold | Applies at ₹50 lakh and above | No threshold |
| Rate | 1% of consideration | 12.5% (long-term) or up to 30% (short-term), plus surcharge and cess |
| Base | Sale consideration | The taxable gain in principle, but in practice the full consideration unless a certificate is obtained |
| Buyer’s registration | PAN-based challan-cum-statement | TAN earlier; PAN-based route for resident individuals and HUFs from 1 October 2026 |
The rates in more detail
- Long-term (held more than 24 months): 12.5% without indexation since 23 July 2024. The grandfathering choice of 20% with indexation for property bought before that date is available only to resident individuals and HUFs, not to NRIs.
- Short-term (24 months or less): taxed at slab rates, so buyers usually deduct at the highest rate of 30%.
- Surcharge: depends on the amount; for long-term capital gains it is capped at 15%.
- Health and education cess: 4% on tax plus surcharge.
For a large long-term sale, this means an effective TDS of roughly 13% to 15% of the full price. On a ₹1 crore sale where your real gain is ₹20 lakh, TDS of around ₹14 lakh would be far more than the tax of about ₹3 lakh you actually owe. You would get the difference back only after filing your return and waiting for the refund. The numbers are an illustration, not a quote for your case.
The lower deduction certificate (Form 128)
Under section 395 of the Income-tax Act, 2025 (the old section 197), you can ask the Assessing Officer to certify a lower or nil rate. The application is Form 128, which replaced Form 13, and it is filed online on the TRACES portal. The certificate names the buyer and the rate, so the buyer deducts only that amount.
What you will typically need
- PAN and login to TRACES and the income tax e-filing portal
- Purchase deed or inheritance documents, and proof of cost and improvement expenses
- The sale agreement or a draft, with the agreed price and buyer’s details (PAN and, where relevant, TAN)
- A computation of capital gains and any exemption you intend to claim
- Recent income tax returns, if filed
Timing
Apply as soon as the price and buyer are agreed, well before the sale deed. Processing can take several weeks, and the buyer cannot apply a lower rate retrospectively. Build this into the sale agreement, for example by stating that the balance will be paid on production of the certificate.
What the buyer must do
- Confirm the seller’s residential status and PAN. If the seller has no PAN, a higher rate can apply.
- Obtain a TAN, or, if a resident individual or HUF buying on or after 1 October 2026, use the new PAN-based process in Form 141 notified for this purpose.
- Deduct TDS at the rate in the certificate, or the full applicable rate if there is none.
- Deposit the tax on time and file the relevant return or statement (Form 144 replaced Form 27Q for non-resident TDS returns).
- Give the seller the TDS certificate so they can claim credit.
Buying from an NRI? Our guide to TDS on property purchase explains the resident side of the process too.
Reducing the tax itself
NRIs can use the same capital gains exemptions as residents. The familiar ones are section 54 (reinvest in a residential house in India), section 54F (for gains on other assets such as a plot, reinvested in a house) and section 54EC (specified bonds, up to ₹50 lakh, within six months). These were renumbered under the 2025 Act; ask your CA for the current references. If you plan to use an exemption, include it in your Form 128 computation. See our guide to saving capital gains tax.
After the sale
- Receive the money in your NRO account.
- File your Indian income tax return for the year and claim credit for the TDS.
- Complete Forms 145 and 146 (earlier 15CA and 15CB) to remit money abroad. See our guide to repatriating sale proceeds.
In Coimbatore, the sale deed will be registered at the sub-registrar office with stamp duty on the higher of guideline value and sale value, which the buyer pays. If you are abroad, sign through a registered power of attorney.
Frequently asked questions
Is there a ₹50 lakh threshold for TDS when buying from an NRI?
No. The ₹50 lakh threshold applies only when the seller is a resident. For an NRI seller, TDS applies whatever the price.
What is the TDS rate when an NRI sells property held for more than two years?
12.5% plus surcharge (capped at 15% for long-term gains) and 4% cess, applied to the sale consideration unless a lower deduction certificate says otherwise.
What replaced Form 13?
Form 128, filed on TRACES under section 395 of the Income-tax Act, 2025, which corresponds to the old section 197.
Does the buyer still need a TAN?
From 1 October 2026, resident individual and HUF buyers can deposit TDS on purchases from non-residents using their PAN. Companies, firms and LLPs still need a TAN.
This article is general information as of September 2026, not legal, tax or financial advice. Rules and rates change; confirm with a qualified advocate, chartered accountant or the relevant department before you act.
References
- TDSMAN: TDS on payments to non-residents, section 393(2) (old section 195)
- Income Tax Department: Form 128, application for lower or nil deduction certificate
- Dinesh Aarjav & Associates: TDS on property purchase from NRIs without TAN from 1 October 2026
- Income Tax Department: Form 145 (earlier Form 15CA) FAQs
Selling your Coimbatore property from abroad?
We help NRI sellers find serious buyers and plan the timeline so your CA can get a lower deduction certificate in place before registration.
