A Lower TDS Certificate for NRIs is an official document issued by the Income Tax Department of India. It permits Non-Resident Indians (NRIs) to pay a reduced rate—or even zero—Tax Deducted at Source (TDS) on property sale proceeds in India. This certificate is transaction-specific and is valid only for a defined period.
This provision is especially helpful for NRIs because, under normal circumstances, TDS is applied to the entire sale consideration rather than just the taxable capital gain. As a result, a significant amount of tax may be deducted upfront, even when the actual tax liability is lower. The seller can reclaim the excess tax only by filing an income tax return, which delays fund availability.
According to a CBDT circular dated September 27, 2023, NRIs now have an updated method to avoid unnecessary TDS deductions on income earned in India. Unlike resident individuals, NRIs cannot submit Form 15G or 15H to prevent TDS. Instead, they are required to submit an application directly to the Assessing Officer to request a certificate for lower or nil TDS.
Let’s now explore the step-by-step process for NRIs to apply for a TDS certificate.
Application for Zero or Lower TDS Certificate
How Can NRIs Apply for a Lower TDS Certificate (Form 13)?
To obtain a lower or nil TDS certificate, Non-Resident Indians (NRIs) need to submit Form 13 online to the concerned Assessing Officer (AO). This process is carried out through the Income Tax Department’s official portal.
The application must be filed under the PAN jurisdiction of the applicant or where the property in question is situated. In cases where there are multiple co-owners or sellers, each individual must submit a separate application.
Documents Required for Lower TDS Certificate Application
Below is the list of documents typically required to complete the application process:
Accurate and complete documentation ensures timely processing of your application and minimizes the chance of rejection or delay.
Approval Process and Expected Timelines
Once the application for a lower or zero TDS certificate is submitted, the Assessing Officer (AO) will assess the documents and may seek further clarification or additional paperwork.
Upon satisfactory review, the certificate is approved and issued digitally via the income tax e-filing portal, making it accessible for download.
Processing duration: Typically ranges from 30 to 60 days post submission.
Validity: The certificate is valid until the end of the relevant financial year, unless revoked earlier by the department.
TDS Deduction Using the Approved Certificate
Once the lower TDS certificate is granted, the buyer is required to deduct TDS at the rate mentioned in the certificate while making the payment to the NRI seller.
Minimum applicable rate: As low as 3% can be permitted.
If a rate lower than this is needed, additional consent from the Commissioner of Income Tax (CIT) must be obtained.
TDS Rules for NRIs Selling Property in India
The rate at which TDS is deducted when an NRI sells property in India depends on whether the gains are short-term or long-term:
Long-Term Capital Gains (LTCG)
If the property has been held for over 2 years, it is considered a long-term capital asset.
Applicable TDS rate is 12.5%, plus surcharge and cess as per prevailing tax laws.
Short-Term Capital Gains (STCG)
If the sale takes place within 2 years of acquisition, the gains are short-term.
In such cases, TDS is deducted at a flat rate of 30%, plus applicable surcharge and cess.
Understanding these rules helps both NRIs and buyers stay compliant and avoid legal or financial hassles.
TDS Rates Including Surcharge and Cess
The basic TDS rates on property sales by NRIs are enhanced with applicable surcharge and health & education cess, depending on the sale value.
Health & Education Cess
A uniform 4% cess is levied on the total of TDS + surcharge.
Surcharge on TDS
The surcharge varies based on the capital gains amount or sale consideration, particularly for individuals:
Note: These effective TDS rates are calculated on gross sale consideration and must be deducted by the buyer when purchasing property from an NRI. Proper TDS deduction helps avoid penalties and ensures tax compliance.
Procedure for TDS Deduction by the Buyer
When an NRI sells property in India, the buyer is legally obligated to deduct TDS on the transaction. The TDS deduction and payment process includes the following key steps:
TDS Deduction by Buyer:
At the time of making payment to the NRI seller, the buyer must deduct TDS at the applicable rate based on the sale value.TDS Payment to Government:
The deducted amount must be deposited with the Income Tax Department within 7 days from the end of the month in which the deduction was made.Issuance of TDS Certificate (Form 16A):
After the TDS is paid, the buyer is required to issue Form 16A to the NRI seller as proof of the TDS deposited.Filing Income Tax Return by NRI:
The NRI seller must report the capital gains while filing their income tax return and claim credit for the TDS deducted.
Option for Lower or Nil TDS Deduction
If the NRI’s actual tax liability is lower than the standard TDS rate, they can request a reduced or nil deduction by applying under Section 197 of the Income Tax Act.
The application must be made using Form 13 to the jurisdictional Assessing Officer.
If the tax department finds the request valid, it may issue a lower or zero TDS certificate, allowing the buyer to deduct TDS at a reduced rate or not at all.
This helps NRIs avoid excess tax deductions and improves cash flow efficiency.
TDS Payment & Filing Requirements
TAN Requirement:
The buyer must acquire a Tax Deduction and Collection Account Number (TAN) to legally deposit TDS on the seller’s behalf.TDS Deposit:
TDS deducted must be deposited with the Income Tax Department using a challan linked to the TAN. It cannot be deposited using a PAN.Filing Form 27Q:
Buyers are required to file Form 27Q, a quarterly TDS return, to officially report the TDS deduction on payments made to NRIs.Issuance of Form 16A:
Upon successful payment, the buyer must issue Form 16A to the seller. This certificate serves as evidence of the TDS paid and helps the seller claim credit in their income tax return.
Why Choose Us for Lower or Nil TDS Certificate Services?
1. Deep Expertise in Indian Tax Laws:
Our skilled team of Chartered Accountants and tax experts brings comprehensive knowledge of Indian tax rules, particularly TDS regulations under Section 195. We ensure accurate and compliant filing of your application for a Lower or Nil TDS Certificate.
2. Prompt and Professional Execution:
We recognize the urgency involved in property transactions. Our team acts swiftly to secure your certificate ahead of the sale, helping you avoid unnecessary delays and over-deductions.
3. Tailored Tax Solutions:
Whether you’re dealing with long-term or short-term capital gains, or seeking full exemption, we offer customized strategies to help you reduce or eliminate your TDS burden, based on your financial scenario.
4. Client-Centric Service:
We take the time to understand your individual case and deliver personalized guidance. Our goal is to make your TDS compliance smooth, transparent, and stress-free from start to finish.
Our Consultancy Services – Expert TDS Guidance for NRIs Selling Property in India
In our Consultancy Services, we specialize in offering expert assistance to Non-Resident Indians (NRIs) navigating the complexities of TDS compliance when selling property in India. With a team of experienced Chartered Accountants, we ensure your tax obligations are handled with precision, speed, and peace of mind.
Whether it’s your first property sale or a repeat transaction, our end-to-end support ensures compliance and minimizes tax-related hassles.
1. Accurate TDS Rate Guidance & Capital Gains Calculation
TDS Rate Determination:
We help you determine whether your capital gains are long-term or short-term, and apply the correct TDS rate accordingly—ensuring strict compliance with Indian tax laws.Capital Gains Computation:
Our experts calculate capital gains accurately by factoring in purchase cost, indexation, sale price, and property improvements. This guarantees that TDS is deducted only on the net gain—not on the full sale value.
2. PAN Assistance for NRI Sellers
PAN Requirement:
A valid PAN (Permanent Account Number) is mandatory for correct TDS deduction. Without one, higher TDS rates may apply.Complete PAN Support:
If you don’t already have a PAN, our team will help you gather the required documents and complete the application process seamlessly, ensuring faster approval and compliance.
3. Monitoring Buyer’s TDS Deduction and Remittance
Buyer’s Legal Duty:
While the buyer is legally responsible for deducting and depositing TDS, we’ll guide you in ensuring the buyer complies with all tax obligations.Timely TDS Remittance:
We track that the buyer deposits TDS with the Income Tax Department within 7 days of the month’s end in which the deduction occurs.
4. Oversight of TDS Return Filing (Form 26QB)
Form 26QB Filing:
The buyer must file Form 26QB to report TDS deducted from your property sale. We confirm its correct filing and resolve any issues, as this form is key to verifying tax compliance.Real-Time Monitoring:
Our team tracks the process to ensure timely issuance of the TDS Certificate (Form 16A)—a vital document for your income tax return.
5. Issuance & Verification of TDS Certificate (Form 16A)
Form 16A Management:
Once TDS is remitted, the buyer must issue Form 16A to you. We assist in verifying this certificate for accuracy and completeness.Rectification Support:
In case of mismatches or delays, we advise on corrective steps with the buyer or tax department to protect your compliance record.
Choose us for seamless NRI TDS compliance.
From PAN application to capital gains calculation, buyer coordination, and TDS tracking—we handle it all so you can sell your property with confidence.
6. Filing of Income Tax Return (ITR) in India
Capital Gains Reporting:
After TDS deduction, you are required to file an Income Tax Return (ITR) in India to report capital gains and claim the TDS paid as credit. Our experts will help you prepare and file the correct ITR form, ensuring that all property sale-related details are accurately reported.Refund Claims:
If TDS deducted exceeds your actual tax liability, we will help you claim a tax refund. Our team ensures your refund is processed efficiently by submitting all necessary documents with precision.
7. Advice on Exemptions and Deductions
Capital Gains Exemptions:
You may be eligible for exemptions under Section 54 or Section 54F if you reinvest your capital gains into another residential property. We will guide you on how to claim these exemptions and ensure that all supporting documents are correctly prepared.Lower TDS Deduction via Form 13:
If your tax liability is expected to be lower than standard TDS, we help you apply for a Lower TDS Certificate under Section 197. This reduces TDS at the source and improves your cash flow. We handle the filing of Form 13 and coordinate with the tax department on your behalf.
8. Assistance in Obtaining Lower TDS Certificate
Section 197 Certificate Application:
To prevent over-deduction of TDS, we help you apply for a Lower TDS Certificate. Our team handles documentation, Form 13 filing, and communication with tax authorities to ensure faster processing.Proactive Coordination:
We ensure you obtain the certificate well before the transaction date, helping both you and the buyer deduct TDS at the correct rate from the outset.
9. Handling TDS Disputes and Tax Notices
TDS Dispute Resolution:
If the buyer deducts incorrect TDS or fails to remit it to the government, we help rectify the issue with the buyer or tax department. Our experts file necessary correction requests and ensure compliance.Representation for Tax Notices:
Received a tax notice? We offer professional representation before the tax authorities, handle documentation, and resolve any clarification required regarding your property sale or TDS filings.
10. Strategic Tax Planning for NRIs
Long-Term Tax Strategy:
We don’t just focus on a single transaction. Our professionals help NRIs with tax-efficient planning for future property sales and investments in India.Reinvestment Guidance:
From reinvesting in residential property to specified bonds under Section 54EC, we advise you on legitimate strategies to minimize capital gains tax and optimize your investment returns.
With our Consultancy Services, you’re not just selling property — you’re making a financially smart, legally compliant, and stress-free decision as an NRI. Let our tax experts simplify your TDS and income tax obligations in India.
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.
Need Help?
Frequently Asked Questions (FAQs)
1. What is a Lower TDS Certificate for NRIs?
A Lower TDS Certificate is issued by the Income Tax Department under Section 197 of the Income Tax Act. It allows an NRI to deduct TDS at a lower rate (or not at all) when selling property in India. This ensures TDS is deducted only on the actual taxable capital gain and not the full sale value. The NRI must apply for this certificate by filing Form 13 along with supporting documents
2. Who deducts TDS when an NRI sells property in India?
The buyer of the property is responsible for deducting TDS under Section 195 at the time of payment. For NRIs, TDS is typically deducted at 20% for long-term capital gains or 30% for short-term capital gains, plus surcharge and cess.
3. Is it mandatory for an NRI to have a PAN card for selling property in India?
Yes, an NRI must have a Permanent Account Number (PAN) to ensure the correct deduction of TDS and to file an income tax return in India. Without a PAN, the buyer may deduct TDS at the maximum applicable rate.
4. Can an NRI claim a refund if excess TDS is deducted?
Yes. If the TDS deducted exceeds the actual tax liability, the NRI can claim a refund by filing an Income Tax Return (ITR) in India for that financial year.
5. What is Form 13 in relation to TDS for NRIs?
Form 13 is used to apply for a Lower or Nil TDS Certificate under Section 197. It must be submitted to the Assessing Officer with proof of income, computation of capital gains, and other relevant documents.
6. How long does it take to get a Lower TDS Certificate?
It usually takes 2 to 4 weeks, depending on the jurisdiction and completeness of documents. It’s advised to start the process well before the sale date to avoid delays.
7. What if the buyer fails to deduct or deposit TDS?
If the buyer fails in TDS deduction or deposit, both buyer and seller may face penalties, interest, or legal consequences. It’s crucial to ensure that the buyer complies with the tax law.
8. What is Form 26QB and who files it?
Form 26QB is the TDS return form for property transactions. It must be filed by the buyer after deducting TDS. NRIs should ensure that the buyer files it correctly as it is required for obtaining Form 16A (TDS Certificate).
9. What documents are required to apply for a Lower TDS Certificate?
Documents typically include:
- Sale agreement/draft
- Computation of capital gains
- PAN and passport copies
- Past ITRs (if any)
- Proof of ownership and acquisition cost
- Property indexation details
- Form 13
10. Can an NRI claim capital gains exemption under Section 54 or 54F?
Yes. If the capital gains are reinvested in another residential property in India, NRIs can claim exemption under Section 54 (for residential property) or Section 54F (if entire sale proceeds are reinvested), subject to conditions.
