NRI Property Sale TDS Estimator — Section 195

Q: Why is TDS on property purchase from an NRI higher than from a resident?

TDS from a resident seller under Section 194-IA is a flat 1% of consideration. TDS from an NRI seller under Section 195 is calculated closer to the actual capital gains tax rate (short-term or long-term, with surcharge and cess) since NRIs may have limited other India-sourced income to true up against at filing time, so the withholding is designed to more closely approximate actual liability upfront.

Q: Can the TDS rate be reduced for an NRI property sale?

Yes — the NRI seller can apply to the tax department for a lower or nil TDS certificate under Section 197, if their actual computed tax liability (after cost of acquisition, indexation where applicable, and exemptions) is lower than what the default TDS rate would deduct.

Q: Who is responsible for deducting this TDS — buyer or seller?

The buyer is responsible for deducting TDS under Section 195 and depositing it with the government, obtaining a Tax Deduction Account Number (TAN) if they don't already have one — this is a meaningfully more involved compliance burden than the simpler Form 26QB process for resident-seller transactions.

Estimate buyer withholding

Unlike resident-property TDS, section 195 withholding is not a simple 1% rule.

Indicative TDS

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Effective rate

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Net payment after TDS	—

How This Is Calculated

When buying property from an NRI seller, the buyer must deduct TDS under Section 195 — at a rate significantly higher than the 1% under Section 194-IA that applies to resident sellers, since it approximates the seller's actual capital gains tax liability (short-term or long-term, with applicable surcharge and cess) rather than a flat percentage of consideration. A lower/nil TDS certificate from the tax department can reduce this if the seller's actual tax liability is lower than the default TDS rate would suggest.

Frequently Asked Questions

Why is TDS on property purchase from an NRI higher than from a resident? ▼

Can the TDS rate be reduced for an NRI property sale? ▼

Who is responsible for deducting this TDS — buyer or seller? ▼

NRI property-sale withholding control

Section 195 applies to sums chargeable to tax; it is not the resident-seller 1% mechanism. The buyer must determine withholding on the chargeable component/rate or follow an applicable lower/nil deduction certificate, with TAN/deposit/return obligations.

Do not present an editable default percentage as a legal rate. Seller residence, holding period, cost, exemptions, surcharge/cess and certificate terms must be reconciled before payment.

Input integrity

Use source documents rather than approximate memory.
Confirm period, units, tax regime/category and sign conventions.
Test zero, threshold and just-above-threshold cases where relevant.

Output interpretation

Separate arithmetic output from legal eligibility/classification.
Preserve assumptions and the official-source date.
Use the linked detailed guide for exceptions and evidence.

Primary-source starting points

Reviewed 22 August 2026. Always test later amendments, corrigenda and portal implementation before a live filing or transaction.

Methodology, assumptions and sources

Scope: Estimates the TDS deductible by the buyer under Section 195 when purchasing immovable property from a Non-Resident Indian seller, based on the applicable capital-gains tax rate on the sale.

Calculation logic

Unlike Section 194-IA (which applies a flat 1% TDS on resident-seller property transactions), Section 195 requires TDS at the "rates in force" for non-resident capital gains — 20% for long-term gains (property held over 24 months) and up to 30% (slab rate) for short-term gains, plus surcharge and cess — on the entire sale consideration, unless a lower/nil-TDS certificate under Section 197 has been obtained. This withholding rate is distinct from, and normally higher than, the seller's actual net-gain tax rate (12.5% under Section 112 for long-term gains) — the two are not interchangeable inputs.

Where the NRI seller has obtained a Section 197 lower/nil-deduction certificate from the assessing officer (based on their actual computed gain), TDS is deducted at the certified rate instead of the default gross-consideration-based rate.

Compute the estimated TDS amount and highlight that, without a Section 197 certificate, TDS is calculated on the full sale value (not just the gain) at the higher withholding rate, often resulting in a much larger TDS deduction than the seller's actual tax liability, which the seller then claims back via a refund when filing their return.

Inputs and assumptions

This calculator estimates the TDS obligation for planning purposes; the buyer is legally responsible for correct TDS deduction and deposit (via Form 27Q) and can face penal consequences for under-deduction.

Surcharge and cess rates applied follow the Finance Act provisions in force for the year of the transaction, applied on the base capital-gains rate.

Exclusions and edge cases

Strongly recommends the NRI seller apply for a Section 197 certificate in advance of the sale to avoid over-deduction and the resulting refund-claim delay — the calculator flags this as a planning point but does not itself apply for the certificate.

Does not compute the seller's actual capital gains (which requires cost of acquisition, indexation/grandfathering treatment and holding period) — use the Capital Gains Tax calculator for that, then apply the resulting rate here for the TDS estimate.

Sources

Review status: reviewed and approved by CA Nikhil Gupta on 17 July 2026.