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NRIs Can Benefit from Lower TDS When Selling Property in India

Being an NRI currently offers a strategic advantage, particularly for those interested in investing in India or selling previously acquired assets.

As per real estate experts, Indian metro cities have witnessed a 15% to 20% annual rise in property sales by NRIs over recent years, largely due to the continuous appreciation in property values.

Data from the National Housing Bank’s residential index shows that property prices surged by 27% in Mumbai and 30% in Delhi between March 2016 and March 2018. While many NRIs continue to evaluate or sell their holdings, understanding the tax implications is crucial.

When a property in India is sold—whether by a resident or a Non-Resident Indian—after being held for over two years, it attracts long-term capital gains (LTCG) tax.

Although the tax rate remains the same for both residents and NRIs, the method of TDS (Tax Deducted at Source) application differs.

NRIs Can Benefit from Lower TDS When Selling Property in India

NRIs can request a certificate from the Assessing Officer for either nil or reduced TDS, based solely on capital gains. This avoids excessive deduction on the entire sale amount, ensuring they retain a fair return on their investment.

In short, if approved, TDS along with surcharge will apply only to the capital gains, not the total sale value—preserving any potential profit. Once sanctioned, the property buyer can pay the NRI the full sale amount, with the tax certificate covering the applicable capital gains TDS issued separately.

This process typically takes 10 to 30 days and requires submission of documents such as the sale agreement, PAN, previous ITRs, and bank statements. Engaging a qualified chartered accountant with NRI taxation expertise can simplify this process significantly.

To calculate capital gains, subtract all applicable expenses (legal fees, transfer charges, development costs, etc.) from the sale price to arrive at the net selling price. Then, deduct the indexed cost of acquisition to determine your capital gains.

NRIs Can Benefit from Lower TDS When Selling Property in India

NRIs Can Avoid TDS Through Capital Gains Exemptions

As an NRI, it is possible to avoid TDS on property sales under certain conditions.

One effective way to obtain this relief is by reinvesting the capital gains earned from the sale of a property into another residential property or specified tax-free bonds. In such cases, the capital gains become exempt from tax in India, and accordingly, TDS will not be applied. To avail of this benefit, the NRI must apply for a tax exemption certificate under Section 195 of the Income Tax Act.

However, if the newly acquired property is sold within two years, the gains from that sale will be considered short-term capital gains and taxed as per the applicable income tax slab of the NRI, with TDS applied at a fixed rate.

NRIs Can Benefit from Lower TDS When Selling Property in India

To repatriate the funds from the sale, the NRI can request their Chartered Accountant to electronically file Form 15CA and Form 15CB, certifying that there is no outstanding tax liability. Once this is done, the funds can be legally remitted abroad. If the NRI chooses not to transfer the money overseas, it can be retained in their NRO (Non-Resident Ordinary) account. However, as per RBI rules, the repatriation limit is capped at USD 1 million per financial year.

Disclaimer: The content on this website is for informational purposes only and does not constitute legal, financial, or professional advice. Please consult qualified experts before acting on any information. K M GATECHA & CO LLP accepts no liability for errors, omissions, or outcomes from the use of this content. This site is not an advertisement or solicitation.

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FAQs

Yes, by reinvesting the capital gains in another residential property (Section 54) or specified bonds (Section 54EC), and obtaining a tax exemption certificate under Section 195, NRIs can avoid TDS deduction.

If the new property is sold within two years, the capital gain becomes short-term and is taxed as per your income slab, with applicable TDS.

Form 15CA and Form 15CB are required to remit funds outside India. They confirm that the tax liability has been discharged or is not applicable.

Yes, under RBI guidelines, NRIs can repatriate up to USD 1 million per financial year from their NRO account, subject to tax compliance and documentation.

Yes, working with a Chartered Accountant experienced in NRI taxation is highly recommended to ensure proper documentation, filings, and to avoid tax disputes.

Key documents include the sale agreement, PAN card, past income tax returns, purchase deed, cost proofs (like invoices, registration fees), and bank statements.

The process usually takes 10 to 30 days, depending on the jurisdiction and completeness of the documentation submitted.

No, you must apply for the certificate before the sale and submit it to the buyer to ensure TDS is not deducted or is deducted at a lower rate.

If no certificate is obtained, the buyer must deduct TDS at 20% (plus surcharge and cess) on long-term capital gains, or 30% (plus surcharge and cess) for short-term gains, calculated on the full sale value.

Yes, if TDS is deducted at a higher rate than your actual tax liability, you can claim a refund by filing your Income Tax Return (ITR) in India.Accordion Content

Yes, TDS rules apply even if the property was inherited. The capital gains are calculated based on the original cost to the previous owner, with indexation benefits.

For Section 54, exemption is typically allowed for investment in one residential property in India. For Section 54EC, the maximum investment allowed is ₹50 lakhs per financial year in specified bonds.