Selling property as an NRI in India is not like selling as a resident. The transaction is the same — you find a buyer, agree on a price, sign a sale deed, register it. But the moment the buyer discovers you’re an NRI, everything changes.
The TDS rate jumps. The buyer suddenly needs to navigate unfamiliar compliance requirements. Your sale proceeds land in an NRO account with repatriation limits. And without proper planning, you can lose 20–30% of the sale value upfront to TDS — money you might not see again for 12–18 months.
This guide covers the complete selling process: TDS mechanics, how to reduce the deduction legally, capital gains tax, exemption routes, and the step-by-step repatriation process to get your money from India to your bank account abroad.
The TDS Problem: Why NRIs Lose So Much Upfront
When a resident Indian sells property to another resident, the buyer deducts TDS at 1% of the sale value under Section 194-IA. Simple, predictable, low impact.
When the seller is an NRI, Section 195 of the Income Tax Act kicks in. The buyer must deduct TDS at the full capital gains tax rate — but applied to the entire sale consideration, not just the profit. This is the part that catches most NRIs off guard.
Here’s what the rates look like in 2026:
Long-term capital gains (property held over 24 months)
TDS at 12.5% plus applicable surcharge and cess. Effective rate: approximately 14–23% depending on the gain amount and surcharge slab.
Short-term capital gains (property held 24 months or less)
TDS at slab rates — up to 30% plus surcharge and cess.
The critical detail
This TDS is calculated on the full sale value, not the capital gain. If you sell a property for ₹1 crore and your actual capital gain is ₹20 lakh, the buyer still deducts TDS on ₹1 crore. At an effective rate of 14%, that’s ₹14 lakh withheld — even though your actual tax liability on ₹20 lakh of gain might only be ₹2.5 lakh.
You get the excess back as a refund when you file your ITR. But that refund takes 6–18 months. Meanwhile, ₹14 lakh of your money is sitting with the government.
The Lower Deduction Certificate: Your Most Important Pre-Sale Step
This is the single most valuable tool available to NRIs selling property in India, and most sellers don’t know about it until after the sale deed is signed.
Under Section 197 of the Income Tax Act, you can apply for a Lower Deduction Certificate (LDC) — also called a Nil/Lower TDS Certificate — through Form 13. This certificate directs the buyer to deduct TDS only on your estimated capital gains, not the full sale value.
Using the same example: instead of the buyer withholding ₹14 lakh from a ₹1 crore sale, the LDC might direct TDS of ₹2.5 lakh — your actual estimated tax liability. That’s ₹11.5 lakh you keep in your pocket immediately instead of waiting over a year for a refund.
How it works
You apply online through the TRACES portal before the sale is completed. You provide details of the property — purchase cost, holding period, estimated sale value, and calculated capital gains. The Assessing Officer reviews the application and issues a certificate specifying the reduced TDS rate. You give this certificate to the buyer, who then deducts TDS at the lower rate.
Timing matters
Apply at least 4–6 weeks before the expected sale date. The AO may request additional documentation, and processing times vary. If you wait until after the sale deed is registered, it’s too late — the TDS has already been deducted at the full rate.
Capital Gains Tax: What You Actually Owe
Once TDS is sorted, your actual tax liability depends on whether the gain is short-term or long-term. We’ve covered the full capital gains framework for NRIs in detail, but here’s the property-specific summary:
Long-term (held over 24 months)
Taxed at 12.5% without indexation. For properties acquired before 23 July 2024, you have the option of 12.5% without indexation or 20% with indexation — whichever results in lower tax. This dual-option benefit was introduced in Budget 2024 specifically for pre-July 2024 acquisitions.
Short-term (held 24 months or less)
Taxed at your applicable slab rate — up to 30% plus surcharge and cess.
Cost of acquisition
For self-purchased property, it’s the original purchase price. For inherited property, it’s the cost at which the previous owner acquired it — not the value at the time of inheritance. The holding period also includes the previous owner’s holding period.
Three Legal Ways to Reduce or Eliminate Capital Gains Tax
These exemptions can significantly reduce your tax liability — but each has specific conditions and timelines that you must meet precisely.
Section 54 — Reinvest in residential property
If you reinvest the long-term capital gains (not the entire sale proceeds) in a new residential property in India, the gains are exempt. You must purchase the new property within 2 years of the sale or construct within 3 years. The exemption is limited to one residential property. If you sell the new property within 3 years, the exemption is reversed.
Section 54EC — Invest in specified bonds
You can invest up to ₹50 lakh of long-term capital gains in bonds issued by NHAI or REC within 6 months of the sale date. These bonds have a 5-year lock-in period and currently offer approximately 5–5.25% annual interest. The lock-in means your ₹50 lakh is illiquid for 5 years — but the capital gains tax saved can be substantial.
Section 54F — Reinvest entire sale proceeds in residential property
If you’re selling a non-residential asset (like commercial property) and reinvest the entire net sale consideration (not just the gain) in one residential property, the full capital gains become exempt. Conditions: you must not own more than one residential property on the date of sale, and the new property must be purchased within the specified timeframe.
Each of these exemptions has strict documentation and timeline requirements. Missing a deadline — even by a day — means the exemption is lost entirely.
Budget 2026 Change: TAN Requirement Removed
This is a practical improvement that makes NRI property sales smoother from October 2026 onwards.
Previously, any resident Indian buying property from an NRI had to obtain a Tax Deduction Account Number (TAN) — a separate registration solely for deducting and depositing TDS. For individual buyers making a one-time purchase, this was unfamiliar, confusing, and frequently caused delays or errors.
Budget 2026 has removed this requirement effective 1 October 2026. Buyers can now deduct and deposit TDS using their existing PAN — the same mechanism used when purchasing from resident sellers.
What this means for NRI sellers: fewer buyers will hesitate or back out because of the TAN process. Faster TDS deposits mean faster credit in your Form 26AS, which means you can file your ITR and initiate the refund process sooner.
Getting Your Money Out: The Repatriation Pipeline
Once the sale is done and TDS is sorted, your sale proceeds (minus TDS) land in your NRO account. Getting them from there to your overseas bank account requires a specific compliance sequence:
Step 1 — Sale proceeds to NRO account
The buyer pays the net amount (after TDS) into your NRO account. This is mandatory — the buyer cannot pay directly to an overseas account.
Step 2 — File your ITR
You must file an Indian Income Tax Return (ITR-2) for the financial year in which the sale occurred. Declare the capital gains, claim any exemptions (Section 54/54EC/54F), and reconcile TDS credits from Form 26AS. Without a filed ITR, banks may refuse to process repatriation.
Step 3 — Obtain Form 16A from the buyer
This is the TDS certificate confirming the buyer has deducted and deposited TDS against your PAN. It’s essential documentation for the next step.
Step 4 — Get Form 15CB certified by a Chartered Accountant
Form 15CB (renamed Form 146 from April 2026 under the new Income Tax Rules) is a CA certificate confirming that all applicable taxes have been paid and the remittance complies with FEMA and the Income Tax Act. Your bank’s authorised dealer branch will require this before processing the transfer.
Step 5 — Submit Form 15CA to the bank
Form 15CA (renamed Form 145 from April 2026) is your declaration to the bank providing details of the remittance. It references the Form 15CB certificate.
Step 6 — Bank processes the remittance
Your authorised dealer bank reviews the documentation, verifies compliance, and transfers the funds to your overseas account.
Repatriation limit
USD 1 million per financial year from NRO account balances, including property sale proceeds. If your sale proceeds exceed USD 1 million, you’ll need to spread the repatriation across two financial years — or apply for RBI approval for a higher amount through your authorised dealer bank.
Exception
If the property was originally purchased using NRE/FCNR funds (foreign exchange), you can repatriate the sale proceeds for up to two residential properties without the USD 1 million cap, to the extent of the original foreign exchange paid.
The Practical Sequence: What to Do and When
If you’re planning to sell property in India, here’s the order that protects your money:
Before listing
Gather all property documents — title deed, purchase agreement, payment receipts, previous owner documents (if inherited). Calculate your expected capital gains. Decide whether you’ll claim Section 54, 54EC, or 54F exemptions.
Before the sale deed
Apply for a Lower Deduction Certificate (Form 13) through TRACES — at least 4–6 weeks before the expected sale. This single step can save you lakhs in unnecessary TDS.
In the sale agreement
Include clauses that explicitly define the buyer’s TDS obligation under Section 195, require the buyer to deposit TDS using your NRI PAN, and set a timeline for providing Form 16A.
After registration
Ensure TDS appears in your Form 26AS. File ITR-2 declaring the capital gains. Engage a CA to prepare Form 15CB. Submit Form 15CA to your bank. Initiate repatriation.
If selling remotely, execute a Power of Attorney for a trusted person in India to handle registration and documentation. The PoA must be notarised and apostilled in your country of residence.
Our team helps NRIs across the US, UK, UAE, Canada, Australia, and Singapore navigate property sales alongside their broader financial planning — from LDC applications and tax structuring to reinvestment of sale proceeds into a portfolio designed for your goals.
Frequently Asked Questions
Why is TDS so high when an NRI sells property in India?
Because TDS for NRI property sales is governed by Section 195 (not Section 194-IA which applies to residents at just 1%). The buyer must deduct TDS at capital gains tax rates — 12.5% for long-term, up to 30% for short-term — applied to the full sale consideration, not just the profit. This often results in TDS far exceeding the actual tax liability. A Lower Deduction Certificate (Form 13) can reduce this to the actual estimated tax.
What is a Lower Deduction Certificate and how do I get one?
A Lower Deduction Certificate (LDC) under Section 197 directs the buyer to deduct TDS only on your estimated capital gains rather than the full sale value. Apply through the TRACES portal using Form 13, providing property details, purchase cost, holding period, and estimated gains. The Assessing Officer reviews and issues a certificate specifying the reduced TDS rate. Apply at least 4–6 weeks before the expected sale date.
How do NRIs repatriate property sale proceeds from India?
Sale proceeds go to your NRO account first. To repatriate, you file an Indian ITR declaring capital gains, obtain Form 16A (TDS certificate) from the buyer, get Form 15CB certified by a Chartered Accountant, submit Form 15CA to your authorised dealer bank, and the bank processes the overseas transfer. The limit is USD 1 million per financial year from NRO accounts. Properties originally purchased with NRE/FCNR funds may qualify for higher repatriation limits.
Can NRIs avoid capital gains tax on property sale in India?
You can reduce or eliminate capital gains tax through legal exemptions: Section 54 (reinvest gains in a new residential property within 2 years of purchase or 3 years of construction), Section 54EC (invest up to ₹50 lakh in NHAI/REC bonds within 6 months, 5-year lock-in), or Section 54F (reinvest entire sale proceeds of non-residential property in one residential property). Each has strict conditions and timelines.
Has Budget 2026 changed anything for NRI property sales?
Yes. The TAN requirement for buyers purchasing from NRIs has been removed effective 1 October 2026. Buyers can now deposit TDS using their PAN, simplifying the process. Additionally, Forms 15CA and 15CB have been renamed to Forms 145 and 146 respectively under the new Income Tax Rules from April 2026. The core TDS rates and repatriation limits remain unchanged.
Disclaimer: This blog is for informational purposes only and does not constitute financial, legal, or tax advice. Property transactions involve complex regulatory requirements under the Income Tax Act, FEMA, and state-specific laws. Tax rates, exemption provisions, and repatriation rules are subject to change. Please consult a qualified Chartered Accountant and legal professional before selling property or initiating repatriation. We specialise in Indian financial planning; for tax implications in your country of residence, please consult a local tax advisor.
