TDS on property sale by an NRI (s.393, was s.195): why the buyer deducts more than the tax, and how to get it back

The short answer

When a non-resident sells land or a building in India, the buyer deducts TDS (s.393(2) (Table: Sl. No. 17); s.195 of the 1961 Act) at 12.5 percent where the property was held more than 24 months and 30 percent where it was not, plus a surcharge set by the amount and a 4 percent cess. In practice buyers deduct on the whole amount paid, because they cannot know your cost, though the law asks only for the sum chargeable to tax. The tax is charged only on the gain, so the deduction is usually more than the tax, and the difference comes back through a return.

A software engineer in the US selling a flat in Pune for ₹ 1,20,00,000 has ₹ 17,94,000 deducted, 14.95 percent of it. The gain is ₹ 58,80,000 and the Indian tax on the sale ₹ 8,40,840, so ₹ 9,53,160 waits for a refund.

This is for a non-resident seller in tax year 2026-27. A resident seller, even one not ordinarily resident, has TDS at 1 percent of the higher of the amount agreed and the stamp duty value where either is ₹ 50,00,000 or more (s.393(1) (Table: Sl. No. 3(i)); s.194-IA of the 1961 Act). An Indian citizen liable to tax in no country but India, usually someone living only in the UAE or another country without personal income tax, is likely deemed resident (s.6(7); s.6(1A) of the 1961 Act) once Indian income including the gain passes ₹ 15,00,000, so check your status first.

Why the buyer deducts on the whole amount

The law asks for deduction on the sum chargeable to tax, which on a sale is the gain. But the buyer cannot know your cost, and a buyer who deducts too little is an assessee in default (s.398(1); s.201(1) of the 1961 Act), owes interest, and can face a penalty equal to the tax not deducted (s.448; s.271C of the 1961 Act). So buyers deduct on the whole amount, and on less only under your certificate or an officer's determination on the buyer's application (s.395(2); s.195(2) of the 1961 Act).

The rates are in Part II of the Finance Act, 2026. A short-term gain on property counts there as other income, at 30 percent, not at slab rates. The surcharge is set on the amount paid to you, with no marginal relief: 10 percent above ₹ 50,00,000 and 15 percent above ₹ 1,00,00,000. Above ₹ 2,00,00,000 it stays at 15 percent for a long-term gain but is 25 percent for a short-term one, or 37 percent above ₹ 5,00,00,000 if you have opted out of the default regime.

The stamp duty value can raise your gain (s.78; s.50C of the 1961 Act) but not the TDS base: that rule is for resident sellers. Without a PAN, or the Rule 217 details in its place, the deduction is at the higher of the rate and 20 percent (s.397(2); s.206AA of the 1961 Act).

The TDS rate by the amount paid to the seller

One payment to one non-resident individual with a PAN and no certificate: tax, surcharge and cess together, and the rate over the amount paid.

At exactly ₹ 50,00,000 there is no surcharge, as each band starts above the last. The long-term rate stops at 14.95 percent because its surcharge is capped at 15 percent. Each joint owner is banded on their own share, a reading and not a settled rule.

TDS against tax in six situations

The six situations the calculator starts from, as preset, each for one non-resident seller.

The plot's short-term gain of ₹ 8,00,000 is taxed at slab rates, ₹ 20,800, but deducted at 31.2 percent. Without its certificate the Dubai sale would be deducted ₹ 89,70,000, and an Indian citizen in the UAE with Indian income of ₹ 3,62,00,000 is likely deemed resident unless liable to tax elsewhere, and then these figures are not the answer. Below the circle rate the gain is worked out on the stamp duty value of ₹ 1,00,00,000 but the TDS on the ₹ 60,00,000 paid, so ₹ 1,43,000 is left to pay.

A lower deduction certificate before the sale, or a refund after it

You apply on Form 128 for a lower deduction certificate before the sale (s.395(1); s.197 of the 1961 Act), and only with a PAN. For the Pune flat the tax is 7.01 percent of the amount paid, rounded up, and a certificate at that rate would cut the deduction from ₹ 17,94,000 to ₹ 8,41,200. The officer decides on their own view of your tax, and the Central Board of Direct Taxes aims to decide within one month (Instruction 1/2014), a target and not a statutory limit. The Form 128 number and a certificate's limits, to the buyer and the amount it names, are as reported.

Without one, the TDS is tax paid on your behalf (s.390(5); s.199 of the 1961 Act), and a return filed by 31 July 2027 (s.263(1)(c) (Table: Sl. No. 4); s.139(1) of the 1961 Act) claims the excess back, with interest at 0.5 percent a month from 1 April 2027 (s.437(1); s.244A(1)(a) of the 1961 Act): about ₹ 4,766 a month for the Pune flat. There is none on a refund under 10 percent of the tax for the year (s.437(2); the second proviso to s.244A(1)(a) of the 1961 Act), as for the Dubai sale. No refund date can be promised.

No home country gives the excess back: the Indian tax is the most it can credit, so the ₹ 9,53,160 comes back only from India.

What the buyer files from 1 October 2026

From 1 October 2026 a resident individual or HUF buyer needs no TAN (s.397(1)(c)(iii), as substituted by the Finance Act, 2026): they pay the TDS on Form 141, Schedule E, with their PAN within 30 days from the end of the month of deduction, and give you Form 132 within 15 days after that, limits that are as reported. The Pune buyer, deducting on 10 January 2027, files Form 141 by 2 March 2027 and gives Form 132 by 17 March 2027.

Any other buyer, a company, a firm or a non-resident among them, and any buyer deducting earlier, needs a TAN (s.397(1)(a); s.203A of the 1961 Act), deposits by the 7th of the next month (30 April for March), files Form 144, formerly 27Q, and gives you Form 131, formerly 16A, all as reported. Give the buyer your PAN, share, regime and any certificate before the payment.

Taking the money out through NRO

The buyer pays into your NRO account, as sale proceeds are not a permitted credit to an NRE or FCNR(B) account; for the Pune flat ₹ 1,02,06,000 arrives. From NRO, an NRI or a person of Indian origin can send up to USD 1 million a financial year abroad (RBI Master Direction on remittance of assets, para 3.2).

Property bought in foreign exchange or from NRE or FCNR(B) funds, a rupee home loan repaid from them included, lets an NRI or an OCI cardholder send out the proceeds of up to two residential properties with no amount cap (Rule 29(2) of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019); whether that also counts against the USD 1 million is not settled, and for inherited property the route is doubtful.

Your bank needs Form 145, formerly 15CA (s.397(3)(d); s.195(6) of the 1961 Act): Part A up to ₹ 5,00,000 in the tax year, and above that normally Part C with an accountant's Form 146, formerly 15CB, or Part B with a certificate, parts and limits that are as reported.

What the calculator does

For one non-resident seller in tax year 2026-27, the calculator tests the 24 month holding period and the stamp duty value, takes the cost with no indexation, and runs the income-tax with and without the sale. It sets the difference against the TDS, suggests a certificate rate, dates the buyer's filings, shows the reinvestment exemptions, flags deemed residence and ends with a list for your CA. It refuses a resident seller.