TDS on an NRI property sale in India: rates, the lower TDS certificate and refunds
When a resident of India sells property, the buyer withholds 1% of the price. When an NRI sells, the buyer withholds tax at the full capital gains rate, and by default on the entire sale price, not just the profit. That is the single most common surprise for U.S.-based families, and it can tie up lakhs of rupees for a year or more.
This guide explains the rules as they stand in November 2026, after India's new Income-tax Act, 2025 took effect.
Who has to deduct the tax
The buyer deducts tax before paying an NRI seller, under section 393 of the new Act (formerly section 195). There is no ₹50 lakh threshold for NRI sellers. Tax is withheld whatever the price.
The buyer must deposit the tax with the government, file a TDS return (Form 144, formerly Form 27Q), and give you a TDS certificate. The tax is deposited by the 7th of the month after it's deducted.
New from October 1, 2026: resident individual and HUF buyers no longer need to obtain a TAN (tax deduction account number) to do this. They can deposit the TDS using their own PAN. That removes one of the main reasons buyers used to hesitate over buying from NRIs.
How much gets withheld
The rate depends on how long the property was held. For inherited property, the holding period includes the time the previous owner held it, so most ancestral property is long-term.
| Long-term (held more than 24 months) | Short-term (24 months or less) | |
|---|---|---|
| Base rate | 12.5%, without indexation | Your slab rate (buyers usually withhold at 30%) |
| Surcharge | 10% of the tax if the payment is over ₹50 lakh; 15% if over ₹1 crore | Depends on the amount |
| Health and education cess | 4% of tax plus surcharge | 4% of tax plus surcharge |
| Effective withholding | About 13% to 15% of the amount paid | Often 31% or more |
A worked example
Suppose you sell an inherited flat for ₹1 crore, and your parents' cost for capital gains purposes is ₹60 lakh.
- Your actual gain: ₹40 lakh. Tax at 12.5% plus cess comes to roughly ₹5.2 lakh.
- What the buyer withholds by default: 12.5% of ₹1 crore, plus 10% surcharge and 4% cess. That is roughly ₹14.3 lakh.
- The gap: about ₹9 lakh of your money sits with the tax department until you file a return and receive a refund.
Figures are rounded and simplified to illustrate the point. Your CA will compute your actual position.
The fix: a lower TDS certificate
You can ask the tax department, in advance, to let the buyer withhold tax only on your actual expected gain. That is a lower or nil deduction certificate, issued under section 395 of the new Act (formerly section 197). The application form is Form 128, formerly Form 13, filed on the TRACES portal.
What to know:
- Apply after the sale agreement is signed and before the buyer starts paying. The certificate names the specific buyer and amount. It can't undo TDS already deducted.
- You'll need: your PAN, the sale agreement, proof of the original cost and any improvements, inheritance documents for inherited property, your capital gains computation, and recent Indian tax returns if you file them.
- Timing: processing typically takes several weeks, depending on the jurisdiction and how quickly queries are answered. Build that into the closing date.
- Validity: it covers the tax year it's issued for, or a shorter period stated on it. Give the buyer a copy before payment.
If too much was withheld: getting a refund
If tax was withheld at the full rate, you recover the excess by filing an Indian income tax return for the tax year of the sale. India's tax year runs April 1 to March 31. The refund is paid into your Indian bank account, typically your NRO account, after the return is processed. That usually takes months, not weeks.
What about U.S. taxes?
The sale is also reportable on your U.S. return. Indian tax paid on the gain can generally be claimed as a foreign tax credit, so the same gain usually isn't fully taxed twice. Only the tax you actually owe India counts, not excess TDS you should have had refunded. Your U.S. CPA will also look at your cost basis for U.S. purposes, which for inherited property is generally the value at the date of death. That is often quite different from the Indian figure. See selling inherited property from the U.S..
Frequently asked questions
What is the TDS rate when an NRI sells property in India in 2026?
For property held more than 24 months, the buyer withholds 12.5% plus surcharge (10% above ₹50 lakh, 15% above ₹1 crore) and 4% cess, roughly 13% to 15% of the amount paid. For property held 24 months or less, withholding is at slab rates, usually 30% plus surcharge and cess.
Is TDS for NRI sellers calculated on the sale price or the profit?
By default the buyer withholds on the full amount paid, because the buyer can't verify your profit. To limit withholding to your actual gain, apply for a lower TDS certificate (Form 128, formerly Form 13) before the sale closes.
Does the buyer still need a TAN to buy property from an NRI?
From October 1, 2026, resident individual and HUF buyers can deposit the TDS using their PAN instead of obtaining a TAN. Before that date, a TAN was required.
How do I get back excess TDS?
File an Indian income tax return for the tax year of the sale. Once it's processed, the excess is refunded to your Indian bank account.
Want the lower TDS certificate in place before closing? Roots & Return lines up an Indian CA, the buyer's paperwork and the timeline so less of your money gets stuck.
Related guides: Form 15CA & 15CB (now 145 & 146) explained · The USD 1 million repatriation limit · Selling inherited property in India from the U.S.
General educational information, current as of November 2026. It is not legal, tax or financial advice. Rates, thresholds, forms and procedures change; confirm them with a licensed Indian Chartered Accountant and a U.S. CPA before you act. Roots & Return coordinates independently licensed professionals; we do not prepare filings, give legal or tax opinions, or hold or transfer client funds.