TDS on NRI Property Sale 2026: Long-Term Capital Gain Rates, Section 197 Lower TDS & Refund Process

Q: What is the TDS rate on long-term capital gain for NRI in 2026?

The base TDS rate under Section 195 for long-term capital gain (holding ≥ 24 months) on NRI property sale is **12.5%** post the July 2024 budget. Effective TDS — once surcharge (0%-15%, capped at 15% under the Section 112 / 112A surcharge ceiling per Finance Act 2022) and the flat 4% health-and-education cess are layered on — typically lands between **13.0% and 14.95%**, regardless of sale value. The 25% / 37% enhanced-surcharge bands that apply to other high-value income do not apply here. The rate is applied to the **full sale consideration**, not just the capital gain.

Q: What is the TDS rate for NRI sale of property under short-term capital gain?

If the property is sold within 24 months of purchase, the gain is classified as short-term and TDS is deducted at the applicable income slab — practically **30% + surcharge + cess**, compounding to roughly **31.2% to 42.7%** depending on the seller's **total taxable income band** (10% / 15% / 25% / 37%). STCG is treated as ordinary income for an NRI seller, so slab is the controlling rate and STCG **falls outside the 15% Section 112 cap** that applies to LTCG. As with LTCG, buyers typically use sale-value as a working proxy at deduction time, but the legally correct surcharge band is the seller's total income — Form 13 under Section 197 is the mechanism to align withholding to actual liability when the proxy overstates.

Q: How can an NRI reduce TDS on property sale to actual tax liability?

File **Form 13** under **Section 197** for a Lower TDS Certificate **before** the sale deed is registered. The Income Tax Officer computes your expected capital gains tax, reviews any Section 54 / 54EC exemptions you intend to claim, and issues a certificate authorising the buyer to deduct at a lower rate — often **1-3% of sale value** instead of the default 12.5%+ surcharge+cess. Allow 4-6 weeks for processing. This is the single highest-leverage tax-cash-flow move for an NRI seller.

Q: How does an NRI claim a TDS refund if too much was deducted?

File the Income Tax Return for the relevant assessment year, declare the capital gain and the actual tax liability, and the excess TDS shows as a refund claim. Refund is credited to the bank account linked to your PAN — make sure your **NRO account** is pre-validated on the Income Tax portal. Typical timeline: 6-15 months from the original deduction date through ITR processing and refund issue. To avoid this delay entirely, use the Form 13 Section 197 route described above.

Q: Can the buyer's TDS be deducted on the capital gain amount instead of full sale value?

Only if you hold a valid Lower TDS Certificate under Section 197. **Without that certificate, Section 195 mandates deduction on the full sale consideration** — even if your actual tax liability is a fraction of the deducted amount. This is the structural reason NRI sellers either pre-file Form 13 or accept a multi-month refund cycle.

Q: If I pay TDS in India, will I be taxed again in the US or UK on the same sale?

Usually no net double tax — but not because India steps back. Under **Article 13** of the DTAA, India (where the property sits) taxes the gain in full, and your **home country grants a foreign tax credit** for the Indian tax paid (USA via **Form 1116**, UK via Foreign Tax Credit Relief). The credit is **capped at your home country's own tax** on that gain, so if the US/UK rate is below India's ~14.95%, the excess Indian tax may not be fully recoverable. **UAE and Singapore residents** pay no personal tax on the gain, so the India tax is simply final — no second tax, and no credit needed.

Q: What documents does an NRI need to claim DTAA benefit on an India property sale?

Two: a **Tax Residency Certificate (TRC)** issued by your country of residence, and **Form 10F** filed on the Indian income-tax e-filing portal (declaring residency, tax identification number, and no permanent establishment in India). Have both ready before the sale deed is registered — they are the precondition for any treaty relief, including the Section 197 lower-TDS route.

TL;DR — TDS on NRI property sale in 2026. When an NRI sells property in India, the buyer must deduct TDS under Section 195 on the full sale consideration — not on the profit. For long-term capital gain (holding

24 months), the base rate is 12.5% post-July-2024 budget; effective TDS lands at 13.0%-14.95% once surcharge and 4% health-and-education cess are layered on, scaled by sale value. Short-term (< 24 months) is deducted at slab — typically 30% + surcharge + cess. The fix for over-deduction is Form 13 / Section 197 — file it before the sale deed is registered to get a Lower TDS Certificate that drops the deduction to roughly the actual capital gains tax liability (often 1-3% of sale value).

The Direct Answer

When an NRI sells property, the buyer MUST deduct TDS under Section 195 at roughly 13-15% (Long Term, post-2024 budget) or 30%+ (Short Term) on the entire sale value, not just the profit. This locks up your capital. To save tax, you can reinvest in another house (Section 54) or buy Capital Gains Bonds (Section 54EC) within 6 months. To avoid the cash-flow hit in the first place, file Form 13 under Section 197 for a Lower TDS Certificate before registration.

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The Lower TDS Certificate

If your profit is small but sale value is high, the headline 12.5%+ TDS on the full sale consideration is unfair. Apply for a Lower Deduction Certificate (Form 13) from your jurisdictional Income Tax Officer before the sale deed is registered. This can reduce TDS to 1-3% of the sale value based on your actual computed capital gain — preserving the cash you need to repatriate or reinvest.

Repatriation Flow →

TDS Rates for NRI Sale of Property: 2026 Reference Table

The rate the buyer applies is a layered calculation: a base capital gains rate under Section 112 / 111A, plus surcharge, plus a flat 4% health-and-education cess on the combined amount. The bands below are what buyers and their CAs typically apply at deduction time using sale consideration as a working proxy — the legally correct surcharge band is determined by the seller's total taxable income for the year, not by the sale value, but the buyer doesn't have that information at registration.

| Holding period | Base rate (Section 195) | Surcharge band (proxy: sale value) | Effective TDS | |---|---|---|---| | > 24 months (LTCG) | 12.5% (post-July-2024) | 0% (sale ≤ ₹50L) | ~13.0% (12.5 + 4% cess) | | > 24 months (LTCG) | 12.5% | 10% (sale ₹50L-₹1Cr) | ~14.30% | | > 24 months (LTCG) | 12.5% | 15% (sale > ₹1Cr — Section 112 cap) | ~14.95% | | ≤ 24 months (STCG) | As per slab (often 30%) | Slab-linked surcharge | ~31.2%-39%+ |

Two important caveats. (1) Surcharge bands are legally on total income, not sale value. A high-consideration / low-gain deal (say ₹1.4Cr sale on a ₹60L cost basis = ₹80L gain) puts the seller in the 10% surcharge band on actual income, even though buyers default to the 15% sale-value-band for TDS — exactly the gap that Form 13 / Section 197 lower-TDS certificates exist to close. (2) Surcharge on LTCG is capped at 15%. Income taxable under Section 112 / 112A doesn't attract the 25% / 37% enhanced-surcharge bands that apply to other high-value income — Finance Act 2022 limited the maximum surcharge on Section 112 / 112A income to 15%, regardless of sale value or total income. STCG falls outside that cap. Always verify the applicable band with a CA before signing the sale agreement.

Long Term vs Short Term — The Holding Period That Matters

The holding period clock starts on the date you originally acquired the property (registered sale-deed date or the date of allotment, whichever applies under Section 2(42A)). If you inherited, you also inherit the previous owner's holding period — useful when the inheritance itself is recent but the original purchase was decades ago.

Budget 2024 changed LTCG rules: rate dropped from 20% to 12.5%, and indexation benefit was removed for most cases (a grandfathering option exists for specific resident transfers — non-resident transfers are generally outside that grandfathering, so the flat 12.5% on unindexed gain is the default). Confirm with a CA which regime applies to your specific deal date and ownership history.

Worked Example: TDS Calculation for NRI Property Sale

Take a representative case: an NRI selling an apartment in Bengaluru held since 2015.

Purchase price (2015): ₹60 lakhs
Sale consideration (2026): ₹1.4 crores
Holding period: ~11 years → Long Term

Without Lower TDS Certificate (Section 195 default):

Base TDS = 12.5% of ₹1.4 Cr = ₹17.5 lakhs
Surcharge (15% band, sale ₹1Cr-₹2Cr) on ₹17.5L = ₹2.625 lakhs
Cess (4%) on ₹20.125L = ₹80,500
Total TDS deducted by buyer: ~₹20.93 lakhs (~14.95% of sale value)

Actual capital gains tax liability:

Capital gain = ₹1.4 Cr - ₹60L = ₹80 lakhs
LTCG tax = 12.5% × ₹80L = ₹10 lakhs
Surcharge: ₹80L total income → 10% band → 10% × ₹10L = ₹1 lakh
Cess: 4% × (₹10L + ₹1L) = ₹44,000
Actual liability: ~₹11.44 lakhs

The buyer over-deducted by ~₹9.5 lakhs — partly because the buyer's sale-value-based 15% surcharge proxy doesn't match the seller's actual 10% surcharge band on a ₹80L total-income year. The NRI now waits for a refund through the next ITR cycle (typically 6-15 months including processing). The fix — Form 13 filed pre-sale — would have authorised the buyer to deduct only ~₹11.44 lakhs, freeing the rest for repatriation or Section 54EC bond reinvestment without the refund delay.

How to Save Capital Gains Tax

1. Section 54: Buy Another House

Invest the Capital Gain amount (not full sale value) into one residential house in India.
Timeline: 1 year before or 2 years after sale (for purchase), or 3 years (for construction).
Cap from FY 23-24: Section 54 exemption is restricted to ₹10 crores of capital gain for the new property purchase.

2. Section 54EC: Bonds

Invest up to ₹50 lakhs in notified bonds (NHAI / REC / PFC / IRFC).
Lock-in: 5 years.
Interest: Taxable, but capital is safe and the corresponding capital gain becomes exempt.
Window: Within 6 months of sale.

3. Capital Gains Account Scheme (CGAS)

If you haven't found a new house by the tax filing deadline (July 31), deposit the unutilized money into a specialized CGAS Account at a notified bank to avoid paying tax that year. You then have until the Section 54 timeline expiry to deploy it.

When reinvesting under Section 54, run the buy-side legal diligence with the same rigour you applied to the sale — see the property title verification checklist for India for the 30-year paper trail every NRI buyer should demand on resale stock.

The Section 197 Lower TDS Workflow (Form 13)

This is the single highest-leverage move for an NRI seller. The mechanics:

Compute expected capital gain with your CA — purchase cost, indexation (if applicable), exemptions claimed (Section 54 / 54EC).
File Form 13 electronically on the Income Tax TRACES portal, referencing the buyer's PAN and the proposed sale value.
Officer issues Lower TDS Certificate specifying a deduction rate matched to your actual tax liability (often 1-3% of sale value).
Buyer deducts at the certified rate, not the default 12.5%+ surcharge+cess.
Process timeline: typically 4-6 weeks; start at least 2 months before the proposed registration date.

For NRIs holding the property through a Power of Attorney arrangement, the POA holder can file Form 13 on your behalf — but the certificate is issued in your PAN, and the eventual refund (if any) is credited to your NRO account, not the POA holder's account.

Will You Be Taxed Again Back Home? The DTAA Credit Side

India taxing your gain is only half the story — and it is the half every other guide stops at. Under Article 13 of India's Double Taxation Avoidance Agreements (USA, UK, UAE and most others), gains on immovable property are taxed in the country where the property is situated. So India keeps the primary right to tax, and the 12.5%-plus-surcharge bill above is not reduced by any treaty. Relief, where it exists, happens on your home country's side — as a foreign tax credit for the Indian tax you already paid.

The catch most NRIs miss: the credit is capped at your home country's own tax on that same gain. If your country of residence taxes the gain lower than India's effective ~14.95% — or not at all — you cannot recover the difference. Your real tax becomes the higher of the two systems.

To claim treaty treatment in India at all, keep two documents ready before registration: a Tax Residency Certificate (TRC) from your country's tax authority, and Form 10F filed on the Indian income-tax portal (a self-declaration of residency, tax ID, and no permanent establishment in India). Without them, the Assessing Officer can deny treaty benefits — including a Section 197 lower-TDS certificate that relies on treaty rates.

The timing trap. India's tax year runs April–March; the US runs on the calendar year and the UK April–April. India TDS is taken at sale, but you claim the home-country credit in your tax year — so the credit can arrive a year after the deduction, a temporary double cash-flow hit even when the net tax washes out. Confirm the exact treaty article and credit limit with a cross-border CA; these mechanics differ treaty by treaty.

Frequently Asked Questions

What is the TDS rate on long-term capital gain for NRI in 2026?

The base TDS rate under Section 195 for long-term capital gain (holding ≥ 24 months) on NRI property sale is 12.5% post the July 2024 budget. Effective TDS — once surcharge (0%-15%, capped at 15% under the Section 112 / 112A surcharge ceiling per Finance Act 2022) and the flat 4% health-and-education cess are layered on — typically lands between 13.0% and 14.95%, regardless of sale value. The 25% / 37% enhanced-surcharge bands that apply to other high-value income do not apply here. The rate is applied to the full sale consideration, not just the capital gain.

What is the TDS rate for NRI sale of property under short-term capital gain?

If the property is sold within 24 months of purchase, the gain is classified as short-term and TDS is deducted at the applicable income slab — practically 30% + surcharge + cess, compounding to roughly 31.2% to 42.7% depending on the seller's total taxable income band (10% / 15% / 25% / 37%). STCG is treated as ordinary income for an NRI seller, so slab is the controlling rate and STCG falls outside the 15% Section 112 cap that applies to LTCG. As with LTCG, buyers typically use sale-value as a working proxy at deduction time, but the legally correct surcharge band is the seller's total income — Form 13 under Section 197 is the mechanism to align withholding to actual liability when the proxy overstates.

How can an NRI reduce TDS on property sale to actual tax liability?

File Form 13 under Section 197 for a Lower TDS Certificate before the sale deed is registered. The Income Tax Officer computes your expected capital gains tax, reviews any Section 54 / 54EC exemptions you intend to claim, and issues a certificate authorising the buyer to deduct at a lower rate — often 1-3% of sale value instead of the default 12.5%+ surcharge+cess. Allow 4-6 weeks for processing. This is the single highest-leverage tax-cash-flow move for an NRI seller.

How does an NRI claim a TDS refund if too much was deducted?

File the Income Tax Return for the relevant assessment year, declare the capital gain and the actual tax liability, and the excess TDS shows as a refund claim. Refund is credited to the bank account linked to your PAN — make sure your NRO account is pre-validated on the Income Tax portal. Typical timeline: 6-15 months from the original deduction date through ITR processing and refund issue. To avoid this delay entirely, use the Form 13 Section 197 route described above.

Can the buyer's TDS be deducted on the capital gain amount instead of full sale value?

Only if you hold a valid Lower TDS Certificate under Section 197. Without that certificate, Section 195 mandates deduction on the full sale consideration — even if your actual tax liability is a fraction of the deducted amount. This is the structural reason NRI sellers either pre-file Form 13 or accept a multi-month refund cycle.

If I pay TDS in India, will I be taxed again in the US or UK on the same sale?

Usually no net double tax — but not because India steps back. Under Article 13 of the DTAA, India (where the property sits) taxes the gain in full, and your home country grants a foreign tax credit for the Indian tax paid (USA via Form 1116, UK via Foreign Tax Credit Relief). The credit is capped at your home country's own tax on that gain, so if the US/UK rate is below India's ~14.95%, the excess Indian tax may not be fully recoverable. UAE and Singapore residents pay no personal tax on the gain, so the India tax is simply final — no second tax, and no credit needed.

What documents does an NRI need to claim DTAA benefit on an India property sale?

Two: a Tax Residency Certificate (TRC) issued by your country of residence, and Form 10F filed on the Indian income-tax e-filing portal (declaring residency, tax identification number, and no permanent establishment in India). Have both ready before the sale deed is registered — they are the precondition for any treaty relief, including the Section 197 lower-TDS route.