Many non-resident Indians own flats or plots in Hyderabad and sell them years later. The sale is taxed in India, and unlike a sale by a resident, the buyer must deduct tax at a high rate on the payment to the NRI. Planning before the sale agreement is signed can save a great deal of blocked money and paperwork.

TDS by the buyer

When the seller is a non-resident, the buyer must deduct tax under section 195 — not the 1% that applies when buying from a resident. The key points:

  • TDS applies to the capital gain, but in practice buyers deduct on the full sale price unless the seller produces a lower deduction certificate, because the buyer cannot verify the gain.
  • The rate is the capital gains tax rate plus surcharge and cess — for long-term gains, 12.5% plus surcharge and cess; for short-term gains, 30% plus surcharge and cess.
  • The buyer needs a TAN, deposits the TDS, files a quarterly TDS return in Form 27Q and issues Form 16A to the seller. Form 26QB, used for purchases from residents, is not the right form.
  • If the NRI seller does not have a PAN, TDS applies at a higher rate. Get a PAN well before the sale.

Capital gains tax

  • Property held for more than 24 months gives rise to a long-term capital gain, taxed at 12.5% without indexation for transfers on or after 23 July 2024.
  • Property held for 24 months or less gives a short-term capital gain, taxed at slab rates.

The gain is the sale price (or the stamp duty value, if higher, beyond a tolerance limit) less the cost of acquisition and improvement and the expenses of transfer, such as brokerage.

Lower deduction certificate

Because TDS on the full sale price is usually much higher than the actual tax, an NRI seller should apply for a lower or nil deduction certificate under section 197 in Form 13 on the TRACES portal before the sale. The application includes the sale agreement, the purchase documents and a computation of the capital gain and any exemption claimed. Once issued, the buyer deducts TDS at the rate in the certificate.

The certificate takes time to obtain, so apply as soon as the sale terms are agreed.

Exemptions available to NRIs

Long-term capital gains on property can be reduced or eliminated by:

  • Section 54 — investing in another residential house in India within one year before or two years after the sale, or constructing one within three years. The exemption is capped at ₹10 crore.
  • Section 54EC — investing up to ₹50 lakh in specified bonds within six months of the sale. The bonds have a five-year lock-in.

Filing the return and claiming refunds

The NRI seller must file an income tax return in India for the year of sale, reporting the capital gain and claiming credit for the TDS. Any excess TDS is refunded after the return is processed.

Repatriating the sale proceeds

Sale proceeds are credited to the NRI's NRO account in India. Funds can be remitted abroad within the limit of USD 1 million per financial year from NRO balances, on submission of Form 15CA and a Chartered Accountant's certificate in Form 15CB confirming that tax has been paid.

A checklist before you sell

  1. Make sure you have a PAN and that your name matches the property documents.
  2. Compute the capital gain and decide on any exemption.
  3. Apply for a lower deduction certificate before the sale.
  4. Ensure the buyer has a TAN and understands section 195 TDS.
  5. File the return for the year and complete Form 15CA/15CB to repatriate.

Frequently asked questions

What is the TDS rate when buying property from an NRI?

For long-term capital gains, 12.5% plus surcharge and cess; for short-term gains, 30% plus surcharge and cess. Without a lower deduction certificate, buyers usually deduct on the full sale price.

How can an NRI reduce TDS on a property sale?

By applying for a lower or nil deduction certificate under section 197 in Form 13 on the TRACES portal before the sale.

Does the buyer need a TAN to buy property from an NRI?

Yes. The buyer must obtain a TAN, deposit the TDS, file Form 27Q and issue Form 16A. Form 26QB applies only to purchases from residents.

How much can an NRI repatriate after selling property in India?

Up to USD 1 million per financial year from the NRO account, with Form 15CA and a Chartered Accountant's certificate in Form 15CB.

How we help

ASKN & Co. LLP helps NRIs selling property in Hyderabad with capital gains computation, lower deduction certificates, returns, refunds and Form 15CB for repatriation. See our ITR filing and NRI tax and international tax services.

This article is based on the Income-tax Act, 1961, which applies up to tax year 2025-26. The Income-tax Act, 2025 applies from tax year 2026-27.

This article is general information based on the law as at the date shown and is not professional advice. Please consult us before acting on it.