Selling Indian Property from Abroad: NRI TDS and Repatriation Guide

Say you inherited a flat in Hyderabad, or bought a plot in Vijayawada ten years ago, and you now live in Dallas. A buyer is lined up. Then your CA tells you the buyer must deduct more than 14% tax on the whole sale price rather than on the gain, and the deal freezes.

Nearly every first-time NRI seller is caught off guard. Your position differs from a resident seller's. This is the same walkthrough we give clients with residential property or land in India who sell from afar, laid out in the sequence a sale really follows.

Once you decide to sell, being an NRI changes the rules

Having a non-resident seller starts a different tax-deduction process. When the seller is resident, the buyer withholds a flat 1% of the sale price under Section 194-IA. Your sale never falls under that section.

Section 195 of the Income Tax Act applies to the buyer in place of that: it governs tax at source on any payment to a non-resident that is taxable in India. TDS is computed on the income inside the payment, and the result stings more than people expect.

Many sellers on the Dallas to Hyderabad corridor have gone through this talk with us. Their first reaction is nearly always the same: "Why is the buyer keeping so much of my money?" The next section answers it.

How much TDS applies when an NRI sells Indian property?

The buyer withholds at the 12.5% long-term capital gains rate plus surcharge and 4% cess, which in the typical case is around 14.95%. Importantly, with no certificate that is charged on the full sale consideration and not on the gain you actually made.

Nothing shocks NRI sellers' cash flow more. Imagine a Rs. 1 crore sale in which your true long-term gain is only Rs. 30 lakh. Lacking a certificate, the buyer may need to withhold tax on the full Rs. 1 crore, leaving close to Rs. 15 lakh with the tax department until you file and claim a refund the next year.

The table below shows the contrast between resident and NRI sellers, which surprises buyers and sellers alike.

• Governing provision · Resident seller: 194-IA · NRI seller: 195
• Base for deduction · Resident seller: the whole sale price · NRI seller: the whole consideration paid, except where a lower certificate exists
• TDS on a long-term gain · Resident seller: 1% · NRI seller: 12.5% plus surcharge plus 4% cess, or about 14.95%
• TDS on a short-term gain · Resident seller: 1% · NRI seller: as per slab rates
• TAN for the buyer · Resident seller: not required · NRI seller: required
• Buyer's TDS return · Resident seller: Form 26QB · NRI seller: Form 27Q
• Route to a smaller deduction · Resident seller: seldom used · NRI seller: apply to the AO on Form 13

Surcharge rises with the sale value, so on expensive deals the effective rate goes above 14.95%. We tell clients to plan on the worst case and then reduce it through a certificate.

Long-term or short-term: the 24-month test

How long you owned the property decides whether the gain is long-term or short-term. A holding of more than 24 months makes an immovable property gain long-term, and 24 months or less makes it short-term.

The difference counts because the two are taxed very differently. Short-term gains join your income and are taxed at slab rates, which can be high. Long-term gains enjoy the concessional regime.

Budget changes announced on 23 July 2024 reshaped this. Property's long-term capital gains rate fell from 20% to 12.5%, but indexation was dropped for transfers made on or after that date. Indexation used to lift your purchase cost to present-day value before computing the gain. Without it, the taxable gain may rise despite the lower headline rate.

NRIs face a particular catch. For property bought before 23 July 2024, the Budget let resident individuals and HUFs choose between the old method (20% with indexation) and the new one (12.5% without it). NRIs get no such choice. You pay a flat 12.5% with no indexation, whenever you bought.

So an NRI who bought a flat in 2010 gets no indexation relief on a long-held gain, which a resident neighbour could claim. This one rule has changed tax bills by several lakh on older properties we have seen.

Form 13: the certificate that protects your cash

The remedy for over-deduction is a lower or nil TDS certificate. Under Section 195(2) you apply with Form 13 to your jurisdictional Assessing Officer and ask the department to certify TDS on your real gain in place of the full sale price.

The certificate is an order by the AO telling the buyer to deduct tax at a reduced rate, or nil, as stated in it. With it in hand, the buyer deducts only that amount, and your money does not sit with the department for a year.

You apply online through TRACES. Submit your computation of the expected capital gain, the purchase and sale documents, and proof of any reinvestment you intend to claim. The officer reviews it and issues a certificate with a rate fixed for that buyer and that transaction.

The waiting time is what sellers underestimate. Our Form 13 cases took anywhere from a few weeks to two months or so, depending on how busy the AO was and how complete your file looked. Apply before the deal is final; if you wait until the sale deed is being drafted, TDS will already have taken the cash.

What the buyer must do: TAN and Form 27Q

The buyer carries real compliance weight, which many resident buyers do not know. First, the buyer needs a TAN, the Tax Deduction and Collection Account Number, since Section 195 deductions cannot be deposited without it.

Once the buyer has deducted, the TDS is deposited and Form 27Q, a quarterly return on tax withheld from payments to non-residents, is filed. You then receive Form 16A as evidence of the deduction, and your Indian return uses it to claim credit.

This explains why some buyers hesitate to buy from an NRI. "TAN", "Section 195" and "Form 27Q" make them fear a wrong deduction and a penalty. If you arrive with clean title and a lower-TDS certificate, you take away most of that friction, which is why tidy paperwork speeds up the sale.

Selling from overseas through a power of attorney

Few NRIs can travel to sign the sale deed, so they use a power of attorney, a legal instrument through which a trusted person in India is authorised to carry out specified acts for you. Here those acts are selling and registering the property.

A PoA signed abroad must satisfy two practical rules. Where you sign, it needs proper attestation, which is notarisation plus apostille if your country is in the Hague Apostille Convention (the United States is), or attestation at the Indian consulate. Then, in India, it goes to the sub-registrar for adjudication and stamp duty within the time your state allows.

Under the Registration Act 1908 the sale deed itself must be registered, and the registrar examines the PoA holder's authority closely. A badly drafted or wrongly attested PoA is among the commonest reasons for rejection of NRI registrations at the counter.

Choose your holder carefully, and word the PoA tightly. On the Dallas to Hyderabad corridor we have looked at sales where an open-ended general PoA handed the holder much more authority than the owner intended; unwinding it cost more than the property fetched. Safer is a specific PoA that covers only this sale. Our guide to PoA pitfalls for NRIs and the GPA versus SPA breakdown give more detail.

Sections 54 and 54EC: lawful ways to reduce the gain

Putting money back into property can reduce or wipe out capital gains tax, and it strengthens the Form 13 application too. Under Section 54, long-term gains on a residential property are exempt if the gain is invested in another residential property in India within a set window: one year before the sale or two years after it, or three years if you build.

The route under Section 54EC is different: put the gain into specified bonds, those of REC or NHAI for example, within six months of the sale, and it is exempt. Investment in those bonds is capped at Rs. 50 lakh. They carry a lock-in and tie up the money, yet the exemption itself is real.

Section 54F applies when you sold a non-residential asset such as land and reinvest the full net consideration in a house. Its conditions are stricter, so confirm eligibility before counting on it. Plan reinvestment before selling, as the exemption affects the gain figure on your Form 13 application, and that in turn lowers the TDS the buyer holds back.

Sending the sale proceeds to the US

The money goes through your NRO account, and you then remit it abroad using Form 15CA and Form 15CB, within the RBI's annual limit. Proceeds of an Indian property sale are credited to an NRO account first and cannot be sent directly abroad.

Per financial year, the RBI allows an NRI to send up to USD 1 million out of the NRO account, no RBI approval required. The ceiling is individual and annual, and it adds up everything leaving that account: sale proceeds, rent, interest and dividends share one USD 1 million.

A second, more generous route exists. When you bought the property out of your NRE or FCNR account, up to two residential properties can have their sale proceeds repatriated beyond the USD 1 million limit, provided the RBI's FEMA conditions are met. Most inherited or rupee-funded properties fall under the USD 1 million annual route instead.

Two forms accompany a remittance. Form 15CA is your online statement to the Income Tax Department saying tax on the money sent abroad has been handled. Form 15CB is signed by a chartered accountant, who certifies what the remittance is and that proper tax has been paid. Banks refuse to release the funds before receiving both, so give your CA enough lead time.

On the Dallas to Hyderabad corridor in our experience, repatriation rarely breaks a deal. The TDS surprise at the start does. Sellers who plan for the USD 1 million limit and the 15CA/15CB filing in advance move their money out without trouble.

A clear title before listing speeds up the whole sale

A property with a cloudy title does not close. Buyers refuse it, and their banks refuse it even more firmly. A lender financing the purchase has its own legal team examine title, and an encumbrance, a missing link document or pending litigation is enough to wreck the loan and the sale along with it.

A title defect found mid-deal is worse for an NRI selling remotely than for a resident, because you cannot easily go to the sub-registrar's office to chase a missing document. The cure is to verify title before you list, not after the buyer's bank raises it.

Speed matters in title checks. LegiScore searches 18,000-plus courts for litigation and encumbrances and delivers a complete legal opinion within 15 minutes, priced at Rs. 1,999 a report. An NRI-targeted check is about $24, while flying a lawyer in to inspect records would be roughly $2,400. A clean opinion gives the buyer's bank little to query, so the sale keeps moving. Our remote due diligence guide and the article on why buyers insist on title verification cover verifying title from abroad.

The whole sequence, start to finish

The order of events for an NRI sale is as follows. First check the title and cure any defect, before the property is advertised. Next, estimate the capital gain and choose between Section 54 and 54EC reinvestment. File Form 13 early, because the lower-TDS certificate takes time. Sign the PoA abroad, attest it, and courier it to India. The buyer then deducts TDS at the rate on your certificate, pays it in and files Form 27Q. Money finally leaves through the NRO account on Forms 15CA and 15CB, with the total kept inside USD 1 million.

Start the first and third steps together and the rest fits in place. Skip them and you lose months, plus a chunk of cash, to refundable but stuck TDS.

What to do next

At the beginning of the process, spend this week on two jobs. Collect your title papers and have the title verified, so the buyer's bank cannot upset the sale at a later stage. And get a CA to estimate your capital gain, which tells you if a Form 13 certificate for lower TDS is worth applying for. Everything else in the sale depends on these two.

What follows, namely the PoA, the buyer's Form 27Q and the repatriation paperwork, runs along a known path. Sellers who lose money are the ones who find out about the Section 195 deduction on signing day, not months before.