By Arosh John | Founder – John Real Estate (MahaRERA Reg. No. A51700001835) | Editor-in-Chief – Thane Real Estate News
Introduction
Over the years, I’ve seen many NRI sellers struggle through property transactions in India with little clarity or fragmented information. On the other side, I’ve also met buyers who hesitate or face compliance hurdles when purchasing from NRIs.
To make this process simpler and safer for both sides, I’ve put together this comprehensive guide. It brings together all the essential rules, latest tax changes, compliance checklists, and practical examples — so that you can understand, at a glance, what really matters in an NRI property transaction.
Whether you are an NRI planning to sell property in India, or a buyer dealing with an NRI seller, this guide covers everything you need to know about TDS, capital gains, repatriation, DTAA benefits, and refunds.
Section 1: Updated TDS Rates & Basics
When an NRI sells property in India, the buyer is responsible for deducting TDS under Section 195, not 194-IA (which applies only to residents). This is one of the most common mistakes made in practice.
- Post 23 July 2024 changes: Long-term capital gains are now taxed at 12.5% without indexation.
- Short-term capital gains continue to be taxed at the seller’s slab rates.
- Buyers must deduct TDS on the entire sale value by default, unless a Lower/Nil Deduction Certificate is obtained.
👉 Read detailed post: [NRI Property Sale in India (2025): Updated TDS Rates & How to Reduce Deductions]
Section 2: Applying for Lower/Nil Deduction Certificate (Form 13)
By default, TDS is deducted on the full transaction value, which often locks up large sums until refund. The way around this is to apply for a Lower or Nil Deduction Certificate (Form 13) under Section 197.
Documents required include:
- PAN, Passport, overseas address proof.
- Original purchase deed, proof of cost, improvements.
- Buyer’s TAN, PAN, and payment schedule.
- Draft sale agreement.
⚠️ Important Compliance Note: If a token or advance payment is made before the certificate is issued, that amount is taxed at full rate. The reduced rate applies only to payments made after certificate issuance.
👉 Read detailed post: [Documents You Need for a Lower or Nil TDS Certificate (Form 13)]
Section 3: Penalties & Issues of Non-Compliance
Non-disclosure of NRI status or deducting tax under the wrong section (like 194-IA) can result in penalties, interest, and refund delays.
- Interest (Sec. 201(1A)): 1% p.m. for failure to deduct, 1.5% p.m. for failure to deposit.
- Late Fee (Sec. 234E): ₹200/day until filing.
- Penalty (Sec. 271H): ₹10,000 – ₹1,00,000 for wrong/late filing of Form 27Q.
- TAN lapses (Sec. 272BB): ₹10,000 for not obtaining/quoting TAN.
👉 Read detailed post: [Penalties & Issues If You Don’t Disclose NRI Status or Follow TDS Rules]
Section 4: Buyer’s Compliance Checklist
For buyers, NRI transactions come with additional responsibilities. A quick checklist ensures compliance:
- Obtain a TAN.
- Deduct TDS seller-wise at correct rate.
- Deposit TDS via Challan ITNS-281.
- File quarterly Form 27Q.
- Issue Form 16A to seller.
- Maintain complete documentation.
👉 Read detailed post: [Buyer’s Step-by-Step TDS Compliance Checklist (NRI Seller – Section 195)]
Section 5: Capital Gains Computation Rules for NRIs
For NRIs, gains are computed as:
Sale Value – (Cost of Acquisition + Cost of Improvements + Transfer Expenses)
- STCG (≤24 months): Taxed at slab rates.
- LTCG (>24 months, post 23 July 2024): 12.5% flat, without indexation.
- Surcharge & cess apply depending on income levels.
Example: A property sold for ₹1.8 crore with cost ₹60 lakh, improvements ₹10 lakh, and transfer expenses ₹5 lakh → taxable LTCG ₹1.05 crore. Tax @12.5% plus surcharge & cess gives liability ~₹15.7 lakh.
👉 Read detailed post: [Capital Gains Computation Rules for NRIs: Updated Framework in 2025]
Section 6: Repatriation of Funds Abroad
After sale, proceeds must first be credited to the NRO account. Repatriation abroad requires:
- Compliance with FEMA USD 1m annual cap (unless property purchased from NRE/FCNR funds).
- Form 15CA (online declaration).
- Form 15CB (CA certificate confirming taxes paid).
- Bank documents: sale deed, Form 16A, challans, PAN, passport, Form A2.
👉 Read detailed post: [Repatriation of Funds Abroad: Process & Documents]
Section 7: DTAA Benefits & How to Claim
India has signed DTAA with over 85 countries, including the US, UK, UAE, and Singapore.
- India retains the right to tax property gains, but relief is provided abroad through credit or exemption.
- Documents required: TRC (Tax Residency Certificate), Form 10F, PAN.
- Without TRC & Form 10F → no DTAA relief, full TDS applies.
👉 Read detailed post: [DTAA Benefits for NRIs: How to Claim Tax Relief on Property Sale Proceeds]
Section 8: Refund of Excess TDS Through ITR Filing
If excess TDS has been deducted, the only way to recover it is by filing ITR.
- Most NRIs use ITR-2.
- Refund is credited once ITR is filed, e-verified, and processed (typically 4–5 weeks).
- Always reconcile Form 16A with Form 26AS & AIS before filing.
👉 Read detailed post: [Refund of Excess TDS Through ITR Filing for NRI Property Sellers]
Conclusion
Navigating NRI property sales isn’t just about signing an agreement — it’s about handling TDS, capital gains, repatriation, and cross-border tax relief correctly.
With this guide, you now have a one-glance roadmap to ensure smoother transactions and avoid costly mistakes.
💡 Need clarity on your NRI property sale or tax compliance? Book a consultation with John Real Estate for professional guidance, backed by Chartered Accountant partners.
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 is recognised for guiding NRIs and investors through resale, luxury villa projects, and compliance-heavy transactions. As Editor-in-Chief of Thane Real Estate News, he provides research-backed insights on property markets, taxation, and investment strategies across MMR.
Disclaimer
This guide is based on provisions of the Income-tax Act, 1961, Finance Act 2024, FEMA regulations, and India’s DTAA framework. It is for informational purposes only and not a substitute for professional advice. Tax laws and treaties are subject to amendments. Readers are strongly advised to consult a Chartered Accountant for case-specific guidance. Neither the author nor Thane Real Estate News accepts liability for consequences arising from reliance on this guide.
