By Arosh John | Founder – John Real Estate (MahaRERA Reg. No. A51700001835) | Editor-in-Chief – Thane Real Estate News
When you sell property as an NRI, buyers often deduct TDS on the full sale value under Section 195. This can result in excess tax deduction if your actual liability (based on capital gains computation) is lower. Filing your Income Tax Return (ITR) is the legal mechanism to recover that excess TDS.
This guide walks you through the process, required documents, timelines, and common pitfalls.
1. Why Excess TDS Occurs
- The buyer normally deducts TDS on gross consideration, not on the computed gain, because the buyer lacks visibility into your actual gain.
- Even with a Lower/Nil Deduction Certificate (Form 13), only payments made after the certificate date are eligible for reduced TDS; earlier instalments remain taxed at full rate.
- Your actual tax liability may be lower due to eligible deductions, exemptions (e.g. under Sections 54, 54EC), or slab-based relief.
2. Which ITR Form Should NRIs Use
- NRIs with only capital gains, interest, rental, or investment income typically use ITR-2.
- If you have business or professional income in India, ITR-3 may be required.
- Filing under the wrong form can delay refund processing or invite scrutiny.
- Ensure classification as non-business and choose the correct regime (old or new) as per guidelines.
3. Documents & Information Required
- Form 16A(s): TDS certificates from the buyer(s).
- Sale deed & capital gains working worksheet (sale value, cost, improvement, transfer expenses).
- Challan / proof of any additional tax paid (if applicable).
- Form 26AS / AIS / TDS statement: To verify the TDS amounts claimed against you. Since AY 2023-24, Form 26AS mainly reflects TDS/TCS, while detailed items are shown in AIS/TIS. Reconcile both before filing.
- PAN, Passport, TRC / Form 10F if claiming DTAA relief.
- Details of exemptions you claim under Sections 54 / 54EC / other relevant sections.
4. Step-by-Step Process to Claim Refund
- Collect all TDS certificates and verify that amounts match Form 26AS/AIS.
- Prepare your capital gains working based on sale, cost, improvements, etc.
- Compute your actual tax liability: LTCG/STCG + surcharge + cess.
- Subtract TDS already deducted from liability — if negative, the balance is refund due.
- File ITR (ITR-2 / ITR-3 as applicable) before the due date.
- Verify your ITR by e-verification (Aadhaar OTP, net banking, or signed ITR-V).
- Track your refund through the Income Tax e-filing portal; refund will be credited to the bank account you specify (often NRO account or another authorized account).
5. Timeline & Refund Credit
- The standard due date for filing ITR (non-audit cases) is 31 July of the assessment year.
- Occasionally, the due date is extended by the Government.
- Processing starts only after e-verification. Refunds are usually credited within 4–5 weeks, though delays may occur if there are mismatches or verification issues.
- Even if your income is below the taxable threshold, filing ITR is necessary to recover TDS.
6. Common Mistakes & Tips
- Mismatch between Form 16A and Form 26AS/AIS — always cross-verify.
- Using the wrong ITR form which may reject your return.
- Skipping eligible exemptions or deductions, reducing refund.
- Not verifying the return — an unverified return is invalid.
- Failing to include DTAA/relief documents if applicable — leads to lost credits.
Related Guides:
- [Capital Gains Computation Rules for NRIs: Updated Framework in 2025]
- [Buyer’s Step-by-Step TDS Compliance Checklist (NRI Seller – Section 195)]
- [Documents You Need for a Lower or Nil TDS Certificate (Form 13)]
Frequently Asked Questions
1. Why do NRIs often face excess TDS on property sales?
Because buyers usually deduct TDS on the entire sale value, not the capital gain, unless a Lower/Nil Deduction Certificate was obtained beforehand.
2. How can an NRI claim refund of excess TDS?
By filing the correct ITR (usually ITR-2) and reconciling TDS from Form 16A with Form 26AS/AIS. Refunds are credited to your Indian bank account after processing.
3. Which ITR form should NRIs use?
Most use ITR-2 for capital gains and investment income. ITR-3 is required only if you have business or professional income in India.
4. How long does it take to get a TDS refund?
Refunds are processed after e-verification of the ITR. If documents match, credit is typically seen in 4–5 weeks, though delays can occur.
5. What documents are needed to claim refund?
TDS certificate (Form 16A), sale deed, capital gains working, PAN, and Form 26AS/AIS reconciliation. If claiming DTAA relief, also TRC and Form 10F.
6. What are common mistakes that delay refunds?
Using the wrong ITR form, not reconciling Form 16A with 26AS/AIS, skipping exemptions, or forgetting to e-verify your return.
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 experience in property transactions, he is recognised for guiding NRIs and investors through resale, luxury villa projects, and compliance-intensive deals. As Editor-in-Chief of Thane Real Estate News, he shares research-driven insights on property markets, tax compliance, and investment strategy across MMR.
Disclaimer
This article is based on provisions of the Income-tax Act, 1961, and official Income Tax Department guidelines. It is for informational purposes only and should not be construed as professional tax or legal advice. Tax laws may be amended, and interpretations may vary. Readers are strongly advised to consult a qualified Chartered Accountant for case-specific guidance. Neither the author nor Thane Real Estate News accepts liability for consequences arising from reliance on this article.
