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—nri-tds-195-property-sale-lower-deduction-certificate-india [2026/07/22 17:44] (current) – created - external edit 127.0.0.1
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 +{{htmlmetatags>metatag-title=(NRI Property Sale TDS Section 195 Lower Deduction India)&metatag-description=(NRI property sale TDS falls under Section 195, so the buyer needs a TAN and Form 27Q, while the seller can cut the deduction using a Section 197 certificate.)&metatag-keywords=(NRI property sale TDS, Section 195, Form 27Q, lower deduction certificate, Form 13)&metatag-robots=(index,follow)&metatag-og:title=(NRI Property Sale TDS Under Section 195 and the 197 Remedy)&metatag-og:description=(NRI property sale TDS falls under Section 195, so the buyer needs a TAN and Form 27Q, while the seller can cut the deduction using a Section 197 certificate.)&metatag-og:type=(article)}}
  
 +====== NRI Property Sale TDS Under Section 195 ======
 +
 +
 +
 +{{ :social:auto:nri-tds-195-property-sale-lower-deduction-certificate-india.png?direct&1200 |NRI Property Sale TDS Under Section 195 — RTI Wiki}}
 +
 +<WRAP center round info 95%>
 +**Quick Reply:** NRI property sale TDS falls under Section 195, so the buyer needs a TAN and Form 27Q, while the seller can cut the deduction using a Section 197 certificate.
 +</WRAP>
 +
 +When an NRI sells property in India, the buyer must deduct TDS under Section 195 of the Income Tax Act on the sale amount, not just on the profit. This is very different from the resident seller route. The good news is that the NRI seller can apply under Section 197 for a lower or nil deduction certificate so tax comes off the actual gain instead of the whole price.
 +
 +If you are the buyer, getting this wrong is your problem, not the seller's. The tax department recovers short deductions from the person who paid the money. So both sides need to understand the rules before the sale deed is signed.
 +
 +===== Why Section 195 is different from the resident route =====
 +
 +When a **resident** sells property worth ₹50 lakh or more, the buyer deducts a flat 1 percent under Section 194-IA and files **Form 26QB** using only a PAN. It is simple.
 +
 +When the seller is an **NRI**, that route does not apply at all. Instead:
 +
 +  * TDS is deducted under **Section 195**, which covers payments to non-residents.
 +  * TDS is on the **whole sale consideration** at the capital-gains rate, unless a Section 197 certificate reduces it.
 +  * The buyer must hold a **TAN**, not just a PAN.
 +  * The buyer files **Form 27Q**, the quarterly return for payments to non-residents.
 +
 +This is the trap most buyers fall into. They assume 1 percent like a normal sale, deduct too little, and later get a demand notice with interest and penalty.
 +
 +===== What the buyer must do =====
 +
 +  - **Get a TAN.** A Tax Deduction Account Number is mandatory before you deduct TDS for a non-resident. Apply through the NSDL or the income-tax e-filing portal.
 +  - **Confirm the seller is an NRI** and ask for the lower-deduction certificate, if any.
 +  - **Deduct TDS** at the correct rate on each payment or instalment.
 +  - **Deposit the TDS** by challan on or before the 7th of the next month.
 +  - **File Form 27Q** every quarter, by 31 July, 31 October, 31 January and 31 May.
 +  - **Issue Form 16A** to the seller as proof of deduction.
 +
 +===== Long-term or short-term: the holding period =====
 +
 +The rate depends on how long the NRI held the property.
 +
 +  * Held for **more than 24 months**: it is a **long-term** capital asset.
 +  * Held for **24 months or less**: it is **short-term**, and the gain is taxed at the seller's slab rate.
 +
 +The 24-month threshold for land or building was set by amendment to Section 2(42A) and has applied since April 2018.
 +
 +===== The headline LTCG rate after Budget 2024 =====
 +
 +For transfers on or after **23 July 2024**, long-term capital gains on property are taxed at **12.5 percent without indexation**. Before that date the rate was 20 percent with indexation. This change came in through the Finance (No. 2) Act, 2024 under Section 112.
 +
 +One important point for NRIs: the law gives a special relief letting the seller choose between the old 20 percent with indexation and the new 12.5 percent without indexation. **That choice is only for resident individuals and HUFs.** An NRI seller does not get the option. For an NRI, long-term gains on property are taxed at 12.5 percent without indexation, full stop.
 +
 +On top of the base rate, the buyer must add **surcharge** (if the amount crosses the surcharge slabs) and **health and education cess** of 4 percent. So the effective deduction is higher than 12.5 percent. The exact effective rate depends on the size of the gain and the surcharge slab, so do not assume a single fixed all-in number.
 +
 +Because TDS under Section 195 is charged on the **full sale price** rather than the gain, the amount held back can be far more than the seller's real tax. That is exactly why the next step matters.
 +
 +===== The key remedy: a Section 197 lower TDS certificate =====
 +
 +This is the most useful part for any NRI seller. Under **Section 197**, the seller can apply for a certificate that tells the buyer to deduct tax at a **lower rate or nil rate**.
 +
 +  - The NRI files **Form 13** with the jurisdictional Assessing Officer (TDS), usually online through the TRACES portal.
 +  - The officer works out the **actual capital gain** and the real tax due.
 +  - If satisfied, the officer issues a certificate fixing the lower deduction amount.
 +  - The seller gives this certificate to the **buyer**, who then deducts only the lower amount.
 +
 +Without this certificate, the buyer must deduct on the whole consideration, and the NRI seller waits for a refund after filing a return. The certificate avoids locking up a large sum for months. Apply for it **before** the sale closes, because it can take several weeks to issue.
 +
 +For the bigger picture on dealing with government offices and your rights, see [[https://righttoinformation.wiki/book|The RTI Playbook]].
 +
 +===== Real-life example =====
 +
 +**Ravi**, an NRI in Dubai, sold his Pune flat in March 2026 for ₹90 lakh. He had bought it in 2015, so it was long-term. The buyer, worried about a notice, first planned to deduct 12.5 percent plus surcharge and cess on the **full ₹90 lakh**, around ₹13 lakh.
 +
 +Ravi instead applied under Section 197 with Form 13. His actual gain was only about ₹30 lakh. The Assessing Officer issued a certificate, and the buyer deducted TDS on the gain rather than the whole price. Ravi saved several lakh rupees from being tied up until his refund.
 +
 +===== FAQ =====
 +
 +==== Does the buyer of an NRI's property need a TAN? ====
 +
 +Yes. Unlike a purchase from a resident, where only a PAN and Form 26QB are needed, buying from an NRI means the buyer must get a TAN and file Form 27Q under Section 195.
 +
 +==== Is TDS on the sale price or only the profit? ====
 +
 +By default, Section 195 TDS is on the **whole sale consideration**, not the gain. To have tax deducted on the real capital gain, the NRI seller must get a Section 197 lower-deduction certificate first.
 +
 +==== How does an NRI get a lower TDS certificate? ====
 +
 +The NRI files **Form 13** under Section 197 with the jurisdictional Assessing Officer, usually through the TRACES portal. The officer checks the actual gain and issues a certificate fixing a lower or nil deduction.
 +
 +==== What is the long-term holding period for property? ====
 +
 +Property held for **more than 24 months** is a long-term capital asset. If held for 24 months or less, the gain is short-term and taxed at the seller's slab rate.
 +
 +==== What is the LTCG rate for an NRI selling property now? ====
 +
 +For transfers on or after 23 July 2024, long-term gains are taxed at **12.5 percent without indexation**, plus surcharge and cess. The resident-only option to use 20 percent with indexation does not apply to NRIs.
 +
 +===== Next steps =====
 +
 +  * **Buyers:** get your TAN early, confirm the seller's residency, and ask for any Section 197 certificate before you pay.
 +  * **NRI sellers:** apply for the Form 13 lower-deduction certificate well before closing so tax comes off your real gain.
 +  * **Both sides:** keep the challan, Form 27Q acknowledgement and Form 16A safe for the seller's return and any refund.
 +
 +By Dr. Shrawan Kumar Pathak
 +===== NRI TDS Section 195 property sale: Lower deduction certificate and refund guide =====
 +
 +When TDS is deducted at 20%+ on NRI property sale and you need a lower deduction certificate or refund, here is the complete guide:
 +
 +  - **Step 1: What is Section 195 TDS?** (a) under Income Tax Section 195: when an NRI sells property in India, the buyer must deduct TDS at 20% (plus surcharge and cess — effectively ~23%), (b) for long-term capital gains (property held > 2 years): TDS is 20% (plus surcharge and cess), (c) for short-term capital gains (property held <= 2 years): TDS is 30% (plus surcharge and cess — effectively ~35%), (d) the TDS is deducted on the sale consideration (NOT the capital gain — the TDS is on the entire sale price, which is much higher than the gain).
 +  - **Step 2: The problem.** (a) the TDS is deducted on the sale price (e.g., sale price Rs 1 crore → TDS Rs 23 lakhs — even if the capital gain is only Rs 10 lakhs), (b) the NRI has to wait until the next financial year to claim a refund (file ITR — and the refund takes 6-12 months), (c) the blocked funds (Rs 23 lakhs — for a gain of Rs 10 lakhs — is a huge cash flow problem for the NRI), (d) the buyer may not deduct TDS (some buyers are unaware of Section 195 — and the NRI is later penalized for the buyer's non-compliance).
 +  - **Step 3: Lower deduction certificate (LDC).** (a) under Section 197: the NRI can apply to the Income Tax Officer (ITO) for a lower deduction certificate (the LDC authorizes the buyer to deduct TDS at a lower rate — or nil — based on the actual capital gain), (b) the application is made in Form 13 (online through the TRACES portal — traces.gst.gov.in), (c) the ITO examines: (i) the sale price, (ii) the purchase price, (iii) the capital gain, (iv) the applicable tax (based on the gain — not the sale price), (d) the ITO issues the LDC (specifying the lower rate — e.g., 2% instead of 23% — or nil, if the gain is below the exemption limit), (e) timeline: 30 days (the ITO must process the application within 30 days — though it often takes longer).
 +  - **Step 4: Documents for LDC.** (a) Form 13 (filled online — with the sale and purchase details), (b) sale deed (copy — registered), (c) purchase deed (copy — registered), (d) PAN (of the NRI), (e) NRI status proof (passport, OCI card — or a declaration), (f) computation of capital gain (showing the sale price, purchase price, indexation, and the gain), (g) previous ITRs (showing the income and tax paid — to establish the tax liability), (h) bank account details (the NRI's NRO/NRE account — for the refund, if any).
 +  - **Step 5: How to claim refund.** (a) if the TDS has already been deducted at 23% (and no LDC was obtained): file the ITR (the NRI must file ITR-2 — showing the capital gain and the TDS deducted), (b) the refund is calculated as: TDS deducted – actual tax liability (e.g., TDS Rs 23 lakhs – tax on gain Rs 2 lakhs = refund Rs 21 lakhs), (c) the refund is credited to the NRI's bank account (NRO account — the refund cannot be credited to an NRE account directly), (d) the refund can be repatriated (the NRI can repatriate the refund — up to the limit of the sale proceeds, as per RBI guidelines), (e) timeline: 6-12 months (the ITR is processed — and the refund is issued after processing).
 +  - **Step 6: File RTI.** File RTI with the Income Tax Department asking for: (a) the status of Form 13 application number [number] filed on [date] (PAN: [number], property: [address]), (b) whether the LDC has been issued (if yes: provide the certificate number, date, and the lower rate — if no: the reason for delay), (c) the status of ITR refund for AY [year] (PAN: [number] — the refund amount and the expected date), (d) whether the ITR has been processed (if yes: provide the assessment order — if no: the reason for delay), (e) the reason for the delay in processing the ITR (if the ITR has been filed more than 6 months ago — and the refund has not been issued).
 +  - **Step 7: Common issues.** (a) the LDC is not issued in time (the sale is completed before the LDC is issued — and the buyer deducts TDS at 23%), (b) the LDC is issued at a higher rate than expected (the ITO calculates the gain at a higher amount — due to a valuation dispute), (c) the refund is delayed (the ITR is not processed for months — the NRI has to follow up with the CPC), (d) the refund is less than expected (the assessing officer makes adjustments — e.g., disallows indexation or adds a notional income), (e) the buyer does not deduct TDS (the NRI is later served a notice — for the buyer's non-compliance — and has to prove that the buyer was informed of the TDS requirement).
 +
 +See [[https://righttoinformation.wiki/nri-tds-195-property-sale-lower-deduction-certificate-india|NRI TDS Section 195]] and [[https://righttoinformation.wiki/guide/find-pio-2026|Find PIO]].
 +
 +{{tag>nri tds section 195 property sale lower deduction certificate ldc form 13 refund itr capital gain indexation 2026}}