Surcharge on TDS on sale of property by NRI

TDS Deduction on Sale of Property The buyer needs to deduct TDS at 1% of the sale consideration, which is Rs 3.10 crore in your brother's case. The TDS amount would be Rs 31 lakhs. Surcharge Applicability For Non-Resident Indians (NRIs), the tax rate on long-term capital gains (LTCG) from the sale of property is 20% with indexation benefits or 12.5% without indexation benefits. A surcharge is applicable on the tax amount. Surcharge Rates The surcharge rates for NRIs are as follows¹: - *Up to Rs 50 lakhs*: No surcharge - *Rs 50 lakhs to Rs 1 crore*: 10% surcharge - *Rs 1 crore to Rs 2 crores*: 15% surcharge - *Rs 2 crores to Rs 5 crores*: 25% surcharge - *Above Rs 5 crores*: 37% surcharge Applicable Surcharge Given the sale consideration of Rs 3.10 crore, if we consider the tax implications under section 112, the maximum surcharge applicable would indeed be *15%* if the income falls between Rs 1 crore to Rs 2 crores. Calculation If the tax liability is calculated under section 112 with a tax rate of 12.5%, the surcharge would be 15% of the tax amount. However, the buyer should consult a tax professional to ensure accurate calculation and compliance with tax laws. Recommendations - Consult a tax professional to determine the exact tax liability and applicable surcharge. - Ensure compliance with TDS provisions under Section 194IA of the Income Tax Act, 1961. - Verify the calculation of TDS and surcharge to avoid any potential disputes or penalties.²

In the case of property purchased from an NRI, TDS is deducted under Section 195 and the applicable rate should include surcharge and Health & Education Cess wherever applicable.

For long-term capital gains, the base tax rate is 12.5% (post Budget 2024). In addition, surcharge may apply based on the NRI seller's total taxable income. Generally, a 10% surcharge applies where total income is between ₹50 lakh and ₹1 crore, while a 15% surcharge applies where income exceeds ₹1 crore.

A common misconception is that TDS is deducted only on the capital gain portion. In practice, the buyer is required to deduct TDS on the entire sale consideration unless the NRI seller obtains a Lower Deduction Certificate under Section 197 (Form 128 from April 2026), permitting deduction at a lower rate.

The buyer should also ensure compliance by obtaining a TAN, filing Form 27Q every quarter, and issuing Form 16A to the NRI seller.

For a detailed explanation of NRI property taxation, TDS rates, lower deduction certificates, and ITR filing, refer to:

NRI Capital Gains Tax on Property and Shares, TDS, ITR and lower deduction certificate guide