Why TDS Surprises Almost Every NRI Seller

When a resident Indian sells property, the buyer deducts a nominal 1% TDS. When an NRI sells, the rules change completely: the buyer must deduct tax on the full sale consideration at the rates applicable to the seller’s capital gains — and the buyer is personally liable if they get it wrong. On a Rs 2 crore sale, that can mean Rs 25-30 lakh withheld at source, even if your actual taxable gain is a fraction of that.

The money is not lost — you reclaim any excess when you file your Indian return — but a refund can take a year or more to arrive. Two documents prevent the cash-flow damage: a lower-TDS certificate under Form 13 obtained before completion, and clean Form 15CA/15CB filings when you move the proceeds abroad. This guide walks through both, plus the capital gains math in between.

Step 1: Know Your Holding Period and Rate

• Long-term (held over 24 months): gains taxed at 12.5% (without indexation, under the rules that applied from July 2024). TDS is deducted at this rate plus surcharge and cess on the whole sale price.
• Short-term (24 months or less): gains taxed at your slab rate — TDS at 30%+ on the sale price.
• Inherited property: your holding period includes the previous owner’s, and their original cost becomes your cost basis. Most inherited sales qualify as long-term.

The buyer needs a TAN (tax deduction account number), must deposit the TDS, and must issue you Form 16A. Many resident buyers have never done this — sales to NRIs regularly stall over it, so raise it early in negotiations.

Step 2: Apply for a Lower-TDS Certificate (Form 13)

This is the single highest-value move an NRI seller can make. You (usually through a chartered accountant) file Form 13 online with the jurisdictional assessing officer, showing the expected sale price, your indexed or actual cost, and the resulting gain. The officer issues a certificate instructing the buyer to deduct TDS at a rate matched to your actual tax liability — often cutting the withholding by 60-80%. Our dedicated Form 13 lower-TDS guide covers documents, timelines, and common rejection reasons.

Time it right: certificates take 3-6 weeks and are valid for the financial year, naming the specific buyer. Apply as soon as the buyer is identified, before signing the final sale deed.

Step 3: Save Tax on the Gain Itself

Two main exemptions can reduce the gain to zero:

• Section 54: reinvest the gain in another residential property in India (one year before to two years after the sale, or three years for construction).
• Section 54EC: invest up to Rs 50 lakh of the gain in NHAI/REC capital gains bonds within six months (five-year lock-in).

Both apply to NRIs. Note that reinvestment must be in India — buying a house in London or Dubai does not qualify. If you plan to claim these, tell the assessing officer in your Form 13 application: the certificate can reflect a near-zero rate.

Step 4: Repatriate the Proceeds

Sale proceeds must be credited to your NRO account. From there, our repatriation calculator shows the caps and paperwork; in short:

• Up to USD 1 million per financial year can move abroad from NRO funds, with Form 15CA (your declaration) and Form 15CB (a CA’s certificate that tax has been paid).
• Bought the property using NRE/FCNR funds? The original foreign-currency purchase amount can be repatriated outside the cap, for up to two residential properties.
• Your bank’s remittance desk drives the process; a CA who has done 15CB for property sales will save you weeks.

Once the funds are ready to move, compare corridors on our remittance money pages — on a repatriation-sized transfer, the difference between a 20 bps and 200 bps margin is serious money.

Step 5: Deal With Your Home Country

If you are tax-resident in the US, UK, Canada, or Australia, the gain is generally reportable there too, with a foreign tax credit for the Indian tax under the applicable treaty — run the numbers with our DTAA estimator . Watch for mismatches: your home country may compute the gain in its own currency from the original purchase date, which can create a taxable gain (or loss) even when the INR gain is small. US sellers should also remember FBAR/FATCA reporting once the proceeds sit in Indian accounts — see the US NRI hub .

Where Sellers Lose Money

1. No Form 13 — 13-15% of the sale value locked up for a year as an avoidable refund claim.
2. Buyer deducts 1% as if you were resident — the sale is defective; the liability lands on the buyer, and the dispute lands on the sale.
3. Proceeds parked idle in NRO — NRO interest is taxed at 30%+ in India. Repatriate, or at least move to a sensible NRE FD once eligible .
4. Selling in a hurry inside 24 months — waiting a few weeks to cross the long-term threshold can halve the tax.
5. DIY 15CA/15CB — banks bounce imprecise filings, and each bounce costs weeks.

This guide is general information, not tax advice. Rules current for FY 2025-26 / AY 2026-27; thresholds and rates change with each budget. For advice on your specific sale, use the form above to speak to a qualified professional — NRIWallah may receive a referral fee from the professional, never from you ( how we make money ).