Last reviewed: 28 October 2026. By NRAM & Co., Chartered Accountants, Hyderabad (ICAI FRN 023031S).
In short: When an NRI sells property in India, the buyer must deduct TDS at non-resident rates, which can block a large part of the sale price. Applying for a lower deduction certificate before the sale, filing an Indian tax return, and following FEMA rules for repatriation avoids most problems.
Why the TDS is so high
For a resident seller, the buyer deducts a small percentage of the sale price. For a non-resident seller, the buyer must deduct tax on the capital gain at the rates that apply to non-residents, plus surcharge and cess. Buyers often cannot work out the gain, so in practice they deduct on the full sale value, which can be far more than the tax actually due.
The buyer also needs a TAN (tax deduction account number) to deduct and deposit this TDS and must file a TDS return for it.
The lower or nil deduction certificate
An NRI seller can apply to the income tax department for a certificate that tells the buyer to deduct TDS at a lower rate, or not at all, based on the actual capital gain and any exemption being claimed.
- Collect the purchase deed, sale agreement, and proof of improvement costs.
- Compute the capital gain and any exemption you intend to claim, such as reinvestment in another residential property.
- Apply online with these documents, well before the sale date. Processing usually takes a few weeks.
- Give the certificate to the buyer, who deducts TDS as it specifies.
Capital gains and the tax return
Property held for more than 24 months gives rise to long-term capital gains; a shorter holding gives short-term gains taxed at normal rates. Exemptions may be available if the gain is reinvested in a residential house or specified bonds within the time limits.
The NRI must file an Indian income tax return for the year of sale, report the gain, and claim credit for the TDS. If TDS was more than the tax due, the excess is refunded.
Moving the money abroad
Sale proceeds are usually credited to the NRI’s NRO account. Under FEMA, an NRI can remit up to USD 1 million per financial year from NRO balances, which includes property sale proceeds, after taxes are paid.
The bank will ask for a declaration of the remittance and, above certain limits, a certificate from a Chartered Accountant confirming that tax has been paid (commonly known as Form 15CA and Form 15CB).
Common mistakes
- Signing the sale before applying for a lower deduction certificate.
- The buyer deducting at resident rates, which later leads to notices and penalties for the buyer.
- Not filing an Indian return, so excess TDS is never refunded.
- Not keeping purchase and improvement records, which increases the taxable gain.
How NRAM & Co. can help
We compute capital gains, apply for lower deduction certificates, file NRI tax returns and issue the Chartered Accountant certificates needed for repatriation, all remotely. See NRI Advisory, or email info@nramco.com.
This article is general information, not advice for any specific situation. Indian tax, GST and FEMA rules change often; check the current position with a professional before acting.