Selling property in India as an NRI — TDS, capital gains, and repatriation

When an NRI sells a property in India, three separate regimes kick in together: Section 195 of the Income-tax Act (TDS on the buyer), capital gains tax (the seller's eventual liability), and FEMA (how the money leaves India afterwards). Each is straightforward on its own. Most of the pain on an NRI property sale comes from the three being handled by different people — the buyer, the seller's CA, and the bank — and the paper trail not lining up.

This article walks through each in the current post-Budget 2024 regime, and highlights the places where NRI sales differ sharply from resident sales.

The Budget 2024 rewrite — what actually changed

From 23 July 2024, long-term capital gains on immovable property moved to a single flat rate of 12.5% without indexation, replacing the old 20% with indexation. The headline looks like a rate cut, but the removal of indexation lifts the taxable gain — the net outcome depends on how long the property has been held and how much cost inflation has run against it.

For resident individuals and HUFs owning property before 23 July 2024, the Finance (No. 2) Act 2024 created an option: they can pay whichever is lower of (a) 20% with indexation or (b) 12.5% without. This is the famous "grandfathering" choice.

For NRIs this choice is not available. The grandfathering option is written only for resident individuals and HUFs. NRIs selling immovable property, whenever acquired, now compute the gain without indexation and pay 12.5% plus surcharge and cess. This is the single most important point missed in older guides — get this wrong and the TDS working, the ITR, and the Form 15CB all unravel.

Short-term capital gains (property held two years or less) are taxed at the NRI's applicable slab rate — effectively up to 30% plus surcharge and cess.

TDS on the buyer — Section 195, not 194IA

This is where most NRI property deals trip at the starting line.

Section 194-IA — the familiar 1% TDS on property sales above ₹50 lakh — applies only when the seller is a resident. It does not apply to NRIs.
Section 195 — applies when the seller is a non-resident.

Section 195 has four consequences that Section 194-IA does not:

The buyer must have a TAN. Not just a PAN — a TAN, i.e. a Tax Deduction and Collection Account Number. Section 194-IA allows deduction under the seller's PAN; Section 195 requires the buyer to deduct, deposit, and file a TDS return under their own TAN.
TDS is on the sale consideration, not on the gain. Unless a Lower-TDS certificate is obtained (below), the buyer deducts at the applicable rate on the entire sale price.
The rate is the LTCG / STCG rate, not 1%.
- For LTCG: 12.5% plus surcharge plus 4% cess — effectively around 13.00% below ₹50 lakh of gain, higher at higher surcharge slabs (up to ~14.95% once the ₹5 crore surcharge tier kicks in).
- For STCG: the slab rate (often 30%) plus surcharge plus cess — effectively around 30–39%.
A TDS return (Form 27Q) must be filed by the buyer within the quarter, and a Form 16A issued to the seller. Form 26QB — the 194-IA challan-cum-statement — is not the right form for NRI sales.

Buyers unfamiliar with the Section 195 machinery sometimes deduct at 1% anyway and deposit under 26QB. This is a default that cannot be cleanly fixed later — the NRI seller's PAN then shows a 194-IA credit that does not match the 27Q obligation, and the registrar's paperwork references the wrong section. Insist, as part of the sale agreement, that the buyer engages a CA to set up the TAN and deduct under 195.

The Lower-TDS Certificate — how to stop over-deduction

The TDS at Section 195 rates is on the sale consideration, not on the actual gain. On a ₹2 crore sale where the real LTCG is only ₹40 lakh, deducting 12.5% on ₹2 crore means ₹25 lakh withheld against a real tax liability closer to ₹5 lakh. The seller will get a refund eventually — but only after filing the ITR the next year.

The fix is a Lower-TDS Certificate under Section 197, which tells the buyer to deduct at a rate calibrated to the actual gain, not the sale price.

Filed on Form 13 through the TRACES portal (tdscpc.gov.in), under the NRI seller's login. The old paper filing with the jurisdictional Assessing Officer has been superseded for most cases.
Attachments: purchase deed, cost of acquisition and improvement evidence, draft sale agreement, buyer's PAN and TAN, capital gains computation.
The Assessing Officer reviews and issues a certificate specifying a reduced TDS rate (sometimes 2–5% on sale consideration; sometimes a rupee amount).
Processing typically takes 4–8 weeks. Apply well before the sale date — ideally before the sale deed is drafted.
The certificate is buyer-specific and transaction-specific. Hand it over to the buyer; they reduce TDS to the specified rate and deposit accordingly.

Without a Lower-TDS certificate, accept that a large chunk will sit with the tax department until the ITR-2 refund arrives six to twelve months later.

Computing capital gains for an NRI sale

The formula (post Budget 2024)

For LTCG (property held more than 24 months):

LTCG = Sale Consideration
       − Cost of Acquisition (actual, no indexation)
       − Cost of Improvement (actual, no indexation)
       − Transfer Expenses (brokerage, legal, stamp duty paid by seller)
Tax  = 12.5% × LTCG + surcharge + 4% cess

For STCG (property held up to 24 months):

STCG = Sale Consideration − Cost of Acquisition − Improvement − Transfer Expenses
Tax  = applicable slab × STCG + surcharge + 4% cess

Cost basis when the property was inherited or gifted

Inherited or gifted property: the cost to the previous owner (the one who originally acquired for consideration) is the cost basis. The holding period also includes that previous owner's holding period — so an inherited property the NRI just received can still be LTCG if the parent held it for decades.
Property acquired before 1 April 2001: the seller may use the fair market value on 1 April 2001 as the cost basis (a one-time option under Section 55). Get a registered valuer's report documenting this value.
Improvement costs before 1 April 2001 are ignored (only post- April 2001 improvements count when the FMV option is used).

Surcharge for NRIs

Surcharge on capital gains, post-Budget 2024, is capped at 15% for LTCG on immovable property — the old 25% and 37% top tiers do not apply to this specific head of income. Combined with 12.5% LTCG and 4% cess, the effective ceiling on LTCG is ~14.95%.

Saving capital gains tax — three exemptions

Section 54 — buy another residential house

Who qualifies: individual or HUF selling a long-term residential house property.
Reinvestment: buy one new residential house in India, within one year before or two years after the sale; or construct within three years.
Cap (post Budget 2023): reinvestment that counts toward exemption is capped at ₹10 crore. A larger house can still be bought; only the first ₹10 crore reduces the taxable gain.
Parking the money: if the new house is not yet bought by the ITR due date, deposit the unutilised amount into a Capital Gains Account Scheme (CGAS) account with a public-sector bank before filing.

Section 54F — proceeds of a non-residential asset into a residential house

Who qualifies: sale of any long-term capital asset other than a residential house (e.g., a plot, commercial property, shares, gold), with proceeds reinvested in one residential house in India.
Must not own more than one other residential house on the date of sale.
Reinvest the entire net sale consideration to claim full exemption (proportional exemption for part reinvestment).
Same ₹10 crore cap and CGAS parking rules.

Section 54EC — invest in specified bonds

Who qualifies: any seller of a long-term immovable property.
Where: 54EC bonds issued by NHAI, REC, PFC, or IRFC.
Cap: ₹50 lakh per financial year, aggregated across NHAI and the others.
Window: within six months of the sale.
Lock-in: 5 years.
Works alongside Section 54 / 54F — not instead of.

Can an NRI claim these?

Yes — all three sections are available to NRIs exactly as to residents. The only NRI-specific wrinkles are:

The reinvestment property must be in India (Section 54, 54F).
Bonds must be Indian-issued (Section 54EC — the issuers listed above all qualify).
Keep documentary proof for the CA issuing Form 15CB on repatriation. The CA needs to see exemption claims to certify that taxes have been fully discharged.

Repatriation of sale proceeds

The post-sale question is how to get the net proceeds out of India. There are two distinct paths, depending on how the property was originally funded.

Path A — property funded by foreign exchange (NRE/FCNR)

If the property was originally bought with funds from an NRE or FCNR account, or by direct inward remittance from abroad, the original principal in foreign exchange can be repatriated without counting against the USD 1 million window. This facility is available for the sale of up to two residential properties per individual NRI, lifetime.

Beyond the original foreign-exchange principal, the balance — the Indian capital appreciation — falls under the general USD 1 million per FY NRO window (Path B).

Path B — property funded by rupee sources (NRO) or by inheritance

If the property was funded from NRO balances, rupee loans, or inherited (and therefore never foreign-sourced), sale proceeds sit in NRO and are repatriable up to USD 1 million per financial year across all NRO remittances combined. This is the default path for most NRI property sales — and for inherited properties always.

The paperwork

For either path, the bank wants the full chain:

Form A2 — outward remittance declaration under FEMA.
Form 15CB — CA certificate that tax has been deducted/paid and the repatriation is compliant.
Form 15CA Part C — online declaration by the remitter, referencing the 15CB acknowledgement, filed on incometax.gov.in.
Sale deed, registered.
Buyer's TDS certificates (Form 16A) and Form 27Q entry on your PAN 26AS.
ITR filed for the year of sale (or an undertaking to do so in the due course, depending on bank practice).
Original purchase proof if claiming Path A (bank statement showing the NRE/FCNR debit, or inward remittance advice).
Capital gains computation and proof of any exemption claims (Section 54 investment papers, 54EC bond certificates).

See our detailed articles on the two-day NRO-to-NRE process, the 15CA/15CB mechanics, and sending money out of India.

Step-by-step sale process

PAN — essential for the seller if not already on file. Apply early if needed; processing takes 2–3 weeks for NRIs.
Clean title check — ensure chain of title is clear, mutation is recorded, society dues and property tax are paid. A title defect that surfaces at the registrar's office aborts the sale.
Value the property — agree a price and draft a sale agreement (agreement to sell) with an earnest-money component.
Buyer gets a TAN — absolutely not optional. Section 195 deduction requires it.
Apply for Lower-TDS Certificate on TRACES — especially if the sale is materially above the indexed cost basis and full-rate TDS would produce a large refund claim. Allow 4–8 weeks.
Sale deed executed — buyer deducts TDS at the rate in the Lower-TDS certificate (or the default Section 195 rate), deposits the TDS with the government, and pays the seller the balance.
Buyer files Form 27Q quarterly and issues Form 16A to the seller. Cross-check the entry appears on the seller's Form 26AS on the e-filing portal.
Registration of the sale deed at the sub-registrar's office — stamp duty and registration charges paid by buyer.
Proceeds land in the NRI seller's NRO account.
Invest or exempt — if claiming Section 54 / 54F / 54EC, complete the investment within the statutory window or park in CGAS.
File the ITR-2 for the year of sale — declare the gain, claim the exemption(s), and take credit for Section 195 TDS. Refund of any excess TDS follows.
Repatriate — engage a CA for Form 15CB, file Form 15CA Part C online, submit to the bank with Form A2, bank processes the outward remittance.

For a representative timeline, the whole sequence from first buyer interest to money abroad runs 4–8 months for a clean transaction, longer if a Lower-TDS certificate, a Section 54 reinvestment, or an ITR refund is on the critical path.

Power of attorney — if the NRI cannot travel

An NRI who cannot travel to India for the sale executes a registered Power of Attorney in favour of a trusted Indian relative, authorising them to sign the sale deed, attend registration, receive payment into the NRO account, and sign TDS documents. The POA must be:

Registered in India (mere notarisation in the country of residence is no longer enough for property sale in most states).
Apostilled or consularised in the country where the NRI signs it, then presented for registration in India.
Specific — a general, wide-worded POA can be refused by the registrar. Spell out the property, the buyer, the price, the authorisations.

See our article on selling via POA for the practical drafting and registration steps.

Common pitfalls

Buyer deducts 1% under 194-IA when seller is an NRI. This is the single most frequent error. Fix it at agreement stage.
No TAN on the buyer side. Adds weeks as the buyer applies and receives one from NSDL.
Missing Lower-TDS certificate on a large sale, leading to a huge refund tied up for a year.
Assuming the 20%-with-indexation option still applies to NRIs. It does not. NRIs pay 12.5% without indexation on LTCG, full stop.
Forgetting Section 194-IA / 195 aggregation rules when there are multiple sellers. Joint NRI-resident sales need TDS split per seller; buyers should deduct under 194-IA for the resident co- owner's share and under 195 for the NRI's share, with separate challans.
Repatriation without 15CA/15CB — bank will refuse to remit. The forms are not optional for NRO outward transfers above the self-declaration thresholds.
Skipping the ITR for the year of sale. The ITR is how the TDS deducted at source gets reconciled against the actual liability and refund issued. No ITR, no refund; worse, a notice.
Mixing up Path A and Path B on repatriation. Path A (foreign- exchange funded) preserves the USD 1 million window for other NRO flows; Path B (rupee / inheritance) eats into it. Know which you are on.
Losing the original purchase paperwork. Without purchase deeds going back decades, cost-basis substantiation relies on valuer's reports (post-1 April 2001 FMV option) which cost money and time. Keep the originals.
POA that is too generic. A registrar who rejects the POA can block the sale on the day. Get a property-transaction specialist to draft it.

Bottom line

Selling property in India as an NRI is a regulated, well-trodden process — but it runs across three parallel tracks (tax, FEMA, and the sale deed) that must stay in sync. Get four things right and the rest follows: Section 195 with a proper TAN on the buyer; a Lower-TDS certificate if the gain-to-sale ratio warrants it; the Budget 2024 12.5%-no-indexation working on the LTCG; and a clean 15CA/15CB when the money finally moves abroad. Engage a CA experienced in NRI property early — the fee is a rounding error on the transaction and the error-prevention value is material.