Selling Property in India as an NRI: The TDS Rules

Why the TDS rate is so much higher for NRIs

When a resident sells property in India, the buyer deducts a flat 1% TDS under Section 194-IA. When an NRI sells, none of that applies — the buyer must instead deduct TDS under Section 195, and by default, on the entire sale value, not just the gain. Depending on how long the property was held, the effective rate (including surcharge and cess) can run to roughly 20–21% for long-term gains, and considerably higher for short-term gains taxed at slab rates.

The certificate that changes this

Because TDS is otherwise deducted on the full sale price rather than the actual profit, NRIs routinely end up with far more tax withheld than they actually owe — recoverable only by filing a return and waiting for a refund. A Lower or Nil Deduction Certificate, applied for on Form 13 with the Assessing Officer, fixes this upfront: once granted, TDS is deducted only on the actual capital gain, at the appropriate rate, instead of the gross sale value.

Whose responsibility is it, actually?

The obligation to deduct TDS correctly sits with the buyer, not the seller — but it's the NRI seller who suffers if it's done wrong, either through excess deduction or, worse, a buyer who doesn't deduct at all and leaves the seller's tax position unresolved. Buyers are often unfamiliar with Section 195 specifically (as opposed to the far more common 1% rule for resident sellers), which is exactly where problems start.

Getting the timing right

A Lower Deduction Certificate application takes time to process, so it needs to be filed well before the sale closes — not on the day of the transaction. If the sale is already done and excess TDS was deducted, the only route left is claiming it back through your income tax return, which means waiting for a refund cycle instead of keeping the money at the time of sale.