NRI selling property in India: TDS, lower deduction certificate and repatriating the money
What happens when an NRI sells a house in India: buyer's TDS on capital gains, TAN, lower deduction certificates, capital gains tax, NRO accounts and the USD 1 million repatriation limit.
When a non-resident Indian sells property in India, the 1% TDS rule for resident sellers does not apply. Instead the buyer must deduct tax at the rates that apply to a non-resident's capital gain. For a long-term gain, that is 12.5% plus surcharge and 4% cess, or roughly 13% to 15%. Unless the seller produces a lower deduction certificate from the Income Tax Department, buyers usually apply this rate to the full sale price, because they cannot see the seller's cost. Until 30 September 2026 the buyer needed a TAN and a quarterly TDS statement. From 1 October 2026, a buyer who is a resident individual or HUF reports this deduction in the PAN-based challan-cum-statement (Form 141, Schedule E) under section 393(2) of the Income-tax Act, 2025, the same route used for resident sellers. The NRI seller then files an Indian return to settle the final tax. Under FEMA rules, money can be sent abroad from an NRO account up to USD 1 million a financial year, supported by Forms 15CA and 15CB.
This guide uses the old section numbers that most buyers and advisers still use, alongside the Income-tax Act, 2025 that took effect on 1 April 2026. Rates and processes carried over, but form names may differ on the portal.
Who can buy from an NRI, and what the NRI can sell
- An NRI or Overseas Citizen of India (OCI) can sell residential or commercial property in India to a person resident in India, to another NRI or to an OCI.
- Agricultural land, plantation property or a farmhouse held by an NRI, for example through inheritance, can generally be sold only to a person resident in India.
- The sale is registered in the usual way at the sub-registrar. An NRI who cannot travel can execute a registered or consularly attested power of attorney in favour of someone in India. The attorney signs the deed on the seller's behalf.
TDS on an NRI sale: how much the buyer deducts
| Holding period | Tax on the gain for a non-resident | Typical TDS without a certificate |
|---|---|---|
| More than 24 months | 12.5% without indexation + surcharge + 4% cess | 13% to about 15% of the amount paid, depending on the surcharge slab |
| 24 months or less | Slab rates; buyers apply the maximum rate + surcharge + cess | Often over 30% |
Non-residents cannot use the 20% with indexation option, which is limited to resident individuals and HUFs for property bought before 23 July 2024. Surcharge rises with the size of the gain or income: 10% above ₹50 lakh and 15% above ₹1 crore, with the rate on long-term gains capped at 15%.
Example without a certificate (illustrative): ₹1.5 crore sale, long-term. TDS at 12.5% + 15% surcharge + 4% cess = 14.95% of ₹1,50,00,000 = ₹22,42,500. The NRI receives ₹1,27,57,500.
Example with a certificate: If the flat cost ₹90 lakh, the actual gain is about ₹60 lakh, and the tax on it is about ₹8.97 lakh at the same rate. A lower deduction certificate for that amount releases about ₹13.5 lakh more to the seller on the day of sale, instead of waiting for a refund after the return is processed.
The lower deduction certificate
The NRI applies online through the TRACES portal, giving:
- The sale agreement or a draft of it, with the buyer's details
- Purchase documents proving the cost, plus improvement bills
- Details of any exemption claimed under Section 54 or 54EC, with proof of investment where available
- Recent Indian tax returns and PAN
The assessing officer issues a certificate specifying the rate or amount for that buyer and that transaction. Apply four to eight weeks before the sale. Processing can take a month or more, and the buyer cannot lawfully deduct less without it.
What the buyer has to do
- Check which route applies. From 1 October 2026 (Income-tax (Fifth Amendment) Rules, 2026, CBDT Notification 121/2026), a resident individual or HUF buyer files Form 141, Schedule E on the e-filing portal, with the seller's PAN or, if the NRI has no PAN, the tax residency certificate and foreign tax identification number. Payments before that date, and buyers who are companies or firms, follow the older TAN-based route: get a TAN through the TIN facilitation service, deposit with the non-resident challan and file the quarterly TDS statement. Confirm on the e-filing portal which applies to you.
- Deduct at the applicable rate, or at the certificate rate, at the time of each payment.
- Deposit and report within the time the form allows (for Form 141, within 30 days from the end of the month of deduction).
- Issue the TDS certificate to the seller.
- Remember that the stamp duty value affects the capital gain, and the 110% tolerance applies. See the circle rate guide.
Buyers who deduct only 1% by mistake can be held to be in default for the whole shortfall, with interest. If the seller's residential status is in doubt, ask for a written declaration and take advice.
Getting the money out of India
- Where it goes. Sale proceeds are normally credited to the NRI's NRO account. If the property was originally bought with money from abroad or an NRE/FCNR account, the amount paid in foreign exchange can generally be repatriated for up to two residential properties. Keep the inward remittance proof.
- USD 1 million a year. From NRO balances, an NRI can remit up to USD 1 million per financial year, covering sale proceeds and other NRO funds together. The bank will ask for Form 15CA, which you file yourself on the e-filing portal, and usually Form 15CB, a chartered accountant's certificate that tax has been paid or deducted.
- Tax first. Banks will not remit until they see the tax position in order. Keep the TDS certificate and, where relevant, the lower deduction certificate ready.
Filing the NRI's return
The NRI must file an Indian income tax return for the year of sale, showing the capital gain, any exemption claimed and the TDS. If more tax was deducted than due, the refund is paid to the Indian bank account listed in the return. A double taxation avoidance agreement (DTAA) may let the NRI claim credit abroad for Indian tax. Check how your country of residence treats it.
FAQ
Can the buyer deduct only 1% if the NRI seller agrees?
No. The rate depends on the law, not on agreement between the parties. Without a certificate, the buyer must deduct at the non-resident rate or risk being treated as in default.
Do I need a lower deduction certificate if I am reinvesting under Section 54?
It is the only way to have the planned exemption reflected in the TDS. Otherwise full TDS is deducted, and you claim a refund in your return.
Is the NRI's sale subject to stamp duty?
The stamp duty is paid by the buyer as in any sale. The seller's residential status does not change it.
Can an OCI cardholder sell inherited agricultural land?
Generally only to a person resident in India. Check the current FEMA rules with an authorised dealer bank before signing.
Sources
- Income Tax Department e-filing portal — Form 15CA, returns and refunds
- TRACES — lower deduction certificate applications and TDS certificates
- Reserve Bank of India — FEMA rules on property and remittances for NRIs
- Protean TIN facilitation — TAN application
- See also capital gains tax on a property sale, TDS for resident sellers and the overview of costs
