By Arosh John | Founder – John Real Estate (MahaRERA Reg. No. A51700001835) | Editor-in-Chief – Thane Real Estate News (TREN)
Thane – MMR | November 2025
When property changes hands in India, TDS — Tax Deducted at Source — becomes a crucial compliance step.
The rate, forms, and procedure vary sharply depending on whether the seller is a Resident Indian or a Non-Resident Indian (NRI).
This updated 2025 explainer outlines the current framework in clear, professional language for buyers, sellers, and agents.
1. What Changed in 2025 — The 12.5% Capital-Gains Rule
From July 23, 2024, India introduced a simplified capital-gains system.
All assets, including land and buildings, now attract a flat 12.5% long-term capital-gains (LTCG) tax without indexation when held for 24 months or more.
The earlier 20% with indexation option remains available only for resident individuals/HUFs who owned the property before that date and opt for grandfathering — a transitional continuation of older provisions for pre-existing assets.
For NRI sellers, the new 12.5% rate applies automatically to all long-term property transfers made after July 23, 2024.
For an in-depth explanation of documentation, repatriation norms, DTAA applicability, and detailed TDS compliance for overseas sellers, read
👉 The Complete Guide to NRI Property Sale & TDS Compliance (2025 Edition).
2. Resident vs NRI Sellers — Key Differences
| Criteria | Resident Seller | NRI Seller |
|---|---|---|
| Applicable Law | Section 194-IA | Section 195 |
| TDS Rate | 1% on total sale consideration (if value ≥ ₹50 lakh or SDV ≥ ₹50 lakh) | 12.5% + surcharge + 4% cess on long-term gains; short-term gains taxed at slab rate + surcharge + cess |
| Threshold | ₹50 lakh | None |
| Basis of Deduction | Sale consideration | Under Section 195, TDS applies to the capital gains earned by the NRI seller. However, if no valid Lower or Nil Deduction Certificate (LDC) is produced, buyers must deduct TDS at standard rates on the full sale consideration, as the actual capital gains cannot be determined at the time of the transaction. |
| Forms for Payment | Form 26QB | Challan ITNS-281 + quarterly return Form 27Q |
| TDS Certificate | Form 16B | Form 16A |
| Lower/Nil Deduction Option | Not applicable | Available through Form 13 / Section 197 Certificate obtained before registration |
| Deposit Deadline | Within 30 days from the end of the month of deduction | Within 30 days from the end of the month of deduction |
3. Buyer’s Procedure
If the Seller is a Resident (Section 194-IA)
- Deduct 1% TDS at payment or registration.
- Pay online using Form 26QB within 30 days of the month-end.
- Download and issue Form 16B to the seller via TRACES.
If the Seller is an NRI (Section 195)
- Obtain a TAN (Tax Deduction Account Number).
- Deduct tax as follows:
• 12.5% + surcharge + cess for long-term gains.
• Applicable slab rate + surcharge + cess for short-term gains. - Make payment through Challan ITNS-281.
- File quarterly Form 27Q and issue Form 16A.
- If and only if the seller has a valid Lower/Nil Deduction Certificate (Form 13 under Section 197), deduct tax at the rate stated in that certificate. Otherwise, deduct at standard rates on the total sale consideration.
- Important: The LDC is issued in the buyer’s name and TAN for that specific transaction. The buyer must verify that the certificate lists their details and property before applying the lower rate.
4. Illustrative Examples
A. Resident Seller — ₹1 Crore Apartment
Buyer deducts ₹1,00,000 (1%) → pays via Form 26QB → issues Form 16B.
B. NRI Seller — ₹2 Crore Apartment (Long-Term Case)
Without LDC: Buyer deducts ≈ 14.95% (12.5% + surcharge + cess) → pays via Challan ITNS-281 → files Form 27Q → issues Form 16A.
With LDC: Buyer deducts only at the approved lower rate shown on the certificate issued in their name.
5. Refunds and Certificates
- Resident sellers: Any excess TDS is adjusted or refunded in their Income-Tax Return (ITR).
- NRI sellers: Refunds for excess TDS are available only after filing the ITR. To avoid this, apply early for a Lower Deduction Certificate on the Income-Tax portal before registration.
- Buyer’s Note: The certificate must mention the specific buyer’s name and TAN for that property; otherwise, standard TDS rates will apply.
6. Common Compliance Errors
- Using Form 26QB for NRI transactions instead of ITNS-281 + Form 27Q.
- Missing the 30-day deposit deadline.
- Incorrect PAN entries for the seller.
- Failing to issue Form 16B / Form 16A.
- Assuming a generic LDC covers all buyers — each certificate is buyer-specific.
7. Why Buyers Usually Deduct at Standard Rates in NRI Deals
While Section 195 targets actual capital gains, buyers normally cannot verify the seller’s cost and indexation data during registration.
Unless a valid buyer-specific LDC is available, buyers must deduct TDS at standard rates on the entire sale consideration to remain compliant and avoid default under Section 201.
8. Official Reference Links
- Income-Tax Department: https://www.incometax.gov.in
- CBDT / PIB Notification (July 23, 2024): Introduced the 12.5% LTCG regime and effective date.
- TRACES Portal: https://www.tdscpc.gov.in
- Form 13 / Section 197: Application for Lower or Nil Deduction Certificate.
9. Key Takeaways
- Resident Sellers: 1% TDS via Form 26QB within 30 days — unchanged and straightforward.
- NRI Sellers: 12.5% (+ surcharge + cess) on long-term sales; slab rates for short-term.
- LDCs are buyer-specific; if not available or not in the buyer’s name, deduct TDS at standard rates on the full sale consideration.
About the Author
Arosh John is the Founder of John Real Estate (MahaRERA Reg. No. A51700001835) and Editor-in-Chief of Thane Real Estate News (TREN) — the Mumbai Metropolitan Region’s leading property-intelligence platform covering infrastructure, policy, and market trends. With more than a decade of specialisation across Thane and Mumbai real estate, Arosh is recognised as one of the region’s foremost voices in NRI property advisory, resale transactions, and premium residential markets. His deep on-ground understanding of micro-markets such as Majiwada, Kolshet, and Ghodbunder Road has positioned him as a trusted consultant for both domestic and international buyers seeking transparent and compliant real-estate guidance. Through TREN, he combines expert real-estate advisory with factual reporting to make complex legal and regulatory topics accessible to the public and the industry alike.
Disclaimer
All information is verified from the Income-Tax Department, CBDT, and PIB sources as of November 2025. Tax outcomes may vary depending on holding period, DTAA benefits, and surcharge slabs. Readers are advised to consult a Chartered Accountant or tax advisor for case-specific guidance.
