When an NRI sells property in India in 2026, the buyer is required to deduct TDS at a substantially higher rate than for a resident seller, and the seller can apply in advance for a lower-deduction certificate to avoid over-withholding and a lengthy refund process later. This guide sets out what changed with the Income Tax Act, 2025, how capital gains and TDS are currently treated, what FEMA allows in terms of repatriation, and the documentation an NRI seller should assemble before agreeing a price.
PropIntel is a boutique real estate advisory covering Delhi-NCR, Gurugram, Noida and Goa, and advises NRI clients on acquisition, discreet divestiture and transaction structuring. This article is general information, not tax or legal advice; every NRI sale should be reviewed by a chartered accountant and, where FEMA or title issues arise, a lawyer, before signing.
Key Takeaways
- The Income Tax Act, 2025 became operative from 1 April 2026 and renumbered large parts of the 1961 Act. TDS on an NRI’s property sale continues to apply, generally at a materially higher rate than the 1% TDS applicable to resident sellers, because it is calculated on the full sale consideration, not on the computed capital gain.
- Long-term capital gains (property held more than 24 months) are generally taxed at an effective rate of about 12.5% without indexation, following the Union Budget 2024 changes carried into the new Act; short-term gains are taxed at the seller’s slab rate.
- An NRI seller can apply for a lower-TDS (or nil-TDS) certificate before registration, but the process typically takes four to eight weeks, so it should be initiated as soon as a buyer is identified, not after a sale agreement is signed.
- Repatriation of sale proceeds is generally capped at USD 1 million per financial year from an NRO account, with a separate route for proceeds traceable to the original NRE/FCNR-funded investment; agricultural land, plantation property and farmhouses cannot be repatriated at all.
- Exact section numbers and rate tables under the new Act are still settling in public commentary as of September 2026; treat specific figures in this article, and elsewhere, as a starting point for a conversation with a chartered accountant, not a final computation.
Why NRI Property Sales Are Taxed Differently From Resident Sales
When a resident sells property in India, the buyer typically deducts a flat 1% TDS on the sale consideration under the provision commonly known by its old number, Section 194-IA. When the seller is a non-resident, the buyer must instead deduct TDS at a much higher rate, because the deduction is calculated on the entire sale consideration rather than on the seller’s actual capital gain, and the higher non-resident withholding provisions apply regardless of whether the seller ultimately owes that much tax. This structural difference, not any change specific to 2026, is why NRI sellers routinely see a large amount withheld at source and then have to reclaim the excess by filing a return, unless they secure a lower-deduction certificate in advance.
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What Changed Under the Income Tax Act, 2025
India’s Income Tax Act, 2025 became operative from 1 April 2026, replacing large parts of the Income Tax Act, 1961, and renumbering many provisions in the process. Transactions where the sale consideration is credited or paid on or after 1 April 2026 fall under the new Act’s provisions; transactions completed before that date remain governed by the 1961 Act’s numbering.
Multiple tax-advisory publishers place the consolidated TDS provisions for non-resident payments, including property sale consideration, under the new Act’s Section 393, described as consolidating several TDS provisions previously spread across different sections of the 1961 Act. However, published commentary is not fully consistent on how specific sub-sections map to the old Section 195 (the 1961-Act provision NRI sellers and buyers are most familiar with), and on the exact rate schedule that applies to immovable property specifically, as distinct from other non-resident payments. As of this run, PropIntel treats the precise section reference and rate table as still settling in public commentary, and recommends every NRI seller confirm the current section number and applicable rate directly with a chartered accountant, or the Income Tax Department’s own guidance, before relying on any single published summary, including this one.
How Much TDS Is Typically Deducted When an NRI Sells Property
Based on currently published tax-advisory guidance for the 2026-27 assessment year, the broad shape of NRI property-sale TDS is as follows. These are indicative ranges only and should be confirmed for the specific transaction.
| Holding Period | Capital Gains Treatment | Approximate Effective TDS Range (incl. surcharge/cess, as reported) |
|---|---|---|
| More than 24 months (long-term) | ~12.5% effective rate, no indexation | Roughly 14% to 15% |
| 24 months or less (short-term) | Taxed at seller’s slab rate | Roughly 30% to 36% |
The critical point most sellers underestimate: TDS is deducted on the full sale consideration, not on the computed gain. A seller with a modest actual gain, or even a loss, can still see a large amount withheld at closing unless a lower-deduction certificate has been obtained in advance.
Capital Gains Tax: Long-Term vs Short-Term
Following changes introduced in the Union Budget 2024 and carried into the Income Tax Act, 2025, long-term capital gains on property held for more than 24 months are generally taxed at an effective rate of about 12.5%, without the indexation benefit that was previously available, for transfers after 23 July 2024. Short-term capital gains, on property held for 24 months or less, continue to be taxed at the seller’s applicable income-tax slab rate, which for many NRIs in higher income brackets can exceed 30%.
Common exemption routes that reduce the final tax liability, subject to conditions and time limits, include reinvesting the gain into a new residential property within the prescribed window, or investing in specified capital gains bonds, generally capped at ₹50 lakh, within six months of the sale. These exemptions reduce the seller’s final tax liability but do not, by themselves, reduce the TDS the buyer withholds at the time of registration; that requires a separate certificate, described below.
Applying for a Lower TDS Deduction Certificate
An NRI seller who expects the standard TDS deduction to significantly exceed their actual tax liability, whether because of exemptions, a modest gain, or a loss, can apply to the tax department for a certificate authorising the buyer to deduct TDS at a lower, or nil, rate. This is commonly referred to by its long-standing form number, Form 13, though the new Act has renumbered the underlying form.
Processing typically takes four to eight weeks from a complete submission, which is why PropIntel advises clients to apply as soon as a buyer is identified and a draft sale agreement is in place, well before the registration date, rather than after signing. Documents typically required include the draft sale agreement showing consideration and property details, a capital gains computation, proof of the original holding period (the original purchase deed), passport and OCI or visa documentation, the last three years of Indian income tax returns if filed, and evidence supporting any exemption being claimed.
Repatriating Sale Proceeds Abroad: FEMA Rules
Under FEMA, an NRI can generally repatriate up to USD 1 million per financial year (April to March) from balances held in an NRO account, which is where sale proceeds are typically credited in the first instance. Proceeds that can be traced back to the original purchase having been funded through NRE or FCNR remittances follow a separate route and are not counted against the USD 1 million annual cap, subject to a limit of two residential properties for this treatment. Proceeds from the sale of agricultural land, plantation property or a farmhouse cannot be repatriated abroad at all under current rules and must remain in India.
Repatriation documentation typically includes the relevant chartered accountant certification forms (commonly referred to by their earlier numbers, Form 15CA and Form 15CB), the registered sale deed, the TDS certificate, income tax return acknowledgements, and the remitting bank’s own FEMA compliance declarations. Because these requirements sit at the intersection of the Income Tax Act and FEMA, they should be confirmed with both a chartered accountant and the remitting bank before the sale is finalised, not after funds are already sitting in an NRO account.
Price-Source Comparison: Why the Declared Consideration Matters
For capital gains computation, tax law generally treats the higher of the actual sale consideration or the property’s government-notified value (the local circle or collector rate) as the “deemed consideration” for tax purposes, even if the buyer and seller have agreed a lower figure. This means an NRI seller cannot rely solely on the negotiated asking price to estimate their tax liability; the applicable circle rate at the time of sale, which can differ meaningfully from a portal’s listed asking price or an informal broker estimate, is a second, independent figure that must be checked. Sellers in a corridor that has recently seen a sharp circle-rate revision, such as parts of Gurugram in 2026, should specifically re-check this figure before finalising a computation, since a stale figure can materially understate the deemed consideration and the resulting tax exposure.
Practical Checklist for an NRI Seller
- Confirm which Act and which section currently governs TDS on the transaction based on the expected date of consideration, and get the applicable rate confirmed in writing by a chartered accountant, rather than relying on a generic online summary.
- If TDS at the standard rate would clearly exceed your actual liability, apply for a lower-deduction certificate as soon as a buyer is identified, allowing four to eight weeks for processing before the intended registration date.
- Obtain an independent capital gains computation, using the correct deemed consideration (the higher of actual sale price or current circle/collector rate for the property’s location), before agreeing a final price with the buyer.
- Retain the original purchase deed and, if the property was inherited, the prior owner’s purchase documentation, since holding period and cost basis both depend on it.
- If you have filed Indian income tax returns in the past, keep the last three years available; if you have not, budget extra time for the lower-deduction certificate process.
- Ensure sale proceeds are credited to an NRO account in the first instance, and only pursue the NRE/FCNR-linked repatriation route where you can document the original funding source.
- Confirm whether any part of the property (for example, agricultural land within a larger parcel) falls under the non-repatriable category before assuming full proceeds can be sent abroad.
- Ask the buyer’s advisor to confirm, in writing, the TDS rate and section they intend to apply, and reconcile it against your own CA’s expectation before registration.
When It May Be Better to Wait
If a buyer has not yet been identified but a sale is being planned, it is generally worth starting the capital gains computation and gathering documentation early, rather than waiting until an agreement is signed, precisely because the lower-deduction certificate process has a multi-week lead time; applying only after signing typically means the higher standard TDS is withheld, with the excess recoverable only after filing a return the following year. Similarly, where a property was recently inherited and the cost-basis documentation from the original owner is incomplete, it is usually better to resolve that documentation before agreeing a sale price, since an unclear cost basis makes both the capital gains computation and the lower-deduction application harder to support.
Frequently Asked Questions
How much TDS is deducted when an NRI sells property in India?
It depends on the holding period and the seller’s specific circumstances, but published guidance for 2026-27 places long-term sales (held over 24 months) at an effective TDS rate of roughly 14% to 15% including surcharge and cess, and short-term sales at a materially higher rate, often 30% or more, because TDS is calculated on the full sale consideration rather than the actual gain.
Can an NRI repatriate the full sale proceeds of Indian property abroad?
Generally, up to USD 1 million per financial year can be repatriated from an NRO account. A separate, higher allowance applies where the proceeds can be traced to the original purchase having been funded through NRE or FCNR remittances, subject to a two-property limit. Proceeds from agricultural land, plantation property or a farmhouse cannot be repatriated at all.
What is Form 13 and how does an NRI apply for it?
Form 13, referred to under a renumbered form reference in the Income Tax Act, 2025, is the application for a certificate authorising the buyer to deduct TDS at a lower or nil rate instead of the standard non-resident rate. It requires a draft sale agreement, a capital gains computation, proof of holding period, identity documents and past tax returns if filed, and typically takes four to eight weeks to process.
Is capital gains tax different for NRIs selling property compared with residents?
The capital gains tax rates themselves (broadly, an effective 12.5% for long-term gains without indexation, and slab rates for short-term gains) apply similarly to residents and non-residents. The practical difference for NRIs is the much higher TDS withheld at the time of sale, since it is calculated on the full consideration rather than the gain, which is why the lower-deduction certificate matters more for NRI sellers.
How long does it take to get a lower TDS deduction certificate?
Typically four to eight weeks from a complete application, which is why it should be initiated as soon as a buyer is identified and a draft agreement is in place, rather than after the sale deed is signed.
PropIntel Perspective
The single most common mistake we see among NRI sellers is timing: starting the tax and documentation process only after a buyer and price have already been agreed, by which point the standard, higher TDS rate is effectively locked in for that transaction. This is likely to matter most for NRIs selling higher-value residential or commercial property, where the gap between the standard TDS and a properly certified lower rate is largest in absolute terms, and for anyone selling an inherited property where cost-basis documentation takes time to assemble. Before signing anything, it is worth confirming the current circle or collector rate for the property’s specific location, since that figure, not just the negotiated price, feeds directly into the capital gains computation. Where a buyer has not yet been identified, or the property was recently inherited, it is often better to spend a few additional weeks on documentation and a CA-reviewed computation before going to market, rather than accelerating the timeline and accepting a larger, recoverable-only-later TDS deduction.
This section reflects PropIntel’s independent analysis and is not investment, tax or legal advice. Every NRI sale should be reviewed by a qualified chartered accountant and, where title or FEMA questions arise, a lawyer, before a sale deed is signed.
Sources and Methodology
Figures on TDS rates, capital gains treatment and FEMA repatriation limits are drawn from the following publicly available sources, accessed 13 September 2026. Because the Income Tax Act, 2025 transition is recent, section numbering and specific rate tables vary across secondary sources; readers should treat the ranges in this article as indicative and confirm exact figures with a chartered accountant or the Income Tax Department’s own published guidance before relying on them for a transaction.
- Section 393 of Income Tax Act 2025 Explained: FAQs for Deductors, India Briefing
- Selling Indian Property as an NRI in 2026, FinPracto
- NRI Selling Property in India 2026: TDS & Tax Guide, NoBroker
- TDS Compliance, Income Tax Department
Author: PropIntel Advisory Desk | Published: 13 September 2026 | Information reviewed on: 13 September 2026 | Recommended review date: by 13 December 2026, or sooner if the Income Tax Department issues further clarifications on the Income Tax Act, 2025.
This article is for general information only and does not constitute tax, legal or investment advice. Every NRI property sale should be reviewed by a qualified chartered accountant, and, where title or FEMA questions arise, a lawyer, before a sale deed is signed.