NRI Property Sale in India: TDS Rates and Key Compliance Requirements – FY 2026–27

When an immovable property situated in India is sold by a Non-Resident Indian (NRI), tax deduction at source (TDS) is governed by Section 393(2) of the Income-tax Act, 2025, corresponding to Section 195 of the Income-tax Act, 1961.

Unlike transactions involving resident sellers, the ₹50 lakh threshold does not apply. The buyer must determine the applicable withholding rate and deduct tax in accordance with the relevant provisions.

1. Applicable TDS Rates

The tax treatment depends on whether the capital gain is long-term or short-term, together with the applicable surcharge and Health and Education Cess.

For eligible LTCG taxable at 12.5%, the illustrative effective rates are:

The surcharge applicable to LTCG is subject to the relevant statutory cap. The applicable rate must be determined with reference to the seller’s circumstances and the law in force; it should not be inferred solely from the sale consideration.

2. TDS on Gross Consideration and Lower Deduction Certificate

In the absence of an applicable lower or nil deduction certificate, TDS may be required on the gross sale consideration, rather than merely on the capital gain.

For example, on a sale consideration of ₹150 crore, an illustrative withholding rate of 14.95% would result in TDS of ₹22.425 crore. This illustrates the potential cash-flow impact and is not a determination of the seller’s final tax liability.

Where the actual capital gain is substantially lower than the sale consideration, the seller may apply for a Lower or Nil Deduction Certificate in Form No. 128, under the prescribed procedure. The Assessing Officer may determine an appropriate rate based on the estimated taxable income and supporting documentation.

Obtaining the certificate before completion of the transaction can help avoid excessive withholding. If excess TDS has already been deducted, the seller may claim the eligible refund through the income-tax return, subject to the applicable provisions.

3. PAN vs. TAN: Change Effective from 1 October 2026

For eligible transactions executed on or after 1 October 2026, resident individual and HUF buyers purchasing property from a non-resident can use their PAN instead of obtaining a separate TAN, subject to the prescribed conditions.

The applicable PAN-based reporting procedure is Form No. 141, Schedule E. This procedural simplification does not reduce the amount of TDS otherwise payable.

Companies, firms and other categories of buyers should separately verify their applicable TAN and reporting obligations. For transactions outside the scope of the new facility, the relevant non-resident TDS procedures, including Form No. 144 where applicable, must be followed.

4. Consequences of Non-Compliance

Incorrectly applying the resident-seller TDS rate to a non-resident seller may expose the buyer to treatment as an assessee-in-default, together with applicable interest, penalties and other statutory consequences.

Before completing the transaction, the buyer should verify the seller’s residential status, applicable withholding rate, surcharge and cess, availability of a lower deduction certificate, and the prescribed payment and reporting requirements.

Conclusion

NRI property transactions require careful assessment of both the substantive tax liability and the buyer’s withholding obligations. Advance planning, correct rate determination and timely procurement of a lower deduction certificate, where appropriate, can minimise avoidable cash-flow constraints and compliance risks.

Professional note: The applicable rate and reporting procedure should be verified against the statutory provisions and rules in force on the transaction date. TDS is a withholding mechanism and may differ materially from the seller’s final tax liability.