Selling Property in India as an NRI: How TDS Works in 2026 and How to Keep It From Holding Up Your Money

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Last updated: Oct 8, 2026

You have found a buyer for your flat in Chennai. The price is right, and you would like the sale done without flying back three times. Then someone mentions that the buyer will “cut tax” before paying you, and suddenly the number you were counting on looks smaller, and nobody can tell you by how much.

That worry is reasonable. When an NRI sells property in India, the buyer has to deduct tax at source (TDS) from the payment, and the amount is often well above the tax you actually owe. The excess comes back, but only after you file a return, which can take months. The good news is that most of this can be planned for, and much of it can be reduced, if you act before the sale agreement is signed. This guide walks through it in that order. If you are selling from abroad, our NRI property services cover the local side of the sale.

Meet Arun: A Flat in Chennai, a Job in Dubai

Consider a seller, we will call him Arun, who works in Dubai and owns a Chennai flat he bought years ago for ₹60 lakh. A buyer has offered ₹1.5 crore. Arun wants it done in two months, he cannot be in Chennai for registration, and he wants to send most of the money back to Dubai. We will follow his sale through each step.

Why the Buyer Is Nervous Too

It helps to see the sale from the buyer’s side. When the seller is an NRI, the buyer has to deduct the tax, deposit it with the government, report it, and give you a TDS certificate. If they deduct too little, they can be treated as in default and charged interest on the shortfall. Your own tax is still settled in your return.

The paperwork got simpler on 1 October 2026. A buyer who is a resident individual or HUF no longer needs a TAN (a tax deduction account number) when buying from an NRI. They can now deposit and report the tax with their own PAN on Form 141, the same form used when buying from a resident, and give you a TDS certificate on Form 132. The relief is only for resident individuals and HUFs. Companies, firms, LLPs and buyers who are themselves non-resident still need a TAN.

So a careful buyer will deduct the full amount unless you hand them a certificate saying otherwise, and an unsure buyer may slow the deal down. Settling the TDS number early makes you an easier seller to buy from.

How Much Will Be Deducted

The rate depends on how long you have held the property.

What “surcharge and cess” means. Surcharge is extra tax charged as a percentage of the tax itself. How much depends on your income, which for a property sale means your capital gain (plus any other Indian income that year), not the sale price and not the tax: none up to ₹50 lakh, 10% above ₹50 lakh up to ₹1 crore, and 15% above ₹1 crore (the maximum for long-term capital gains on property; short-term gains can attract more). A 4% Health and Education Cess is then added on top. So the 12.5% long-term rate works out to:

There is a catch at the TDS stage. The buyer does not know your gain, so in practice they treat the amount they deduct on, usually the full sale price, as the income. That means a sale above ₹1 crore generally has TDS deducted at 14.95%, even if your actual gain is much smaller. When you file your return, surcharge is worked out on your real gain, and the difference is refunded. A lower-deduction certificate avoids this by basing the deduction on your gain from the start.

One point catches many NRI sellers out. When the long-term rate changed in July 2024, resident individuals who bought before 23 July 2024 were given a choice of 20% with indexation. NRIs were not given that choice. For an NRI the long-term rate is 12.5% without indexation, whenever the property was bought.

Here is what that means for Arun. We ignore costs of sale and exemptions to keep it simple.

Arun would be handing over more than ₹9.5 lakh above his tax bill and waiting for a refund. That is the gap the next step closes.

The Step Most NRIs Skip: The Lower-Deduction Certificate

The whole problem in Arun’s numbers comes down to one thing: the buyer does not know Arun’s gain. They do not know what he paid for the flat years ago, what he spent on it, or what he can set off. Faced with that, the only safe thing for them to do is to deduct on the full sale price. They are not being difficult. They simply have nothing else to go on.

The lower-deduction certificate fixes exactly that. It is the tax department telling the buyer, in writing, how much to deduct, worked out from Arun’s real gain. The buyer no longer has to guess, and no longer carries the risk of guessing wrong.

Arun’s chartered accountant applies for a certificate under Section 395(1), using Form 128 (which replaced Form 13), filed online with the Income Tax Department. The tax officer looks at his purchase cost and sale price and sets a TDS rate that reflects the tax he actually owes. If it is granted, the buyer deducts at that rate instead of on the full price.

• Apply as soon as the agreement is signed. The certificate applies only to payments made after it is issued, so an advance paid when the agreement is signed is normally deducted at the full rate (see the example below). Apply well before registration, so the balance is deducted at the lower rate.
• Have your papers ready. Applications typically include the sale agreement, proof of your purchase cost and any improvements, the chain of title, costs of the sale, proof of your residential status, past returns if any, and a Tax Residency Certificate if you claim a treaty rate.
• Give it time. Processing takes weeks, so plan the registration date around the certificate, not the other way round.

Example: TDS on the advance.

Say Arun signs the sale agreement at ₹1.5 crore and the buyer pays a ₹5 lakh advance that day. His lower-deduction certificate has not been issued yet, so the buyer deducts at the full rate. Assuming the flat is a long-term capital asset, the rate in this example is 14.95%, so ₹74,750 is deducted and Arun receives ₹4,25,250. The ₹74,750 is deposited against Arun’s PAN and can be adjusted against his final tax when he files his return. Once the certificate is issued, the buyer deducts at the rate it states on the remaining ₹1.45 crore.

The certificate is not an exemption. It only stops more tax being held back than you are likely to owe.

Getting the Money Home

The sale money is paid into Arun’s NRO account. The Reserve Bank of India allows NRIs to remit up to USD 1 million per financial year (April to March) from NRO balances, including the sale proceeds of property. If the sale is larger, plan the transfer across two financial years.

To send it, the bank asks for two documents that changed names on 1 April 2026: Form 145 (your declaration, formerly Form 15CA) and Form 146 (a chartered accountant’s certificate, formerly Form 15CB). The conditions differ if a property was inherited, gifted or bought with foreign money, so check your own case before promising anyone a transfer date.

Signing From Abroad: The Power of Attorney

Arun cannot be in Chennai for registration, so he gives a Power of Attorney to a trusted person to sell on his behalf. In Tamil Nadu the cost of a Power of Attorney to sell depends on who receives it:

If Arun’s brother holds it, the cost is small. If a friend or agent does, it is 1% plus 1% of the flat’s market value, about ₹3 lakh on a ₹1.5 crore flat.

Getting a Power of Attorney signed abroad accepted in India

• Sign it before the right person. For someone living outside India, the Power of Attorney must be executed before and authenticated by a notary public, a court, a judge, a magistrate, or an Indian Consul or Vice-Consul.
• Apostille, if your country is in the Hague Apostille Convention. India accepts an apostilled document from a member country without any further legalisation. The US, the UK, Canada, Australia and Singapore are members.
• Consular attestation if it is not. The UAE is not a member, so a Power of Attorney signed in Dubai cannot rely on an apostille. The straightforward route is to sign it before the Indian Consulate or Embassy, which the law recognises directly. That is what Arun does.
• Have it stamped in Tamil Nadu. A document signed abroad should be sent to India in the original and stamped in Tamil Nadu within the applicable time limit. Allow time for the courier and the stamping before the sale deed is signed.

Arun’s Sale, in Order

1. Check the title, the records and the Patta so the sale does not stall later.
2. Agree the price and sign the sale agreement. The advance paid now is normally deducted at the full rate.
3. Apply for the lower-deduction certificate (Form 128) with a chartered accountant.
4. Sign the Power of Attorney, if attending is not possible.
5. Register the sale deed at the Sub-Registrar Office.
6. The buyer deducts and deposits the TDS and gives Arun the certificate.
7. The chartered accountant prepares Forms 145 and 146, and the money goes out.
8. Arun files his Indian tax return and claims credit or a refund.

Documents You May Need

• PAN and passport copies
• Purchase deed and proof of cost and improvements
• Patta, Chitta and Encumbrance Certificate (if the buyer’s bank wants the digitally signed EC from the TNREGINET login, apply when it asks, as some banks want a recent one)
• Draft sale agreement and sale deed
• Power of Attorney, if used
• NRO account details
• Lower-deduction certificate, if obtained
• Tax Residency Certificate, if you claim a treaty rate

What Changed on 1 April 2026

The Income-tax Act, 2025 replaced the 1961 Act, and the sections and forms were renumbered. If an article still uses the old numbers, it describes the old law.

Mistakes We See NRI Sellers Make

• Applying for the certificate after registration. By then the buyer has usually deducted the full amount.
• Assuming the buyer will deduct only on the profit. Unless a certificate says so, do not plan on it.
• Expecting the 20% with indexation option. It was given to resident individuals, not NRIs.
• Forgetting the Indian tax return. The TDS certificate is only credit. The return settles the actual tax and releases any refund.
• Mismatched details. A PAN or a name that differs across documents can delay the credit.

Frequently Asked Questions

Is there a minimum sale value below which TDS does not apply to an NRI seller?

No. The ₹50 lakh limit is a resident-seller rule. For an NRI seller, TDS generally applies whatever the price.

Can the buyer deduct less if I ask?

Only if the tax officer issues a lower-deduction certificate under Section 395(1). Without it, the buyer is expected to deduct at the prescribed rate.

I inherited the property. Does that change anything?

The cost and holding-period rules for inherited property differ, and a legal heir certificate and Patta transfer may be needed before you can sell. A chartered accountant can work out your position.

I am an NRI buying from another NRI. Who deducts?

The buyer still deducts, because the seller is a non-resident. The 1 October 2026 relief from needing a TAN applies only to resident individual and HUF buyers, so a buyer who is also an NRI should plan on getting a TAN early. Our guide to closing costs for NRI property buyers in Tamil Nadu covers the buyer’s other costs.

How long does the refund take?

It comes after you file your Indian return for that year and the return is processed, so it can be many months after the sale. That is why the certificate is worth the effort.

Sources & Official References

• Income-tax Act, 2025, Section 393(2), Table S. No. 17 (TDS on payments to non-residents) and Section 395 (certificate for lower or nil deduction).
• Income Tax Department, Form 128, “Application for issuance of certificate for lower/nil deduction” (Income-tax Rules, 2026).
• Finance Bill, 2026, First Schedule, Part II (rates for deducting tax from payments to non-resident Indians: 12.5% on long-term capital gains, 30% on other income, surcharge of 10% and 15% with a 15% cap for long-term capital gains) and the 4% Health and Education Cess, Union Budget 2026-27, indiabudget.gov.in. Confirm against the Finance Act, 2026 as enacted.
• CBDT Notification No. 121/2026, Income-tax (Fifth Amendment) Rules, 2026, G.S.R. 830(E) dated 22 September 2026 (Form 141 Schedule E and Form 132 for purchases from non-residents, from 1 October 2026).
• Income-tax Rules, 2026 (G.S.R. 198(E), 20 March 2026), Forms 145 and 146 for remittances to non-residents, and the Income Tax Department e-filing portal, Income Tax Forms page.
• Reserve Bank of India, Master Direction: Remittance of Assets, Master Direction No. 13/2015-16, updated as on 29 June 2026 (USD 1 million per financial year from NRO balances, including sale proceeds of assets), rbi.org.in.
• Registration Department, Government of Tamil Nadu, TNREGINET “Duty and Fees” page (General Power of Attorney to sell immovable property), page last updated 22 January 2026.
• Registration Act, 1908, Section 33(1)(c) (Power of Attorney executed by a principal who does not reside in India).
• Indian Stamp Act, 1899, Section 18 (instruments executed outside India).
• Ministry of External Affairs, “Attestation / Apostille” (acceptance of apostilled documents in India), and HCCH status table of the 1961 Apostille Convention.