When an NRI sells property in India, the buyer has to deduct tax before paying. Two things catch sellers out. The TDS is worked out on the whole sale price, not on your profit, and on 1 October 2026 the buyer’s paperwork changed. This guide covers the current rates, the over-deduction trap, how a lower deduction certificate fixes it, and what changed this month.
| You held the property for | Type of gain | TDS rate |
|---|---|---|
| More than 24 months | Long-term | 12.5% (no indexation) plus surcharge and 4% cess |
| 24 months or less | Short-term | Your slab rate. Buyers usually deduct 30% plus surcharge and cess |
On a long-term gain, the effective rate works out to about 13% with no surcharge, 14.3% with a 10% surcharge and 14.95% with a 15% surcharge. The 12.5% rate applies to sales on or after 23 July 2024. This TDS used to fall under Section 195. For payments from 1 April 2026, it’s Section 393(2) of the Income-tax Act, 2025. Unlike deals with resident sellers, there’s no ₹50 lakh threshold, so TDS applies at any price. If your PAN isn’t on the paperwork, the rate can jump to 20% or more.
One more point worth knowing: resident individuals and HUFs who bought before 23 July 2024 can choose between 12.5% without indexation and the old 20% with indexation. As the rules are described, NRIs don’t get that choice. For a property held for many years, that can matter, so run both numbers with a chartered accountant.
Unless you hold a lower deduction certificate, the buyer deducts on the entire sale consideration. Here’s what that looks like on a ₹1.2 crore sale of a property bought for ₹80 lakh:
| Sale price | ₹1,20,00,000 |
| Bought for | ₹80,00,000 |
| Your gain | ₹40,00,000 |
| Tax you actually owe (12.5% plus 4% cess) | ₹5,20,000 |
| TDS a buyer commonly deducts on the full price (about 14.95%) | ₹17,94,000 |
| Extra withheld until you claim it back | ₹12,74,000 |
This is an illustration: it ignores other income, purchase costs and exemptions. Some buyers apply no surcharge, in which case the TDS is ₹15,60,000 and the excess is ₹10,40,000. Either way, the excess comes back only after you file your return and it’s processed. Until then, it’s your money sitting with the tax department.
You can apply to the tax department for a lower or nil deduction certificate (Section 197 under the old Act, Section 395 under the new one). You give it your gain calculation, and if it’s satisfied, the buyer is told to deduct only on the gain, or at a lower rate. In the example above, you’d receive about ₹1.148 crore at registration instead of about ₹1.02 crore. If you plan to reinvest in another house or specified bonds, the certificate application can usually reflect that.
The certificate isn’t instant, and the buyer needs it before the payment is made. So apply early, well before the registration date, and agree in writing with the buyer that they’ll deduct as the certificate says.
Until 30 September 2026, a buyer purchasing from an NRI had to obtain a TAN just to deduct this TDS. That’s the step many buyers disliked, and some asked for a discount or backed out. From 1 October 2026, a resident individual or HUF buyer can use their PAN instead, depositing the tax and reporting it through Form 141 (Schedule E), and issuing you a TDS certificate (Form 132). The deposit is due within 30 days from the end of the month in which the tax was deducted.
This is paperwork relief, not tax relief. The buyer still has to deduct TDS at the same rates. The change covers resident individual and HUF buyers, so if your buyer is a company or another type of entity, ask your CA what applies. For you as the seller, the practical point is the same as before: get the TDS certificate and check that the credit appears in your tax statement (Form 26AS or AIS) before you file your return.
Sale proceeds go into your NRO account first, not straight to an NRE account. From there, you can remit up to USD 1 million per financial year after taxes are paid, with Form 15CA and a chartered accountant’s Form 15CB. There’s special treatment for property bought with foreign money (NRE or FCNR funds), where up to two residential properties can be repatriated outside the USD 1 million cap. Sums above the limit need RBI approval through your bank. Details vary with how the property was bought, so confirm the route with your bank and CA before you sell.
If you reinvest the gain in another residential house, or put it into specified bonds, you may be able to reduce or avoid the capital gains tax. These are the exemptions known as Sections 54, 54F and 54EC under the old numbering. The 54EC bonds are capped at ₹50 lakh and must be bought within six months of the sale. The buyer’s TDS ignores all of this unless your lower deduction certificate accounts for it, so otherwise you’d claim it when you file your return.
What is the TDS rate on sale of property by an NRI in 2026?
For long-term gains (held over 24 months), 12.5% plus surcharge and 4% cess. For short-term gains, your slab rate, and buyers usually deduct at 30% plus surcharge and cess.
Is TDS deducted on the sale price or on the profit?
On the full sale price, unless you get a lower deduction certificate. Then it’s deducted as the certificate says.
Does the buyer still need a TAN?
Not from 1 October 2026 if they’re a resident individual or HUF. They can use their PAN and Form 141. Other buyers should check with a CA.
How do I get excess TDS back?
File your income tax return and claim the credit. The refund comes after the return is processed.
How much sale money can I take abroad?
Up to USD 1 million per financial year from your NRO account after taxes, with Forms 15CA and 15CB. Special rules apply to property bought with NRE or FCNR funds.
Sources: the amendment notified on 22 September 2026 (effective 1 October 2026) as reported by Outlook Money and others, the Finance Act 2024 capital gains changes, and RBI and FEMA remittance guidance as summarised by ICICI Bank and law firms, checked in October 2026. NRI tax and FEMA rules are complex and change often, so confirm with a chartered accountant before you sell. This is general information, not tax advice.
