Selling Property in India as an NRI: TDS and the Lower-TDS Certificate

When an NRI sells property in India, Section 195 of the Income Tax Act makes the BUYER responsible for deducting TDS before paying the seller -- not the seller, and not the registrar. This is a critical difference from a resident seller's property sale, where no TDS applies at all and the seller simply reports and pays tax on their gain when filing their return.

The buyer has no visibility into what the seller originally paid for the property, what improvements were made, or any exemptions the seller might claim -- so without further paperwork, the buyer has no legal basis to deduct tax on anything other than the FULL sale consideration, at the applicable capital-gains rate. This is very often dramatically more than the seller's actual tax liability, since real capital gain (sale price minus purchase price and eligible costs) is usually much smaller than the full sale price.

Long-term capital gains (property held more than 24 months): a flat 12.5% with no indexation benefit, regardless of when the property was originally acquired. This is an important NRI-specific point -- resident individuals and HUFs got a choice between the old 20%-with-indexation regime and the new 12.5%-without-indexation regime for property acquired before July 2024, but NRIs are NOT eligible for that grandfathering choice; the flat 12.5% rate applies universally.

Short-term capital gains (held 24 months or less): treated at a flat 30% assumption for TDS-withholding purposes, mirroring the same "the payer cannot know your actual slab" logic used for NRO FD interest TDS. On top of either rate, surcharge (capped at 15% for long-term gains under the Finance Act 2022; genuine disagreement exists across sources on whether the same cap applies to short-term property gains) and a flat 4% Health & Education cess apply.

A Section 197 lower/nil-deduction certificate (commonly called a "Form 13" certificate) is how a seller gets the buyer's TDS deduction reduced to reflect the ACTUAL capital gain instead of the full sale price. The seller applies for it through the TRACES portal before the sale closes -- the Assessing Officer reviews the seller's cost of acquisition and computes the real gain, then issues a certificate specifying the correct, lower deduction amount for the buyer to use.

The catch is timing: processing typically takes 15-45 days, so this needs to be applied for as soon as the sale is being negotiated, not at the closing table. Without a certificate on file, the buyer has no legal basis to deduct anything less than the full-consideration rate, no matter how well-documented the seller's actual cost basis is informally. One unresolved caveat worth flagging: some sources describe "Form 13" being renumbered to "Form 128" under the Income-tax Act, 2025 (effective April 2026) -- this was not independently confirmed at the time of writing, so confirm the current form name/number with a CA or the TRACES portal before applying.

The "actual capital gain" figure above is itself a simplified starting point: sale price minus purchase price. It does not account for cost of improvement (money spent on renovations, which raises your cost basis and lowers your taxable gain), transfer expenses like brokerage and legal fees, or Section 54/54EC/54F reinvestment exemptions (which can substantially reduce or eliminate the taxable gain if you reinvest in another property or specified bonds). All of these can only reduce your real liability further below even the Form-13 certificate figure -- factor them in when deciding whether a certificate is worth pursuing, and definitely when filing your final return.