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TDS on Property Sale by NRI in India 2026 — Section 195 & Form 27Q

What the buyer must deduct, which forms to file, how the NRI can reduce or reclaim TDS.

When an NRI sells property in India, the buyer is legally required to deduct TDS at source under Section 195 of the Income Tax Act — before paying any consideration to the seller. This is distinct from the resident-seller rule under Section 194IA (1% above ₹50L): for NRI sellers, the rates are 20% or 30%, applied to the full sale price, with no minimum threshold. This guide covers every aspect of this obligation — rates, forms, deadlines, DTAA relief, and refund process.

Section 195 — TDS Rates for NRI Property Sale

TDS is deducted on the entire sale consideration — not on the capital gain. This is the most costly misunderstanding in NRI property transactions.

Holding PeriodGain TypeBase TDS RateWith Surcharge + 4% Cess
More than 2 yearsLong-Term Capital Gains (LTCG)20%~20.8% (income <₹50L) to ~23.92% (income >₹5Cr)
2 years or lessShort-Term Capital Gains (STCG)30%~31.2% (income <₹50L) to ~35.88% (income >₹5Cr)
Important:

TDS is applied on the full sale price — e.g. on a ₹1 crore property, the buyer deducts ₹20 lakh TDS (at 20% base) and pays only ₹80 lakh to the NRI seller. The NRI then files an ITR to reclaim the excess over their actual tax liability.

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Step-by-Step: Buyer's TDS Obligations

  1. Obtain TAN — the buyer must have a Tax Deduction Account Number (TAN) from the Income Tax department before deducting TDS. Apply via Form 49B on tin.nsdl.com.
  2. Deduct TDS at source — deduct the applicable rate (20% or 30% + surcharge + cess) from the payment being made to the NRI seller.
  3. Deposit via challan — deposit TDS to the government using Challan ITNS 281 within 7 days of the end of the month in which deduction was made.
  4. File Form 27Q — file quarterly TDS return (Form 27Q) within 31 days of quarter end. This is different from Form 26QB used for resident sellers.
  5. Issue Form 16A — generate and provide Form 16A (TDS certificate) to the NRI seller within 15 days of the due date for filing Form 27Q.

Key Forms — Section 195 Transactions

FormWho FilesPurposeDeadline
Form 27QBuyer (deductor)Quarterly TDS return for payments to non-residents31 days after quarter end
Form 16ABuyer (deductor)TDS certificate issued to NRI seller15 days after Form 27Q due date
Form 15CABuyer (remitter)Declaration of nature of payment to non-resident; submitted to authorised dealer bank before remittanceBefore remitting proceeds to NRI
Form 15CBChartered AccountantCA certificate confirming tax compliance on the remittance; required for Form 15CA (Part C) when remittance >₹5 lakhBefore Form 15CA Part C filing
Form 13 (Section 197)NRI sellerApplication for lower or nil TDS certificate from Assessing Officer — reduces TDS at source if actual tax liability is lowerBefore sale closes (apply in advance)

Lower Deduction Certificate — Section 197 / Form 13

The standard TDS rates (20% / 30%) are applied on the full sale price — which can result in massive over-deduction when the NRI's actual indexed capital gain is a fraction of the sale price. A Lower Deduction Certificate (Form 13) under Section 197 allows the NRI to pre-certify the correct TDS rate to the buyer.

When to apply:Whenever the NRI's indexed cost of acquisition (factoring in inflation) brings the actual long-term capital gain below the gross sale price — which is typically the case for properties held 5+ years in appreciating markets. Example: if you bought for ₹30 lakh in 2015 and sell for ₹1 crore in 2026, the indexed cost may be ₹70 lakh, meaning the actual LTCG is only ₹30 lakh. TDS on ₹6 lakh (20% of ₹30L gain) is very different from TDS of ₹20 lakh (20% of ₹1Cr sale price).

Timeline: Apply to the Assessing Officer (AO) of your TAN jurisdiction at least 4–6 weeks before the sale date. The AO has 30 days to issue or reject. Without this certificate, the buyer is legally obligated to deduct at full rates.

DTAA Relief on NRI Property Sale

India's Double Taxation Avoidance Agreements (DTAA) with 90+ countries can reduce or eliminate Indian TDS on capital gains from property sale. Key provisions:

CountryDTAA Treatment (Capital Gains from Indian Property)
USAIndia has primary taxing rights; US allows foreign tax credit
UAEIndia has taxing rights on immovable property gains
UKIndia has primary taxing rights; UK credits Indian tax paid
SingaporeIndia has taxing rights on immovable property situated in India
CanadaIndia has primary taxing rights; Canada credits Indian tax

To claim DTAA benefit: provide a Tax Residency Certificate (TRC) from your country of residence to the buyer, along with Form 10F. Without TRC, the buyer must deduct at the higher domestic rate. Always engage a cross-border tax advisor — DTAA interpretation varies by treaty and fact pattern.

NRI TDS Refund — How to Claim

If TDS deducted exceeds the NRI's actual tax liability, the excess is refundable after filing an Indian ITR. Steps:

  1. File ITR-2 (if only capital gains income from India) or ITR-3 (if business income) for the relevant assessment year.
  2. Report the capital gain, claim the indexed cost of acquisition deduction, and declare the TDS deducted (using Form 16A details).
  3. The ITR must be filed by 31 July of the assessment year (31 October with audit). Late filing permitted up to 31 December with ₹5,000 penalty.
  4. Refund is processed by the Centralised Processing Centre (CPC) — typically within 3–6 months of ITR filing. Credited to the NRI's NRO bank account linked in the ITR.
Common mistake:

NRIs who do not file an ITR lose the TDS refund entirely. There is no automatic refund — you must file even if you have no other Indian income. Deadline is 31 July each year for the prior financial year (April–March).

Frequently Asked Questions

What is TDS rate for NRI property sale in India 2026?

Under Section 195 of the Income Tax Act, TDS on NRI property sale is 20% for long-term capital gains (held >2 years) and 30% for short-term gains, plus applicable surcharge and cess. TDS applies to the full sale consideration — not just the capital gain.

How does an NRI get TDS certificate after property sale?

The buyer must file Form 27Q within 30 days of the next quarter end, then issue Form 16A to the NRI seller. The NRI can then claim TDS credit in their Indian ITR or apply for a lower deduction certificate under Section 197.

Can an NRI claim refund of TDS on property sale?

Yes. NRIs can claim TDS refund by filing an Indian income tax return (ITR-2 or ITR-3). If actual capital gains tax is less than TDS deducted, the difference is refunded after assessment.

What is Form 15CA and 15CB for NRI property sale?

Form 15CA is a declaration by the remitter (buyer) about the payment to NRI. Form 15CB is a certificate from a Chartered Accountant confirming the nature of remittance and applicable taxes. Both are mandatory for repatriating sale proceeds abroad.

What is the TDS threshold for NRI property sale?

There is no minimum threshold — TDS applies on the full sale consideration when the seller is an NRI. The buyer must deduct TDS regardless of property value under Section 195.

What is a lower deduction certificate (Form 13) for NRI property sale?

An NRI seller can apply to the Income Tax Assessing Officer for a lower or nil TDS deduction certificate (Form 13) under Section 197 before the property sale closes. This is useful when the actual capital gains tax is significantly lower than the headline TDS rate — for example, where indexed cost of acquisition is high. The buyer then deducts TDS at the certificate rate instead of the standard rate.

Does DTAA reduce TDS on NRI property sale?

India has Double Taxation Avoidance Agreements (DTAA) with 90+ countries. Depending on the treaty, capital gains from Indian property may be taxable only in the NRI's country of residence — not in India. If the DTAA provides relief, the NRI must provide a Tax Residency Certificate (TRC) from the foreign country to claim the reduced rate. A CA consultation is mandatory to apply DTAA benefit correctly.

What form does the buyer file for TDS on NRI property?

The buyer files Form 27Q (not Form 26QB which applies to resident sellers). Form 27Q must be filed quarterly — within 31 days of the end of the quarter in which TDS was deducted. Failure attracts interest at 1.5%/month plus penalty.

Planning an NRI property sale? Run the numbers first.

Use Brickplot's TDS calculator to estimate TDS on any sale price, and the rental yield calculator to evaluate your investment before selling.

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