NRI Property Sale TDS Rules: Rates, Refunds, Repatriation & More Explained

Selling property in India as a Non-Resident Indian (NRI) comes with specific tax obligations that every seller must understand. One of the most important aspects is Tax Deducted at Source (TDS), which affects both buyers and sellers in property transactions. This comprehensive guide will help you navigate through the complexities of TDS on NRI property sales.

When an NRI sells property in India, the buyer is legally required to deduct TDS from the payment before transferring money to the seller. This tax obligation exists regardless of the buyer's residential status - only the seller's NRI status matters for determining TDS rates.

Understanding the property transfer and home loan tax benefits is crucial for making informed decisions about your real estate investments in India.

Quick Overview of TDS Rules for NRI Property Sales

Understanding the basic framework helps streamline your property transaction. Here's what you need to know at a glance:

Key Details:

• Long-Term Capital Gains (LTCG) Rate: 20% + surcharge + 4% cess (for properties held over 2 years)
• Short-Term Capital Gains (STCG) Rate: As per NRI's income tax slab
• Who Deducts: Property buyer must deduct TDS
• Payment Timeline: Within 30 days from month-end of deduction
• Essential Documents: Title deed, PAN card, Power of Attorney, passport/visa, sales agreement
• Key Forms: Form 26QB, Form 27Q, Form 16A, Form 13 (for reduced TDS)
• Repatriation: Requires Form 15CA/CB plus tax payment proof
• Refund Option: Available through ITR filing if TDS exceeds actual tax liability

How to Check if Seller is Resident or Non-Resident

Determining residential status is crucial for applying correct TDS rates. The Income Tax Department provides a residential status calculator, or you can manually calculate using these steps:

Steps to Determine Residential Status:

Calculate Days Spent in India: Count total days present in India during the financial year. Your presence even for part of a day counts as a full day.

Apply Residency Tests: You're considered a resident if you meet either condition:

• Present in India for 182 days or more in the current financial year
• Present for 60+ days in current year AND 365+ days in the preceding four years

Check Special Exceptions: Certain situations modify these rules:

• Indian citizens working abroad: 60-day rule doesn't apply
• Income below ₹15 lakhs with Indian citizenship/origin: 60-day rule waived
• Visiting India temporarily: Special provisions may apply

Determine Ordinary vs Non-Ordinary Resident: If you were non-resident in 7 out of 10 preceding years, you may qualify as non-ordinary resident with different tax implications.

Getting professional help from a chartered accountant ensures accurate status determination and proper tax planning. For comprehensive guidance on buying property in India as an NRI, understanding all legal procedures and tax-saving strategies is essential.

TDS Deduction Process for NRI Property Sales

The TDS deduction process follows specific procedures that both buyers and sellers must understand:

Buyer's Responsibilities:

The buyer must obtain a Tax Deduction and Collection Account Number (TAN) before deducting TDS. Unlike regular property transactions with resident Indians, buying from an NRI makes TAN mandatory. If multiple buyers are involved, each must have their own TAN.

Deduction Timing:

TDS should be deducted at the time of property registration, not during individual payments. This ensures proper documentation and compliance with tax regulations.

Deposit Requirements:

The deducted TDS must be deposited with the Income Tax Department within 7 days after the month-end when deduction occurred. Use Challan ITNS 281 for online or bank deposits.

TDS Rates for Different Property Holdings

The TDS rate depends on how long you've held the property:

Long-Term Holdings (Over 2 Years):

• Base rate: 20%
• Health and Education Cess: 4%
• Effective rate: 20.80%
• Surcharge applies for high-value transactions above ₹50 lakhs

Short-Term Holdings (Under 2 Years):

• Rate: As per your income tax slab (can be up to 30%)
• Additional cess: 4%
• Higher surcharge for premium properties

Example Calculation:

For a property sold at ₹45,00,000 held for 3 years:

• Sale Value: ₹45,00,000
• TDS Rate: 20%
• Cess: 4%
• Total TDS: ₹9,36,000

TDS on Properties Below ₹50 Lakhs

Even properties below ₹50 lakhs attract TDS under Section 195. Here's the breakdown:

Long-Term Capital Gains:

• Capital gain tax: 20%
• Surcharge: Nil
• Health and education cess: 4%
• Effective TDS rate: 20.80%

Short-Term Capital Gains:

• Rate: As per applicable income tax slab
• Cess: 4% of total tax
• Final rate varies based on NRI's total income

Reducing TDS Through Form 13

You can significantly reduce TDS by obtaining a certificate from the Income Tax Department:

Application Process:

Submit Form 13 with supporting documents including purchase price, date of acquisition, and improvement costs. The Income Tax Officer will compute actual capital gains and issue a certificate for lower TDS deduction.

Required Documents:

• Original purchase deed
• Receipts for property improvements
• Valuation reports
• Construction/renovation bills
• Other relevant cost proofs

Benefits:

Instead of TDS on entire sale value, you'll pay only on actual capital gains, resulting in substantial savings. Understanding smart ways to save tax when selling property can help you optimize your tax liability significantly.

Money Repatriation for NRIs

Transferring sale proceeds abroad requires specific compliance:

Documentation Required:

• Form 15CA (can be prepared by NRI or CA)
• Form 15CB (must be prepared and signed by Chartered Accountant)
• Proof of TDS payment
• RBI/FEMA compliance certificates

Repatriation Limits:

NRIs can repatriate up to USD 1 million per financial year under the Liberalized Remittance Scheme. Amounts above this limit require special RBI approval.

Bank Requirements:

Submit all forms to your authorized dealer bank along with sale deed, tax payment receipts, and other specified documents.

Tax Filing and Return Requirements

For Buyers:

• File quarterly TDS returns using Form 27Q
• Submit within 31 days of quarter-end
• Provide Form 16A certificate to seller
• Pay interest for late deposits (1-1.5% per month)
• Face penalties up to ₹1 lakh for non-compliance

For Sellers:

• File income tax return in India
• Claim refund if TDS exceeds actual tax liability
• Report global income if classified as resident
• Maintain proper documentation for future reference

Avoiding Double Taxation

India has Double Taxation Avoidance Agreements (DTAA) with many countries to prevent paying tax twice on the same income:

How It Works:

If you pay tax in India on property sale, you can claim credit in your country of residence. This reduces your overall tax burden while maintaining compliance in both countries.

Example:

An NRI in the USA selling Indian property pays tax in both countries. However, under India-USA DTAA, taxes paid in India can be credited against US tax liability, preventing double taxation.

Documentation:

Maintain detailed records of taxes paid in India, including TDS certificates and final tax payments, to claim credits in your resident country.

Important Considerations for Sellers

Getting Lower TDS Certificate:

Apply for Form 13 certificate to reduce TDS on actual capital gains rather than entire sale value. This can save lakhs of rupees in unnecessary tax deduction.

Document Collection:

Ensure you receive Form 16A from buyer as proof of TDS deduction. This certificate is essential for claiming refunds or credits.

Investment Options:

Consider reinvesting capital gains in specified bonds or properties to reduce tax liability under sections 54, 54EC, or 54F.

Co-ownership Situations:

Each co-owner must separately apply for reduced TDS certificate through individual Form 13 applications.

Buyer's Key Responsibilities

TAN Registration:

Obtain TAN before property purchase from NRI. This is mandatory and different from PAN requirements.

Timely Compliance:

Deposit TDS within specified timelines to avoid interest charges and penalties. Late filing attracts ₹200 per day penalty.

Proper Documentation:

Maintain all certificates, receipts, and forms for future reference. Provide Form 16A to seller immediately after filing TDS return.

Home Loan Considerations:

For financed purchases, deduct TDS when paying seller, not when paying EMIs to bank. Learn about home loan tax benefits that can help you save significant amounts annually.

Recent Changes and Updates

The tax landscape for NRI property sales continues evolving. Recent amendments include:

Revised LTCG Rates:

From July 23, 2025, new rates may apply for long-term capital gains calculations, affecting overall TDS computation.

Enhanced Compliance:

Stricter documentation requirements and digital filing mandates ensure better tax collection and transparency.

DTAA Updates:

Regular updates to bilateral tax treaties may affect your tax planning strategies.

Professional Assistance Benefits

Engaging qualified professionals helps navigate complex requirements:

Chartered Accountant Services:

• Accurate residential status determination
• Optimal tax planning strategies
• Form 13 preparation and filing
• Repatriation documentation
• ITR filing and refund claims

Legal Expertise:

• Property documentation review
• Compliance verification
• Dispute resolution support
• Cross-border tax planning

Conclusion

Understanding TDS on NRI property sales is crucial for successful real estate transactions. While the process may seem complex, proper planning and professional guidance can help minimize tax burden and ensure full compliance. Remember that residential status determination affects your entire tax liability, not just TDS rates.

The key to successful NRI property transactions lies in early preparation, proper documentation, and timely compliance with all requirements. Whether you're selling a property worth ₹25 lakhs or ₹2 crores, understanding these rules helps you make informed decisions and avoid costly mistakes.

Stay updated with latest amendments, maintain proper records, and don't hesitate to seek professional help when needed. With proper planning, you can efficiently manage your property sale while meeting all tax obligations. For those considering property vs stocks investments, understanding the tax implications of each option is crucial for making the right financial decisions.

Frequently Asked Questions

1. What is the TDS rate for NRI property sales in 2025?
For long-term holdings (over 2 years), the rate is 20% plus 4% cess. For short-term sales, it follows the NRI's income tax slab rates.

2. Can an NRI avoid TDS on property sale?
TDS cannot be completely avoided, but it can be reduced by obtaining a Form 13 certificate based on actual capital gains computation.

3. Is TAN mandatory for buying property from NRI?
Yes, buyers must obtain TAN (Tax Deduction and Collection Account Number) before purchasing property from any NRI seller.

4. How long does Form 13 certificate processing take?
Typically 15-30 days, depending on document completeness and Income Tax Officer's workload. Apply well before property registration.

5. Can NRI claim TDS refund if excess amount is deducted?
Yes, NRIs can claim refunds by filing income tax returns in India if TDS exceeds actual tax liability.

6. What happens if buyer doesn't deduct TDS on NRI property purchase?
Buyer faces penalties, interest charges, and potential legal action. The tax liability doesn't disappear and compounds over time.

7. Do OCI cardholders get same TDS treatment as NRIs?
Yes, Overseas Citizen of India cardholders are treated similar to NRIs for TDS purposes and can apply for reduced deduction certificates.

8. Is residential status determination mandatory for every property sale?
Yes, proper residential status determination is essential as it directly impacts TDS rates and overall tax obligations for both parties.