TDS when an NRI sells property in India: Section 393 (old Section 195) and the lower-TDS certificate (2026)

Which law applies to your sale?

India replaced the Income-tax Act, 1961 with the Income-tax Act, 2025 from April 1, 2026. What matters is when the buyer pays or credits the money. A sale where the buyer paid you on or before March 31, 2026 follows the old Act and its section numbers. Any payment on or after April 1, 2026, including the balance on a deal signed earlier, follows the new Act.

The tax itself did not change much. What changed is the numbering and the forms your buyer and your CA use. Here is how the old names map to the new ones:

Most buyers' CAs, banks and online guides still use the old names, so expect to hear "195" and "Form 13" for a while. Ask your CA to quote the new section numbers on any certificate or challan.

Why does the buyer deduct on the whole sale price?

India taxes the gain on Indian property no matter where the seller lives. The buyer is required to deduct tax on the sum "chargeable to tax", which is your capital gain. But the buyer cannot work out your gain: they do not know your purchase cost, improvement costs or exemption plans. So unless you hand them a certificate from the tax department, they deduct on the full amount they pay you. Any extra comes back to you as a refund when you file your India return, which can take a year or more.

The resident-seller rule is different. When a resident sells, the buyer deducts just 1% on property above Rs 50 lakh. That rule does not apply to an NRI seller, so there is no threshold and no flat 1%.

What rate does the buyer deduct?

For a long-term gain (property held more than 24 months), the base rate is 12.5%. Indexation is not available to NRIs. The option of 20% with indexation for property bought before July 23, 2024 is only for resident individuals and HUFs. Surcharge and the 4% health and education cess then sit on top:

Surcharge on long-term capital gains is capped at 15%, so the rate tops out near 14.95% even on very large sales. A short-term gain (held 24 months or less) is taxed at slab rates, which for most NRIs means the top 30% slab, plus the normal surcharge and cess.

How much money gets locked up?

Say you bought a Hyderabad flat in 2016 for Rs 90 lakh and sell it in December 2026 for Rs 1.5 crore. These are rounded, illustrative figures.

• Long-term gain: Rs 1.5 crore minus Rs 90 lakh = Rs 60 lakh.
• Tax on the gain at about 14.95%: roughly Rs 8.97 lakh.
• Default TDS at about 14.95% of the Rs 1.5 crore sale price: roughly Rs 22.4 lakh.
• Extra withheld: about Rs 13.5 lakh, held by the tax department until your refund is processed.

That gap is why the lower deduction certificate exists.

Is a lower deduction certificate (Form 128) worth it?

Usually yes, when your real tax is well below the default TDS. You apply under Section 395 in Form 128 (the old Form 13) with your estimated gain, the tax on it and your supporting documents. If the Assessing Officer agrees, you get a certificate naming the buyer and a lower rate, and the buyer deducts at that rate instead. The tax department has said it is moving toward automated certificates where the criteria are clearly met, but plan for manual review.

Practical points:

• Apply at least 6 to 8 weeks before the planned sale deed date. Officers often ask for more documents.
• Keep ready: your purchase deed, the sale agreement, proof of improvement costs, your PAN, and a computation of the gain and tax.
• The certificate is specific to the buyer and the property. If the buyer changes, you apply again.
• If you plan to reinvest in another house or in specified bonds to claim a capital gains exemption, include that plan. The officer can reflect it in the rate.
• If the timeline does not allow a certificate, let the buyer deduct the full amount and claim the refund in your India return. Our guide on India income tax returns for NRIs covers that filing.

What does the buyer have to do?

The buyer's steps depend on who they are.

A resident individual or HUF buyer (from October 1, 2026)

1. Collect your PAN and, if you have one, your lower deduction certificate.
2. Deduct TDS on each payment, including the advance, at the normal rate or the certificate rate.
3. Pay it and file the details online using their own PAN in Schedule E of Form 141, within 30 days from the end of the month of deduction. No TAN is needed.
4. Download and give you the TDS certificate in Form 132.

Any other buyer (a company, a firm, or a payment before October 1, 2026)

1. Hold a TAN (application Form 134, the old Form 49B).
2. Deposit the TDS by the 7th of the following month (April 30 for March deductions).
3. File the quarterly non-resident TDS return in Form 144 (the old Form 27Q).
4. Give you the TDS certificate in Form 131 (the old Form 16A).

Late deposit or a missed return is the buyer's penalty, not yours. It becomes your problem if your credit does not show up in your tax statement, so check that the TDS appears against your PAN before you file.

After the sale: moving the money to the US

The net amount lands in your NRO account. To send it abroad, your bank will ask for Form 145 (the old Form 15CA) and usually a CA certificate in Form 146 (the old Form 15CB). See Forms 145 and 146 for sending property-sale money to the US for the steps and the USD 1 million a year NRO limit.

What this means for your taxes

The sale is also reported on your US return in the year of the sale. Indian tax actually paid on the gain, net of any refund, can be claimed as a foreign tax credit on Form 1116. See Form 1116 for tax paid in India and reporting Indian income on your US tax return. If the sale was large enough that Indian tax will not be fully covered by TDS, read about advance tax for NRIs too.

This is general information, not advice for your situation. Rates and forms changed in 2026, so have a CA confirm the numbers on your specific sale. Lesser Tax handles the US side and works with partner CAs in India: see how Lesser Tax works for NRIs.