TDS on Sale of Property by an NRI

When buying property from an NRI seller, the buyer must deduct TDS at the capital-gains rate (12.5% for LTCG without indexation, post-23 July 2024) on the full sale value — not the standard 1% domestic-seller rate.

FY 2026-27 · Section 393(2)

Quick answer

Indicative rate

12.5% (LTCG) or applicable STCG slab

Section & code

Section 393(2), Sl. No. 17, Code 1057

Forms typically needed:

Form 15CA Form 15CB Lower deduction certificate (recommended)

Cross-Border TDS Decision Helper

Nature of payment

Payee has valid PAN?

TRC + Form 41 furnished?

Indicative Act rate

20%

Domestic Act rate under Section 393(2) for royalty/FTS to a non-resident non-company — doubled from 10% by Finance Act 2023 (effective 1 April 2023), unchanged since. Classify carefully: royalty and FTS have different treaty definitions.

Without a TRC and Form 41, the treaty rate can't be applied — the Act rate above governs until documentation is furnished.

This is a decision aid, not a filing determination — always confirm classification and the exact treaty article with a professional before remitting.

The mistake that costs buyers the most: using the wrong rate

When an Indian resident buys immovable property from a resident seller, the buyer deducts a flat 1% TDS on the sale value if it exceeds ₹50 lakh, under the domestic Code 141 (formerly Section 194-IA) framework. When the seller is an NRI, this entire framework doesn't apply — instead, the buyer must deduct TDS under Section 393(2) at the capital-gains rate applicable to the seller: 12.5% for long-term capital gains (holding period over 24 months, without indexation, for transfers on or after 23 July 2024) or the applicable rate for short-term gains if held for a shorter period.

This is a materially higher effective deduction than the domestic 1% rate, and it's calculated on the gain in principle (though in practice, absent a lower-deduction certificate, many buyers deduct conservatively on the full sale consideration, since determining the seller's actual gain and cost basis isn't something the buyer can independently verify).

No ₹50 lakh threshold applies to NRI sellers

The domestic ₹50 lakh threshold under Code 141 is specific to resident-seller transactions. For NRI sellers, Section 393(2)'s no-threshold rule applies — TDS obligations arise regardless of the property's sale value, even for a property sold well below ₹50 lakh, if the seller is non-resident.

Why a lower-deduction certificate is almost always worth pursuing

Deducting TDS on the full sale consideration (rather than just the gain) can result in a substantial over-deduction, especially where the property has a high cost basis relative to the sale price, or where the seller intends to reinvest the proceeds under an exemption provision (like Section 54-equivalent relief). NRI sellers commonly apply for a lower-deduction certificate from the tax officer before the sale closes, specifying a reduced rate (or the rate applied only to the actual computed gain) — this is a well-established, routine practice in NRI property transactions precisely because the default full-consideration deduction is so often excessive relative to the actual tax liability.

The buyer's practical obligations

Confirm the seller's residential status before determining which TDS framework applies — don't assume based on the property location or the seller's name.
If NRI, apply the capital-gains rate under Section 393(2), not the domestic 1% rate.
Check whether the seller has (or is applying for) a lower-deduction certificate before finalizing the deduction amount.
File Form 15CA, and generally Form 15CB, before completing the transaction and registering the sale.

Worked example

A ₹1.2 crore property sale by an NRI seller with no lower-deduction certificate

An Indian resident buys a property for ₹1,20,00,000 from an NRI seller who has held it for over five years (long-term). Absent a lower-deduction certificate, the buyer deducts TDS conservatively on the full sale consideration at 12.5%: ₹15,00,000, plus applicable surcharge and cess. If the seller had instead obtained a lower-deduction certificate specifying the rate applied to the actual computed gain (say, a gain of ₹40,00,000 rather than the full ₹1.2 crore), the TDS would be substantially lower — this is why sellers are strongly advised to apply for the certificate well before the sale closes.

Common mistakes & litigation traps

Buyers applying the domestic 1% rate to an NRI seller

This is the single most common and costly error in NRI property transactions — always confirm seller residential status before assuming the domestic Code 141 framework applies.

Deducting on the full sale value without checking for a lower-deduction certificate

Sellers frequently apply for and obtain certificates that substantially reduce the deduction — buyers should ask before finalizing the TDS amount.

Missing the no-threshold rule for NRI sellers

Unlike the domestic ₹50 lakh threshold, TDS obligations on an NRI seller's property sale apply regardless of the sale value.