Selling property in India can trigger very different TDS rules for NRI and resident sellers. For a resident seller, a buyer generally deducts 1% TDS when the property transaction meets the applicable ₹50 lakh threshold, while payments to an NRI seller fall under the non-resident withholding framework and can involve substantially higher deductions.
The difference is important because TDS is a withholding mechanism, not necessarily the final tax liability. An NRI may be able to claim a refund if more tax was deducted than ultimately payable, or seek a lower/nil deduction certificate before the transaction where eligible.
Why are TDS rules different for NRI and resident property sellers?
The key difference is the seller's residential status for income-tax purposes.
For a qualifying purchase from a resident seller, the buyer generally uses the property-sale TDS provisions under Section 194-IA of the earlier Income-tax Act framework. The familiar rule is 1% TDS on the higher of the sale consideration or stamp-duty value when the applicable threshold is met.
A sale by an NRI is treated differently because the payment is being made to a non-resident. The withholding framework applicable to non-residents is designed around the taxability of income in India, including capital gains.
From April 1, 2026, the Income Tax Act, 2025 reorganised the TDS provisions, so readers should not rely on older articles that use only the previous section numbers without checking the current framework.
How much TDS is deducted when an NRI sells property in India?
The amount withheld can be significantly higher than the 1% commonly associated with a resident seller.
Current tax guidance describes withholding for an NRI property sale in terms of the applicable capital-gains taxation. For long-term gains, the relevant rate can be 12.5%, while short-term gains can be subject to applicable slab rates; however, the actual withholding calculation can depend on the transaction, applicable provisions, surcharge, cess and any available treaty or lower-deduction relief.
A crucial practical point is that the withholding can be calculated on the sale consideration rather than simply the eventual taxable gain, which can create a substantial cash-flow difference for the seller.
Resident vs NRI property-sale TDS
| Point | Resident seller | NRI seller |
|---|---|---|
| General withholding framework | Property-sale TDS provisions | Non-resident withholding provisions |
| Commonly cited section under earlier law | Section 194-IA | Section 195 |
| Common TDS rate | 1% for qualifying transactions | Can be substantially higher |
| ₹50 lakh threshold | Applicable under the resident property-sale rule | No equivalent minimum threshold under the non-resident framework |
| Who deducts TDS? | Buyer | Buyer |
| Lower/nil deduction relief | Available in applicable circumstances | NRI can seek lower/nil withholding where eligible |
| Final tax liability | Determined through applicable tax rules | Determined after considering capital gains, exemptions and applicable rules |
The ₹50 lakh threshold and 1% rule relate to the resident-seller property transaction framework; guidance on NRI transactions states that there is no minimum transaction threshold for TDS on payments to an NRI seller.
Is NRI property-sale TDS calculated on the profit or the full sale price?
This is one of the most important distinctions for an NRI seller.
TDS withholding and final capital-gains tax are not necessarily the same calculation. The seller's eventual capital gain is generally determined after considering the relevant cost and other permitted adjustments, whereas withholding can be made from the amount being paid to the non-resident.
That means an NRI could see a sizeable amount withheld even when the eventual tax liability is lower. In such cases, the excess can potentially be claimed back through the income-tax return, subject to the applicable rules.
What happens if an NRI seller wants lower TDS?
An NRI who expects the actual tax liability to be lower than the amount being withheld can seek a lower or nil deduction certificate.
Under the earlier framework, this was commonly associated with Form 13 and Section 197. From April 1, 2026, the new framework uses Form 128 for applications for lower or nil TDS in relevant circumstances.
This is particularly relevant for property transactions because otherwise a seller may have to wait until filing the income-tax return to recover excess TDS as a refund.
What documents and compliances should buyers and NRI sellers check?
The exact paperwork depends on the transaction and the seller's circumstances, but buyers should not treat an NRI property purchase like an ordinary resident-seller transaction.
Before completing the deal, the parties should verify:
- Seller's residential status for income-tax purposes.
- PAN and property documents of the seller.
- Purchase agreement and agreed sale consideration.
- Acquisition cost and relevant property-holding details.
- Whether the seller qualifies for any capital-gains exemption.
- Whether a lower/nil TDS certificate has been obtained.
- Applicable TDS payment and reporting requirements.
- Whether additional FEMA/remittance requirements apply if sale proceeds are being sent outside India.
An NRI selling Indian property may also need to consider FEMA requirements when remitting the sale proceeds outside India.
What is the 2026 change that property buyers should know?
The Income Tax Act, 2025 came into effect from April 1, 2026, bringing a major restructuring of the income-tax law and renumbering several TDS provisions. This means older online guides can contain section numbers and procedural references that no longer match the current framework.
For example, current guidance identifies Section 393 of the Income Tax Act, 2025 as the consolidated TDS provision covering various non-salary payments, replacing the fragmented section structure of the earlier Act.
This is particularly important for an article targeting searches such as “NRI property sale TDS 2026,” “TDS on sale of property by NRI,” “NRI selling property in India tax” and “TDS rate for NRI property sale.”
What should an NRI seller do before selling property in India?
The biggest practical mistake is waiting until the sale payment is about to be made to investigate TDS.
A seller should ideally establish the expected capital gain, applicable tax treatment and withholding requirement before signing or completing the transaction. If the expected TDS is substantially higher than the eventual tax liability, the seller can investigate whether a lower/nil deduction certificate is available.
For a high-value transaction, professional tax advice is particularly important because the calculation can depend on the property's acquisition date, cost, nature of gain, exemptions, seller's residential status and applicable tax treaty.
NRI property sale TDS: Quick Q&A
What is the TDS rate when an NRI sells property in India?
The applicable withholding can be substantially higher than the 1% resident-seller rate. The exact amount depends on the applicable non-resident tax provisions, nature of the capital gain and other factors.
Is TDS deducted when an NRI sells property below ₹50 lakh?
The ₹50 lakh threshold associated with the resident property-sale TDS rule does not create the same exemption for NRI sellers. Current guidance states that TDS applies to payments to an NRI seller without a minimum transaction threshold.
Can an NRI get a refund if too much TDS is deducted?
Yes, excess TDS can generally be claimed through the income-tax return when the amount withheld exceeds the seller's final tax liability, subject to the applicable rules.
Can an NRI request lower TDS before selling the property?
Yes. Eligible non-resident taxpayers can seek a lower or nil deduction certificate. The current 2026 framework uses Form 128 for such applications, replacing the earlier Form 13 process.