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Quick answer: when an NRI sells a flat in India, the buyer has to deduct tax before paying the seller. A lower or nil deduction certificate can allow the buyer to deduct less, or nothing, when the seller’s actual tax on the sale is smaller than the tax that would otherwise be deducted. From 1 April 2026 the application is Form 128 (formerly Form 13), filed on TRACES. The buyer can use the lower rate only once the department has issued the certificate and only for payments it covers. This guide covers who applies, the steps, the documents, how to check the certificate and the mistakes that cost sellers money.
This is general information and not tax advice. The Income-tax Act, 2025 and the Income-tax Rules, 2026 apply from 1 April 2026, and procedures are still settling. Check the points below against the Income Tax Department’s Form 128 FAQ and have a chartered accountant prepare the application. This guide is independent and has not been reviewed by a lawyer.
Why the certificate matters
Without a certificate, the buyer deducts tax at the rate in force on the sale payments, not only on your gain, as the NRI property-sale TDS guide explains. If your gain is small, or you plan to reinvest and claim an exemption, the tax deducted can be much more than the tax you finally owe, and you wait for a refund through your return. A certificate changes the cash flow at closing. It does not change your final tax. Your tax for the year is still worked out in your return, and the certificate only decides how much is held back from each payment on the way.
Old and new names
| Until 31 March 2026 | From 1 April 2026 | |
|---|---|---|
| Law | Section 197, Income-tax Act, 1961 | Section 395(1), Income-tax Act, 2025 |
| Application | Form 13 | Form 128 (formerly Form 13) |
| Rules | Rules 28, 28AA, 28AB, 29, 37G and 37H | Rule 213 of the Income-tax Rules, 2026 |
The department’s FAQ is headed Form No. 128 (Earlier Form No. 13) and describes it as the application for a certificate for lower or nil deduction of tax under section 395(1). Form 128 is the application only. The certificate is a separate document that the department issues after it processes the application. See the department’s Form 128 FAQ for the details.
An application is not a certificate
Submitting Form 128 does not by itself allow the buyer to deduct less. The buyer needs the issued certificate that applies to that payment. An acknowledgement of your application is not that certificate.
Do not reduce TDS merely because an application is pending or an accountant has estimated a lower final liability. The buyer who deducts less without an applicable certificate carries the risk of a shortfall, and the seller’s sale can be held up while it is sorted out.
| Step | What happens |
|---|---|
| 1 | Prepare the computation of your estimated income and tax |
| 2 | Submit the application on TRACES |
| 3 | Respond to any queries from the department |
| 4 | Receive the certificate |
| 5 | Check its scope (payer, payment, period, rate, amount) |
| 6 | Give it to the buyer before the payments it covers |
Who applies and when
- The NRI seller applies, not the buyer. The department’s FAQ says a person who wants a certificate for no deduction or lower deduction must file the application. With joint owners, each seller needs a certificate that covers their own share of the consideration.
- Filing is optional. You file only if you want a lower or nil deduction.
- Apply as early as possible and well before the transaction. The FAQ says the certificate must reach the payer before the deduction, and that an application cannot be processed once the transaction involving the deduction is completed.
- The FAQ says there is no statutory limit on how many applications can be filed in a tax year, and that a taxpayer may file more than one if the estimated transaction or income changes during the year. An application can also be withdrawn until it has been processed.
- Allow for payments that may fall in more than one tax year, and ask your accountant whether a separate application is needed for each.
How to apply: the steps
- The application is furnished electronically on TRACES, the TDS portal of the Income Tax Department. It cannot be filed offline. Keep your PAN details ready.
- The FAQ describes the route as TRACES login, then Dashboard, then e-file and view, then File Forms, then Form No. 128.
- Fill in the online form, upload the supporting documents, then e-verify and submit.
- Note the acknowledgement. Answer any queries from the department. When the certificate is issued, download it and check it before it goes to the buyer.
Official application requirements
According to the FAQ, the documents to attach are:
- A computation of your estimated total income and tax liability for the tax year.
- If you did not file a return for any of the preceding four tax years, a computation of income for each such year.
- A note on any income you claim is exempt and not included in your total income.
Not filing a return because none was required is different from failing to file a return that was required. Say clearly which applies to each year, and have your accountant explain it in the computation. See the NRI income tax return guide.
Property-sale supporting records
These are not listed in the FAQ as application attachments, but a chartered accountant will usually need them to prepare the computation:
- The purchase deed, and proof of cost and of any improvement spending.
- The sale agreement, or the draft agreement, with the buyer’s PAN or TAN.
- Your PAN details, passport and travel records, and other evidence needed to establish your residential status for the year. Residential status is decided by days of stay in India, not by citizenship, an overseas address or FEMA status, so keep those questions separate.
- Details of advance tax and TDS already paid, and of your other Indian income such as rent and bank interest.
- If you plan to reinvest and claim an exemption, a note of the plan and the proof you will keep.
- A power of attorney, if someone signs for you. See the NRI power of attorney guide.
Timing
Allow time for review and requests for clarification. Do not commit to a payment schedule that assumes approval by a particular date.
Checking the certificate before you hand it over
Read the certificate against the sale before the buyer relies on it. Each of the following should match:
- Seller’s name and PAN, as in the sale documents. Joint owners each need their own certificate.
- The payer or payers it covers, which should include your buyer.
- The payment category (the sale of the property).
- The period in which it is effective, and whether the payments fall inside it.
- The authorised rate, which may be lower or nil.
- The amount it covers, and any limit still remaining.
- Any conditions, amendments or cancellation shown.
- What happens if the buyer, the consideration or the payment schedule changes. Ask your accountant whether a fresh or amended application is needed.
What the buyer reports
The statement the buyer files depends on the buyer, not on whether the buyer happens to have a TAN. Dates matter, so check them for each payment.
| Buyer | From 1 October 2026 | Before that or for other buyers |
|---|---|---|
| Resident individual or resident HUF buying from a non-resident seller | PAN based route, reported in Form 141, Schedule E | TAN based route, reported in Form 144 |
| Any other buyer, such as a company or firm | TAN based route, reported in Form 144 | TAN based route, reported in Form 144 |
For a deal where payments run on both sides of 1 October 2026, ask the buyer’s accountant which route applies to each payment. See the guide for buyers paying tax on a purchase from an NRI for the buyer’s side.
When a lower or nil rate is allowed
The deduction can be lower only where the department is satisfied that your total income for the year, with the tax on it, justifies it. The officer looks at your total Indian income, not only the sale, so leaving out rent or interest weakens the application. If you plan to claim an exemption by reinvesting, include the plan and its conditions. A plan to reinvest is not the same as an exemption already earned. Your chartered accountant should work out the capital gain and the tax before you apply.
If there is no certificate
Where the sale falls under the ordinary deduction rules, the buyer deducts on the payments at the rate in force, plus surcharge and cess where they apply, and deposits it against your PAN. You claim credit and any refund in your return. If you have no valid PAN, the rate can be higher. Agree with the buyer in writing, before any payment, the basis of deduction, the rate and the authority for it. See the NRI property-sale TDS guide for the rates and the guide to sending property sale proceeds abroad for sending the money abroad afterwards.
A cash flow example
This is an illustration with assumed numbers only. It is not a standard or approved rate, and the rate the department issues can be different.
| No certificate | With a certificate | |
|---|---|---|
| Sale price | Rs 1,00,00,000 | Rs 1,00,00,000 |
| Assumed deduction rate | 20% | 2% (assumed, covering an estimated Rs 2,00,000 tax) |
| Tax deducted by buyer | Rs 20,00,000 | Rs 2,00,000 |
| Cash received at closing | Rs 80,00,000 | Rs 98,00,000 |
| Final tax for the year | Same, worked out in the return | Same, worked out in the return |
The certificate improves cash flow at closing. The final tax is decided in the return, and an estimate that turns out wrong can leave a balance to pay with interest. Do not assume that tax already deducted at an earlier payment will be adjusted automatically against a later certificate.
Mistakes that cost sellers money
- Treating an acknowledgement as a certificate, or reducing TDS because an application is pending.
- Applying after the advance or the sale payment has been made.
- Expecting the certificate to work backwards on tax already deducted.
- Assuming tax is deducted only on the final payment. It applies to each payment, including a token amount.
- Leaving out other Indian income, or using cost figures that do not match the documents.
- Wrong buyer TAN or PAN, or incomplete payer details.
- Not checking the certificate’s period, rate and amount against the payment schedule.
- Using the old form number or section code on a new application.
For the sale itself, see the step by step guide to selling your flat as an NRI and the property lawyer checklist.
Frequently Asked Questions
What is Form 128?
It is the application for a certificate that allows the payer to deduct tax at a lower rate, or nothing. It applies from 1 April 2026 and replaces Form 13.
Is Form 128 the certificate?
No. Form 128 is the application. The department issues the certificate separately after it processes the application.
Does submitting Form 128 allow a lower deduction immediately?
No. The buyer needs the issued certificate that covers the payment. A pending application or an acknowledgement is not enough.
Who applies, the NRI or the buyer?
The NRI seller. With joint owners, each seller needs a certificate that covers their own share.
When must I apply?
As early as possible, and before the transaction. The FAQ says an application cannot be processed once the transaction involving the deduction is completed.
Where do I file it?
On TRACES, electronically. It cannot be filed offline.
What if the buyer has already paid an advance?
Tax deducted on that payment stays deducted. A certificate does not undo it, and you claim any refund through your return. Ask your accountant how the later payments should be handled.
What if the buyer changes after approval?
The certificate names the payer it covers. If the buyer, the consideration or the payment schedule changes, ask your accountant whether a fresh or amended application is needed.
What if payments fall in another tax year?
The certificate is effective for a stated period. Payments outside it are not covered, so ask your accountant whether another application is needed.
Does a nil certificate mean I need not file a return?
No. Whether you must file depends on your income and the law, and a nil deduction certificate does not decide that. See the NRI income tax return guide.
Sources
| Point | Source |
|---|---|
| Form 128, Rule 213, application, documents and process | Income Tax Department Form 128 FAQ |
| Filing portal | TRACES |
Reviewed on 27 October 2026. Check the department’s pages and confirm with a chartered accountant before you apply, particularly the buyer reporting route for payments around 1 October 2026 and how a certificate applies to your payment schedule. This guide has not been reviewed by a lawyer.
The featured image is an AI generated illustration made for this guide, and not a photograph.
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