A buyer purchasing Indian property from a non-resident must use the non-resident withholding framework, not the resident-seller 1% rule.
A buyer purchasing Indian property from a non-resident must use the non-resident withholding framework, not the resident-seller 1% rule. Applicable capital-gain rates, surcharge and cess can create high withholding; a lower-deduction certificate can align TDS more closely with estimated taxable gain.
Legal or Computational Framework
Governing rule
Long-term property gains after 23 July 2024 generally use the 12.5% framework, while short-term gains use applicable rates. Section 195 applies to sums chargeable to tax, but practical deduction on gross payment without a certificate can create excess credit and refund.
Correct workflow
Verify seller residential status; calculate estimated gain and rate; determine whether a lower determination or certificate is needed; obtain TAN and forms; deduct and deposit at payment; issue certificate; seller files return or refund claim.
Step-by-step method
- Verify seller residential status.
- calculate estimated gain and rate.
- determine whether a lower determination or certificate is needed.
- obtain TAN and forms.
- deduct and deposit at payment.
- issue certificate.
- seller files return or refund claim.
Worked example
An NRI sells for ₹1.2 crore with estimated taxable LTCG ₹35 lakh. Applying tax to full consideration can materially exceed final liability; an approved lower certificate can specify an appropriate deduction.
The example is an audit trail, not a substitute for the user's facts. Change one input—residence, payment date, tax year, asset, return form, GST status, employer category or supporting document—and the result can change.
Edge cases
- Treaty usually preserves India right over Indian immovable property: record the factual and legal conclusion in the working paper.
- NRO account is not proof of residence: record the factual and legal conclusion in the working paper.
- Multiple payments require withholding: record the factual and legal conclusion in the working paper.
- Repatriation is a separate FEMA process: record the factual and legal conclusion in the working paper.
- Section 54 relief does not automatically reduce buyer TDS: record the factual and legal conclusion in the working paper.
What Generic Pages Miss
- Deducting 1%.
- Using Form 26QB.
- Ignoring surcharge or cess.
- Assuming sale proceeds equal gain.
- Waiting until registration after instalments.
Generic pages often confuse gross income with net receipt, TDS with final tax, GST turnover with income-tax turnover or a portal value with legal eligibility. Finin2min should show why an amount is accepted, deferred, reversed, rejected or carried forward.
Practical Documentation Checklist
- Seller residence/passport
- Purchase and sale deeds
- Gain and rate working
- Lower certificate
- Buyer TAN/challans
- TDS certificate and refund file
For the complete rules on this topic, see the core guide: TDS Sections 192-194T Consolidated: Section 392 & 393 Mapping.
See the broader FEMA, NRI & International Tax knowledge hub for related rules and calculators on this topic.
Finin2min Summary
A buyer purchasing Indian property from a non-resident must use the non-resident withholding framework, not the resident-seller 1% rule. Applicable capital-gain rates, surcharge and cess can create high withholding; a lower-deduction certificate can align TDS more closely with estimated taxable gain.
Finin2min rule: classify the legal event, calculate from source records and show every adjustment.
Frequently Asked Questions
What is the direct answer for TDS on NRI property sale? ▼
A buyer purchasing Indian property from a non-resident must use the non-resident withholding framework, not the resident-seller 1% rule. Applicable capital-gain rates, surcharge and cess can create high withholding; a lower-deduction certificate can align TDS more closely with estimated taxable gain.
Which law or period applies? ▼
Long-term property gains after 23 July 2024 generally use the 12.5% framework, while short-term gains use applicable rates. Section 195 applies to sums chargeable to tax, but practical deduction on gross payment without a certificate can create excess credit and refund. AY 2026–27 remains under the Income-tax Act, 1961; income from 1 April 2026 is governed by the Income-tax Act, 2025 where relevant.
What calculation or workflow should be followed? ▼
Verify seller residential status; calculate estimated gain and rate; determine whether a lower determination or certificate is needed; obtain TAN and forms; deduct and deposit at payment; issue certificate; seller files return or refund claim.
What does the example demonstrate? ▼
An NRI sells for ₹1.2 crore with estimated taxable LTCG ₹35 lakh. Applying tax to full consideration can materially exceed final liability; an approved lower certificate can specify an appropriate deduction.
Which records should be retained? ▼
Keep seller residence/passport, purchase and sale deeds, gain and rate working, lower certificate, buyer TAN/challans so the result can be reproduced and defended.
What is the most common error? ▼
The most frequent errors are deducting 1% and using Form 26QB.