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TDS on Property Sale by NRI: Step-by-Step Guide

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Financial Analyst

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1. Understand TDS Rules for NRI Property Sale

✔ Applicable Section

Section 195 – TDS on payments to Non-Residents.

✔ TDS Rates

  • Long-Term Capital Asset (held > 24 months):
    TDS = 20% + surcharge + cess (effective ~23% to 25%)
  • Short-Term Capital Asset (< 24 months):
    TDS = slab rate of NRI (30% + surcharge + cess)

✔ Important

TDS is deducted on the sale value, not on capital gains, unless the NRI obtains a Lower Tax Deduction Certificate (LDC) under Section 197.

📉 2. Option for Lower TDS Certificate (Recommended)

NRIs can apply for a Lower TDS Certificate to reduce TDS to:

  • Actual LTCG amount, or
  • Nil if no capital gain

Benefits

✔ Avoid heavy upfront tax
✔ Faster repatriation
✔ No refund dependency

This certificate is issued by the Assessing Officer based on estimated capital gains.

🪪 3. Buyer Must Obtain TAN (Tax Deduction Account Number)

The buyer, not the seller, is responsible for deducting TDS.

Steps

  1. Apply online at TIN-NSDL → Form 49B
  2. Receive TAN within 7–10 days
  3. TAN must be quoted while paying TDS (Challan 281) and filing returns

📑 4. Collect Required Documents

📌 From NRI Seller

  • PAN
  • Passport
  • Overseas address proof
  • OCI/Visa (if applicable)
  • Tax residency certificate (if DTAA is used)
  • Purchase deed of property
  • Bank details for payment
  • Lower Deduction Certificate (if available)

📌 From Buyer

  • PAN
  • TAN
  • Aadhaar
  • Sale agreement
  • Payment schedule

💸 5. Calculate the TDS Amount

If Lower TDS Certificate Available

Apply rate mentioned in the certificate.

If No Certificate

Use standard TDS rates on full sale value.

Example:
Property sale value ₹1 crore → TDS approx. ₹23–25 lakh (LTCG case).

🧾 6. Deduct & Deposit TDS Using Challan 281

Steps

  1. Visit TIN-NSDL → e-Payment → Challan 281
  2. Select:
    • 0020 (if company buyer)
    • 0021 (if individual buyer)
  3. Choose Section 195 – TDS on Non-Residents
  4. Enter TAN, seller PAN, and TDS amount
  5. Make payment via net banking/RTGS/NEFT
  6. Download Challan Receipt (CIN)

📤 7. File TDS Return in Form 27Q

  • Filed quarterly by the buyer
  • Must include seller’s PAN, transaction details, and challan
  • File on TRACES Portal

After filing, the buyer must generate Form 16A TDS Certificate and give it to the NRI seller.

🌍 8. Repatriation of Sale Proceeds (For NRI Seller)

For sending funds abroad, NRI must submit:

  • Form 15CA
  • Form 15CB (CA certificate)
  • Sale deed
  • TDS challan
  • Capital gain computation
  • Bank KYC & FEMA declarations

Bank remits the funds from NRO account to overseas account.

🧮 9. Claim Refund (If Excess TDS Deducted)

NRIs can claim refund while filing ITR 2 or ITR 3 if:

  • Lower TDS certificate was not taken, and
  • Actual capital gain was lower than TDS paid

Refunds are directly credited to the NRO bank account.

📌 10. Common Mistakes to Avoid

❌ Buyer deducts TDS without TAN
❌ TDS deducted only on capital gains without LDC
❌ Wrong TDS section selected in challan
❌ Not filing Form 27Q on time
❌ Not issuing Form 16A
❌ Bank rejects repatriation due to missing 15CA/CB

Conclusion

TDS on sale of property by an NRI is a multi-step compliance process involving TAN, tax deduction, TDS payment, Form 27Q filing, capital gains calculation, and repatriation rules under FEMA. Proper documentation and an early application for a Lower TDS Certificate can significantly simplify the transaction and reduce tax burden.

Disclaimer

This blog is for educational purposes only and does not constitute financial, legal, or tax advice. TDS rates, FEMA rules, and tax laws may change. Readers should verify current regulations and consult qualified professionals before taking any action.

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