When it comes to selling property in India as an NRI, one of the most important financial aspects you need to understand is TDS (Tax Deducted at Source). TDS on property for NRI transactions is not just a tax deduction — it directly impacts how much money you actually receive after the sale.

Whether you're an NRI selling property or a resident Indian buying property from an NRI, this guide covers everything you need to know — including rules, rates, legal risks, and smart tips to reduce your tax burden.

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What is TDS on Property for NRI?

TDS on property for NRI refers to the tax that the buyer of the property is legally required to deduct and deposit with the Indian government before paying the NRI seller. As per Section 195 of the Income Tax Act, the buyer must deduct TDS on the full sale value, not just the capital gains.

This makes NRI property sale much more tax-intensive than sales by resident Indians, where TDS is only 1%.

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Why It Matters

Unlike resident sellers, NRIs are subject to TDS on the entire transaction amount, which often results in excess tax deduction — especially when the actual capital gain is much lower.

This makes it critical to understand the applicable rates and how to reduce them legally — a key focus in any property selling guide India for NRIs.

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TDS Rates on Property Sale by NRI (Effective July 23, 2024)

If the property was held for more than 24 months, it's treated as Long-Term Capital Gains (LTCG) and the following TDS rates apply:

If the holding period is less than 24 months, it becomes Short-Term Capital Gains (STCG) and is taxed at slab rates — meaning TDS at 30% plus surcharge and cess may apply.

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How to Reduce TDS on NRI Property Sale

Here are practical property sale tips for NRIs to reduce excessive TDS:

1. Apply for a Lower Deduction Certificate (Form 13)

If your actual capital gain is less than the total sale value, you can apply to the Income Tax Department for a lower or nil deduction certificate under Section 197.

Steps:

• File Form 13 with relevant documents

• Await assessment and issuance of the certificate

• Share the certificate with the buyer to deduct TDS at the lower rate

This is the most effective legal advice for NRI property transactions — ensuring you don’t overpay tax and wait months for a refund.

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Buyer’s Responsibility in NRI Property Transactions

If you are a resident Indian buying property from an NRI, the law puts several responsibilities on you:

1. Obtain a TAN (Tax Deduction Account Number)

   • Mandatory for deducting TDS.

   • Each co-buyer must obtain a separate TAN.

2. Deduct TDS on Each Payment

   • TDS must be deducted on each installment or lump-sum payment to the seller.

   • The TDS amount must be deposited by the 7th of the following month.

3. File TDS Return and Issue Form 16A

   • After TDS is deposited, a return must be filed.

   • Form 16A must be issued to the NRI seller as proof of deduction.

Failure to follow these rules can result in severe penalties under Section 271C and interest under Section 201 of the Income Tax Act.

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Penalties for Non-Compliance

If the Buyer Fails to Deduct TDS Properly:

• Liability to pay the entire amount of TDS again as a penalty

• Interest and prosecution under the Income Tax Act

• Risk of transaction scrutiny and audit

If the Seller Misrepresents as a Resident:

• The seller may not be able to repatriate the funds abroad

• Can face prosecution for misrepresenting tax residency status

• Ineligible for benefits under DTAA or FEMA regulations

This makes it essential to seek professional legal advice for NRI property sales before entering into any agreement.

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Frequently Asked Questions (FAQs)

Q: Is PAN mandatory for NRI sellers?
Yes, PAN is compulsory for deducting and filing TDS on property transactions involving NRIs.

Q: Can an NRI claim a refund for excess TDS?
Yes. You can file an ITR in India and claim the refund. However, the process takes time and accuracy is crucial.

Q: Is it necessary to file an ITR in India after sale?
Yes, if your income (including capital gains) exceeds the exemption limit, or if you want to claim a refund of excess TDS.

Q: What if the seller does not disclose NRI status?
The buyer may face legal consequences for incorrect TDS deduction. Proper due diligence is critical.

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Final Word: Trusted Help for NRI Property Sale

At India for NRI, we provide end-to-end assistance for NRI property sale, including:

• TDS calculations and planning

• Filing Form 13 for lower TDS deduction

• Buyer-side compliance (TAN, Form 16A, TDS returns)

• Legal documentation and sale deed review

• Repatriation and FEMA advisory

Whether you're in the USA, UK, UAE, Singapore, or Australia, we help you handle the entire transaction smoothly — without traveling to India.