By Arosh John | Founder – John Real Estate (MahaRERA Reg. No. A51700001835) | Editor-in-Chief – Thane Real Estate News
When an NRI sells a property in India, the buyer is required to deduct TDS under Section 195. By default, this deduction is on the entire sale value, not just the profit. That often blocks a significant amount of money until the seller files a tax return and claims a refund.
Thankfully, there is a solution in the form of Form 13 – a Lower or Nil Deduction Certificate under Section 197. This certificate provides relief, enabling the buyer to deduct tax only on the actual capital gains, rather than on the full transaction value.
Documents Required
1. Identity & Status Proof
- PAN card
- Passport (with visa/OCI, if applicable)
- Overseas address proof
2. Property Documents
- Original purchase deed
- Proof of purchase payments
- Bills for renovations or improvements
- Draft sale agreement or buyer’s offer letter
3. Tax Records
- Capital gains computation (12.5% without indexation for long-term property sales post 23 July 2024)
- Estimated total income for the year
- Past 2–3 years’ ITR acknowledgements (if available)
4. Buyer’s Information
- Buyer’s TAN (mandatory for NRI transactions)
- Buyer’s PAN and contact details
- Payment schedule
5. Application Documents
- Completed Form 13 (via TRACES NRI portal)
- Supporting annexures and worksheets
Important Compliance Note: Token or Advance Payments
Under Section 195(1), TDS applies at the time of credit or payment, whichever is earlier. It is important to note that a lower or nil deduction certificate under Section 197 is effective only from the date of issue.
If a token or advance payment is made before the certificate is issued, that portion will still be subject to TDS at the full applicable rate. The reduced rate applies only to subsequent instalments.
Professional Advisory: It is always wise to seek professional advice. Ensure the certificate is obtained before accepting any payment for the transaction. This prevents excess deduction and provides greater clarity for both buyer and seller.
Quick Snapshot: Lower/Nil Certificate Process
| Step | Action | Who Does It | Notes |
|---|---|---|---|
| 1 | Finalise transaction | Seller & Buyer | Avoid token before certificate |
| 2 | Collect documents | Seller | PAN, passport, deed, ITRs |
| 3 | Apply Form 13 | Seller | TRACES NRI portal |
| 4 | Certificate issued | Assessing Officer | Valid for transaction/FY |
| 5 | Deduction at reduced rate | Buyer | TAN, Challan ITNS-281, Form 27Q |
Read Next: Penalties & Issues If You Don’t Disclose NRI Status or Follow TDS Rules in Property Sales
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Frequently Asked Questions
1. What is Form 13 in NRI property sales?
Form 13 is an application under Section 197 of the Income-tax Act that allows an NRI seller to obtain a lower or nil TDS certificate, so tax is deducted only on actual capital gains instead of the entire sale value.
2. Which documents are required for a Lower TDS Certificate?
Key documents include PAN, passport, purchase deed, proof of payments, renovation bills, buyer’s TAN details, and past ITRs. A complete checklist is provided above.
3. Can an NRI accept token or advance money before getting the certificate?
No. Any payment made before the certificate is issued is fully taxable at the standard rate. The reduced rate applies only after the certificate date.
4. How long is the certificate valid?
It is typically valid for the financial year or the specific property transaction, as approved by the Assessing Officer.
5. Do I need a Chartered Accountant to apply?
Yes. While the seller can technically file Form 13, in practice a Chartered Accountant prepares the capital gains working, assists in filing, and ensures compliance with both income tax and FEMA rules.
About the Author
Arosh John is a Thane-based real estate consultant and the Founder of John Real Estate (MahaRERA Reg. No. A51700001835). With over a decade of expertise in property transactions, he has established a reputation for guiding NRIs and investors through resale, luxury villa projects, and complex transactions requiring strict compliance. As Editor-in-Chief of Thane Real Estate News, he provides research-backed insights on property markets, tax compliance, and investment strategies across MMR.
Disclaimer
This article is based on provisions of the Income-tax Act, 1961 and Finance Act 2024 updates. It is intended for general informational purposes only and should not be considered professional advice. Real estate and tax laws are subject to amendments and judicial interpretations. Readers are strongly advised to consult a qualified Chartered Accountant or tax advisor before acting on the information provided. Neither the author nor Thane Real Estate News accepts responsibility for any loss or consequence arising from reliance on this article.
