Quick answer: When an NRI sells a flat, plot or house in India, the buyer must deduct tax before paying the seller. For a long-term gain (property held for more than 24 months) the rate is 12.5%. For a short-term gain it is 30% if the seller is an individual. Surcharge, where the table applies it, and 4% cess are added. Section 393(2) of the Income-tax Act, 2025 refers to the sum paid, not only the profit, so a buyer without a certificate may have to deduct on the full payment, which can be far larger than the seller’s real tax. The Income Tax Department’s rate FAQ speaks of the gains, so agree the base with a chartered accountant before paying. A lower or nil deduction certificate (Form 128, the old Form 13) fixes the amount, but the buyer must hold it before paying. The buyer deposits the tax, and the seller claims any refund through the income tax return. Confirm the figures with a chartered accountant before any money moves.
For NRI sellers in Maharashtra and the resident buyers paying them. General information, not tax or legal advice.
Which law and which form names apply
The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. The Income Tax Department’s TDS compliance FAQ says the earlier of credit or payment decides the Act, and that TDS rates and thresholds were kept. So an older article citing section 195 describes the same rule under its former number. Parliament passed the Taxation and Other Laws (Amendment) Bill, 2026 in August (All India Radio, 11 August). The Department’s FAQs on the Bill list its changes, and none touches section 393(2), the Part II rates or property gains. Check the Gazette for the final text.
| What it is | Current reference | Former reference |
|---|---|---|
| Buyer deducts tax on a payment to an NRI | Section 393(2), Table Sl. No. 17 | Section 195 |
| Seller applies for lower or nil deduction | Section 395(1), Form 128 | Section 197, Form 13 |
| Buyer asks the officer to fix the taxable part | Section 395(2), Form 129 | Section 195(2), Form 15E |
| Declaration before remitting abroad | Form 145 and Form 146 | Form 15CA and 15CB |
| Buyer’s challan and quarterly statement | Form 141, Form 144 | Form 26QB, Form 27Q |
What rate of TDS applies when an NRI sells property
Section 393(2) (Table, Sl. No. 17) covers any sum chargeable under the Act that is paid to a non-resident who is not a company, or to a foreign company, at “rates in force”. Section 3(7) of the Finance Act, 2026 points to Part II of its First Schedule, which supplies them.
| Property sale by a non-resident | TDS rate | Where it is stated |
|---|---|---|
| Long-term gain (held more than 24 months) | 12.5% | Finance Act 2026, Part II. Section 197 also states 12.5% |
| Short-term gain, individual or firm (foreign company: 35%) | 30% | Part II, “the whole of the other income”, and the Department’s FAQ on NRI property sales |
Surcharge and cess. The Part II table works on the sum paid and subject to deduction.
| Seller | Surcharge on the tax deducted |
|---|---|
| Individual, default new regime (section 202) | Above Rs 50 lakh to Rs 1 crore: 10%. Above Rs 1 crore to Rs 2 crore: 15%. Above Rs 2 crore: 25% on other income, but capital gains under sections 196 to 198 are capped at 15% |
| Individual who opted out of that regime | Same up to Rs 2 crore, then 25% up to Rs 5 crore and 37% above. The 15% cap still applies |
| Foreign company | Above Rs 1 crore to Rs 10 crore: 2%. Above Rs 10 crore: 5% |
Section 197 is the long-term gains section, so the cap covers a long-term gain on property. Ask how the table applies to a short-term gain. Cess of 4% is added on tax plus surcharge (section 3(16) of the Finance Act).
Holding period. Section 2 of the Act, clause (101), calls an asset held for not more than 24 months before transfer short-term, and clause (67) calls the rest long-term.
Indexation and treaties. The indexed-cost relief in section 197(3) is for residents only. The Department’s FAQ adds that under most treaties the country where the property stands may tax it.
Why the rate can hit the whole sale value
What the sources say. Section 393(2) tells the payer to deduct “on the amount of such income or sum” credited or paid. The Department’s rate FAQ describes the rate as applied to the gains. In PILCOM v CIT (29 April 2020), the Supreme Court quoted its G.E. India Technology Centre ruling on the earlier section 195: the duty is limited to the appropriate proportion of chargeable income forming part of the gross sum. The TRACES FAQ tells a buyer unsure of the amount to apply to the officer for an order.
Why it can still be the whole price. A buyer rarely knows the seller’s cost. Under section 398, a buyer who fails to deduct the whole or any part of the tax is an assessee in default, with interest at 1% a month. A buyer who guesses the gain carries that risk, so without a certificate the buyer can end up deducting on the full payment.
Two routes fix the amount. Under section 395(1) the seller applies in Form 128. Under section 395(2) and rule 214 the buyer applies in Form 129, and the Assessing Officer determines the chargeable proportion. Apply before the sale is paid, because the Form 128 FAQ says an application cannot be processed once the transaction is completed.
How the lower or nil deduction certificate works
If the Assessing Officer is satisfied that the payee’s total income justifies it, a certificate is issued, and the buyer must deduct at its rate, or nothing, until it expires (section 395(1)). Under rule 213 it is issued in the buyer’s name for a specified payment up to a stated amount, so the form needs the buyer’s details. The steps follow the Department’s Form 128 FAQ. The certificate only changes the amount held back.
- Have a PAN. Form 128 cannot be submitted without one, and section 397(2) bars a certificate without it.
- Prepare a computation of estimated total income and tax for the tax year, income for any of the four preceding tax years with no return, and a note on any exempt income.
- Log in to TRACES at tdscpc.gov.in, open Dashboard, e-file and view, File Forms, Form No. 128, upload the documents, e-verify and submit.
- After processing, download the certificate from TRACES under Downloads, and give it to the buyer before the first payment.
Who deducts and deposits: the buyer
The buyer is the deductor and the seller the deductee, as the Department’s Form 141 FAQ states. This is also the answer to TDS on purchase of property from an NRI, which has its own guide for buyers. Deduct at the earlier of credit or payment, at the certificate rate if there is one.
- Get the seller’s PAN. Without a valid PAN, section 397(2) requires a higher rate, which the Act puts at 20% in a case like this. Rule 217 lifts it for a non-resident without a PAN on a capital asset transfer if the seller gives the buyer contact details, an address abroad, a tax residency certificate where issued, and a foreign tax identification number.
- Deposit and report. An individual or HUF buyer pays within 30 days from the end of the month of deduction and files Form 141, using Schedule E from 1 October 2026 under PAN login (rule 218 and the FAQ). Any other buyer, such as a company or firm, pays within seven days from the end of the month (30 April for March) and files Form 144 each quarter by 31 July, 31 October, 31 January and 31 May (rule 219). That route needs a TAN under section 397(1).
- Issue a TDS certificate. Section 395(4) requires it. Rule 215 prescribes Form 132 for an individual or HUF buyer and Form 131 for others, within 15 days of the statement’s due date.
- Do not short the deduction. Section 398 covers a failure to deduct the whole or any part. The buyer is spared a default only if the seller files a return, includes the income and pays the tax, and the buyer holds an accountant’s certificate.
What the seller should check. Ask for the challan or Form 141 acknowledgement and the TDS certificate. Then confirm the tax shows against your PAN in Form 168, the Department-generated statement in your e-filing account, under tax year 2026-27. If an entry is missing, tell the buyer, who files a corrected statement.
Worked example (an illustration, not your liability)
These numbers are made up. An NRI individual sells a flat for Rs 90,00,000 after holding it for more than 24 months. It was bought in 2015 for Rs 55,00,000. Assume no improvement cost, sale expense or other Indian income. The first table uses the whole sale value as the base, as a buyer without a certificate might.
| Step | Working | Amount (Rs) |
|---|---|---|
| Tax at 12.5% | 12.5% of 90,00,000 | 11,25,000 |
| Surcharge at 10% | Sum paid is above 50 lakh and not above 1 crore | 1,12,500 |
| Cess at 4% | 4% of (11,25,000 + 1,12,500) | 49,500 |
| Held back by the buyer | About 14.3% of the sale value | 12,87,000 |
| Left for the seller | 90,00,000 less 12,87,000 | 77,13,000 |
Next, tax on the actual gain, with no indexation for a non-resident and no surcharge, as total Indian income stays below Rs 50 lakh.
| Step | Working | Amount (Rs) |
|---|---|---|
| Long-term gain | 90,00,000 less 55,00,000 | 35,00,000 |
| Tax at 12.5% plus 4% cess | 4,37,500 + 17,500 | 4,55,000 |
| Excess held back | 12,87,000 less 4,55,000 | 8,32,000 |
Here Rs 8,32,000 stays with the Government until the seller claims it in the return. With a Form 128 certificate allowing only Rs 4,55,000, the seller would receive Rs 85,45,000 at completion, not Rs 77,13,000. A real computation also covers expenses, exemptions, other income and the treaty, so an accountant must do it.
Sending the sale proceeds abroad: Form 145 and Form 146
Form 145 (earlier 15CA) is furnished before money leaves India, as the Form 145 FAQ explains. Part A covers a taxable remittance up to Rs 5 lakh in the tax year. Above Rs 5 lakh, Part B needs an Assessing Officer’s certificate and Part C a chartered accountant’s certificate in Form 146 (earlier 15CB). Part D covers a remittance that is not taxable. A copy goes to the bank first. Rule 220 drops the requirement only for a sum not chargeable to tax, and then only if the remittance is by an individual needing no prior RBI approval under the current account rules, is by an IFSC unit, or carries an RBI purpose code on its list. No listed purpose names sale proceeds of property, so ask your bank and accountant which part applies to your NRO repatriation.
The exchange control side is separate. The RBI’s Master Direction on Remittance of Assets (updated 29 June 2026) lets a bank allow NRIs and persons of Indian origin, on documentary evidence, to remit up to USD 1 million per financial year from NRO balances, sale proceeds of assets or inherited assets. All instalments go through one bank, NRO funds need an undertaking, above USD 1 million needs RBI approval, and taxes must be paid. The RBI’s property FAQ adds a limit of not more than two residential properties. Ask your bank which limit covers your sale. The guide for NRIs buying property in Navi Mumbai covers the purchase side.
Claiming a refund of excess TDS
Section 431 gives a refund when tax paid for a tax year exceeds the tax properly chargeable, and section 433 says every claim is made by furnishing a return under section 263. So the return is the refund route. File it for the tax year of the sale, which is 2026-27 for a sale between 1 April 2026 and 31 March 2027, report the gain and claim the credit shown in Form 168.
Maharashtra and Navi Mumbai: registration, stamp duty and records
The sale is completed by a registered deed. In the Department of Registration and Stamps’ copy of the Registration Act, 1908, section 17(1)(b) makes registration compulsory for an instrument transferring a right in immovable property worth Rs 100 or more, section 28 says it is presented at a Sub-Registrar’s office in whose sub-district the property lies, and section 23 allows four months from execution. Stamp duty is a state matter, separate from TDS. See the stamp duty guide, ready reckoner guide, Index II guide and the IGR Maharashtra portal.
After the sale, the land record changes by mutation (see the property mutation guide). The municipal property-tax name is changed by the corporation that bills the property, which is the NMMC for much of Navi Mumbai and the Panvel Municipal Corporation for areas such as Panvel, Kharghar, Kamothe and Kalamboli. See the NMMC property tax guide, Panvel property tax guide and CIDCO transfer guide. Buyers can use the flat buying checklist.
What to ask your chartered accountant
| Question | Why it matters |
|---|---|
| Is the seller a non-resident for tax, and which Act applies on my payment dates? | Residential status and the payment date decide the rule. |
| From which date is the holding period counted? | More than 24 months gives 12.5%, otherwise 30%. |
| On what amount will tax be deducted, and should the seller file Form 128 or the buyer Form 129? | The base changes the cash held back, and a certificate must be in hand before payment. |
| Which part of Form 145 applies, and how much can I remit this year? | The bank needs the right part, and the RBI limit is yearly and shared. |
Sources and a note on accuracy
Sources read on 10 October 2026. Income Tax Department: Income-tax Act, 2025 sections 393, 395, 397, 398, 197, 2, 431 and 433; rules 213, 214, 215, 217, 218, 219 and 220; the Finance Act, 2026; FAQs for Forms 128, 129, 144, 145 and 146; Form 168. Also the Supreme Court judgment, the TRACES FAQ, the RBI Master Direction and FAQ, and the Registration Act. Rates, forms and portal steps change, so confirm with a chartered accountant and your bank before you pay or file. NaviMumbai.com is an independent information site, not affiliated with any government body or bank.
Frequently Asked Questions
What is the TDS rate when an NRI sells a flat in India?
The Finance Act, 2026 lists 12.5% for a long-term gain (held more than 24 months). A short-term gain is taxed at 30% for an individual and 35% for a foreign company, plus surcharge and cess.
Is TDS deducted on the whole sale price or only on the profit?
The Department and the Supreme Court point to the chargeable gain, but a buyer who deducts too little can be treated as in default under section 398. So without a certificate the buyer may deduct on the full payment. Agree the base with an accountant first.
How do I get a lower TDS certificate when I sell property?
File Form 128 on the TRACES portal with a computation of your estimated income and tax. It needs a PAN and must be filed before the transaction. Give the certificate to the buyer before payment.
I am buying a flat from an NRI. What must I do?
Deduct tax under section 393(2) from every payment, or at the certificate rate. Collect the PAN, deposit on time (30 days from the end of the month for an individual or HUF buyer using Form 141, seven days for others) and give the seller a TDS certificate.
Do I need Form 15CA and 15CB to send sale proceeds abroad?
They are now Form 145 and Form 146. Form 146 is a chartered accountant’s certificate used where Part C of Form 145 applies. Your bank will say which part it needs.
How does an NRI claim a refund of excess TDS?
Through the income tax return, under section 433. Claim the credit shown in Form 168.
