Key takeaway
When an NRI sells property, the buyer must deduct tax at source, often on the full sale price. If your actual tax is lower, apply for a lower or nil deduction certificate before the sale so less money is locked up waiting for a refund.
Why TDS is high for NRI sellers
A buyer purchasing from a non-resident must deduct tax under the non-resident TDS provisions — Section 393(2) of the Income-tax Act, 2025 from 1 April 2026 (earlier Section 195 of the 1961 Act). In practice buyers often deduct on the whole price, because they cannot verify your cost.
What the certificate does
The Income Tax Department can issue a certificate authorising the buyer to deduct tax at a lower rate, or not at all, based on your estimated tax liability (Section 197 of the 1961 Act and the corresponding provision of the 2025 Act).
Step by step
- Compute the gain — sale price less cost of acquisition and improvements, and holding period.
- Collect documents — purchase deed, payment proofs, improvement bills, sale agreement, buyer’s PAN and TAN details.
- Apply online — through the TRACES portal using the prescribed form, with your PAN.
- Respond to queries — the assessing officer may ask for documents.
- Receive the certificate — specific to the buyer and the transaction.
- Complete the sale — the buyer deducts at the certificate rate and issues a TDS certificate.
- File your return — report the gain and claim any refund.
Timing
Apply well before the sale. Processing takes time, and the buyer cannot use the certificate after the payment has been made.
Exemptions to consider
- Reinvestment in a residential house in India, subject to conditions.
- Investment in specified bonds, subject to limits and time periods.
- Inherited property — the previous owner’s cost and holding period are generally counted.
Common mistakes
- Applying after signing the sale agreement with a near completion date.
- A buyer without a TAN.
- Missing purchase documents for old or inherited property.
- Not filing an Indian return to claim the refund.
Frequently asked questions
Can I apply from abroad?
Yes, the application is online and a chartered accountant can help.
Does the certificate cover more than one buyer?
It is issued for specified buyers and transactions; check its terms.
What if TDS was already deducted in full?
File your return and claim a refund of the excess.
Related LegalCops services
References
- Income-tax Act, 2025 — Section 393(2) and lower-deduction provisions
- Income-tax Act, 1961 — Sections 195, 197 (earlier years)
Last reviewed: November 2026.
The information provided is for general educational purposes only and does not constitute legal advice. Applicable laws and procedures may vary depending on the facts, jurisdiction, and circumstances of each matter. Consult a qualified legal professional before taking action.
