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Lower TDS Certificate for NRI Property Sale: Guide

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Saving Mantra Blog: Step-by-Step Process for Lower Tax Deduction Certificate for NRI on Sale of Property in India

When NRIs sell property in India, the buyer is required to deduct TDS at 20% (plus surcharge and cess) on long-term capital gains or at 30% for short-term gains. However, NRIs can reduce this TDS liability by obtaining a Lower/No TDS Certificate from the Income Tax Department under Section 197 of the Income Tax Act.

This guide explains the complete step-by-step process for NRIs to apply for a Lower Tax Deduction Certificate on property sale in India.

✔ Step 1: Determine Eligibility

NRIs can apply for a Lower TDS Certificate if:

  • Total tax liability on capital gains is less than the TDS deducted at source
  • They want to avoid excess TDS deduction by the buyer
  • They have valid PAN and proof of NRI status

✔ Step 2: Calculate Expected Tax Liability

Before applying, NRIs should:

  • Compute capital gains:
    • Long-term (holding period > 24 months)
    • Short-term (holding period ≤ 24 months)
  • Consider deductions under sections 54, 54EC, or 54F (if applicable)
  • Estimate total tax payable based on income slab and exemptions

This helps in determining the reduced TDS amount to request.

✔ Step 3: Prepare Required Documents

The following documents are typically required:

  • PAN card
  • Passport / OCI/PIO proof
  • Sale agreement or property deed
  • Computation of capital gains and expected tax liability
  • Bank account details in India
  • Form 13 (Application for Lower/No TDS Certificate)

✔ Step 4: Fill Form 13 Online (TRACES Portal)

  • Visit the Income Tax Department website or TRACES portal
  • Fill Form 13 (Application for Lower Deduction Certificate)
  • Enter details:
    • Name, PAN, address
    • Property details
    • Estimated capital gains and tax computation
    • Buyer’s details (TDS deductor)

✔ Step 5: Submit the Application

  • Attach all supporting documents
  • Upload computation of expected capital gains tax
  • Submit the application electronically on TRACES/Income Tax Portal

Once submitted, an Acknowledgment Number is generated.

✔ Step 6: Income Tax Department Verification

  • The Income Tax Officer verifies:
    • PAN and identity
    • Computation of capital gains and proposed lower TDS
    • Compliance with Section 197
  • Officer may request additional documents if needed

✔ Step 7: Issuance of Lower/No TDS Certificate

  • On verification, the department issues a Lower/No TDS Certificate specifying:
    • PAN of NRI seller
    • Buyer details (TDS deductor)
    • Certificate validity and lower TDS rate
  • Certificate can be downloaded from the TRACES portal.

✔ Step 8: Provide Certificate to Buyer

  • Share the Lower TDS Certificate with the buyer or deductor
  • Buyer deducts TDS as per the certificate instead of the standard 20% or 30%
  • Ensure a copy is kept for future IT filing

✔ Step 9: File Income Tax Return

  • Even after obtaining lower TDS, NRIs must file IT return in India
  • Report full capital gains, exemptions, and TDS deducted
  • Any remaining tax payable must be paid; excess TDS can be claimed as refund

✔ Step 10: Maintain Records

  • Keep copies of:
    • Lower TDS Certificate
    • Property sale deed
    • PAN, passport, and proof of NRI status
    • Bank receipts and TDS challans

These documents are important for IT compliance and future audits.

Conclusion

Obtaining a Lower Tax Deduction Certificate is essential for NRIs selling property in India to avoid excess TDS. Following the steps—eligibility check, computation, Form 13 submission, and certificate issuance—ensures efficient tax planning and compliance.

Disclaimer

This article is for informational purposes only and does not constitute legal or tax advice. Tax rules, rates, and procedures may change. NRIs should consult a qualified tax professional before applying for a Lower TDS Certificate.

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