When an NRI sells property in India, the buyer must deduct TDS under section 393(2) of the Income-tax Act, 2025 (formerly section 195), and in practice does so on the entire sale value, not just the gain: roughly 12.5% plus surcharge and cess (about 13–15%) if you held the property for more than 24 months, and up to 30% plus surcharge and cess if you held it for less. Your actual tax is usually much lower, so either get a lower-deduction certificate (Form 128, formerly Form 13) before the sale or claim the excess as a refund in your ITR. After tax, you can repatriate up to US$1 million per financial year from your NRO account using Form 145 (formerly 15CA) and Form 146 (formerly 15CB).
The rules below apply to tax year 2026-27 (FY 2026-27) under the Income-tax Act, 2025, after the July 2024 Budget changes.
What changed: NRIs no longer get indexation
Until 22 July 2024, long-term capital gains (LTCG) on property were taxed at 20% after indexation, which raised your purchase cost for inflation. The Finance (No. 2) Act, 2024 replaced this with a flat 12.5% without indexation for transfers on or after 23 July 2024.
There is a grandfathering option. For land or buildings acquired before 23 July 2024, the seller can compute tax both ways (12.5% without indexation, or 20% with indexation) and pay the lower amount. That option is available only to resident individuals and HUFs. As an NRI you pay 12.5% on the un-indexed gain, even on a flat bought in 2005. If you read elsewhere that "NRIs get indexation", that information is out of date.
| Item | NRI seller | Resident seller |
|---|---|---|
| Holding period for long-term | More than 24 months | More than 24 months |
| LTCG rate (sale on/after 23 Jul 2024) | 12.5%, no indexation | 12.5%, no indexation |
| Option of 20% with indexation (asset bought before 23 Jul 2024) | Not available | Available, pick the lower tax |
| STCG (held 24 months or less) | Slab rates | Slab rates |
| Set off LTCG against unused basic exemption | No | Yes |
| TDS by buyer | Sec 393(2) (formerly 195), usually on full sale value at LTCG/STCG rate + surcharge + cess | Sec 194-IA, 1% if consideration is ₹50 lakh or more |
| Buyer needs TAN | Yes | No (PAN-based Form 26QB) |
When calculating the gain:
- Cost of acquisition includes purchase price, stamp duty, registration and documented improvement costs. For property bought before 1 April 2001, you can use the fair market value on 1 April 2001 (capped at stamp duty value) as your cost.
- Inherited property: the previous owner's cost and holding period carry over to you. A flat your father bought in 1998 and you inherited in 2025 is long-term on day one.
- Transfer expenses such as brokerage and legal fees are deductible.
- Stamp duty value: if you sell below the circle rate by more than 10%, Section 50C treats the circle rate as your sale price.
TDS on sale of property by NRI: how section 393(2) (formerly Section 195) works
For a resident seller, the buyer deducts 1% TDS. For an NRI seller, Section 195 requires the buyer to deduct tax at the rate in force on the income chargeable to tax. In practice, because the buyer doesn't know your cost, most buyers and their CAs apply the rate to the full sale consideration unless you give them a certificate.
TDS rates for NRI sellers (FY 2026-27)
| Scenario | Base rate | Surcharge (typical) | Effective TDS incl. 4% cess |
|---|---|---|---|
| Long-term, sale value up to ₹50 lakh | 12.5% | Nil | 13.0% |
| Long-term, ₹50 lakh to ₹1 crore | 12.5% | 10% | 14.3% |
| Long-term, above ₹1 crore | 12.5% | 15% (capped) | 14.95% |
| Short-term (slab) | 30% | 10% to 25%, depending on amount | about 34.3% to 39% |
How surcharge works, and why it is often over-deducted. Surcharge is based on your total income: 10% above ₹50 lakh and 15% above ₹1 crore. For LTCG taxed under Section 112, the surcharge is capped at 15%. Short-term gains taxed at slab rates can attract higher surcharge on very large incomes (25% is the ceiling under the default new regime). Because the buyer can't see your total income, they usually pick the surcharge band from the sale value. On a ₹1.2 crore sale with a ₹30 lakh gain, you may be charged 15% surcharge even though your real income is well under ₹50 lakh. Buyers apply these tiers in different ways, so check the rate your buyer's CA plans to use before closing.
What the buyer must do
- Obtain a TAN (Tax Deduction Account Number) by filing Form 49B. A PAN alone is not enough when the seller is an NRI. Build in a week or two for this.
- Deduct TDS when paying each instalment, including the advance or token amount.
- Deposit the TDS using challan ITNS 281 by the 7th of the following month.
- File Form 27Q (the quarterly TDS return for non-resident payments) and issue Form 16A to you so the credit appears in your Form 26AS/AIS.
A buyer who under-deducts becomes an "assessee in default" and owes interest and penalties. That is why careful buyers insist on the full rate unless you provide a Form 13 certificate.
Form 128 (formerly Form 13): getting TDS deducted only on your actual tax
Under section 395 of the Income-tax Act, 2025 (formerly Section 197), you (the seller) apply to your jurisdictional Assessing Officer for a lower or nil deduction certificate. The application is made online on the TRACES portal in Form 128 (formerly Form 13). You typically submit:
- PAN, passport and proof of NRI status
- Purchase deed, cost of improvements and your capital-gains computation
- Draft sale agreement with buyer name, PAN and TAN
- Details of any planned Section 54/54EC reinvestment
- Your last three years' ITRs
The certificate names the specific buyer and a specific rate. Apply four to six weeks before registration. If you skip it, you claim the excess back in ITR-2, but the refund can take months.
Exemptions that can cut the tax: 54, 54EC and 54F
NRIs can claim the same reinvestment exemptions as residents. The new asset must be in India where the section requires it.
| Section | You sold | You reinvest in | Time limit | Cap |
|---|---|---|---|---|
| 54 | Long-term residential house | One residential house in India (two houses once in a lifetime if LTCG is up to ₹2 crore) | Buy 1 year before or 2 years after, or construct within 3 years | Exemption capped at ₹10 crore |
| 54EC | Long-term land or building | Specified bonds (NHAI, REC, PFC, IRFC), 5-year lock-in | Within 6 months of sale | ₹50 lakh per financial year |
| 54F | Any long-term asset other than a house (for example, a plot) | One residential house in India; the full net sale consideration is needed for a full exemption | Same as Section 54 | ₹10 crore; you must not own more than one other house on the sale date |
If you haven't reinvested by your ITR due date, deposit the amount in the Capital Gains Account Scheme at an authorised bank to keep the Section 54/54F claim open. Check whether the 54EC issuers currently accept NRI subscriptions and on what repatriation terms. Some allow it only on a non-repatriable basis.
Worked example: a US-based NRI sells a Pune flat
Ravi, an NRI in Seattle, bought a Pune flat in June 2014 for ₹60 lakh plus ₹4 lakh stamp duty and registration. He sells it in September 2026 for ₹1.5 crore and pays ₹1.5 lakh brokerage. He also has about ₹3 lakh of NRO interest and rent in FY 2026-27.
| Line | Amount |
|---|---|
| Sale value | ₹1,50,00,000 |
| Less brokerage | ₹1,50,000 |
| Less cost (no indexation for an NRI) | ₹64,00,000 |
| LTCG | ₹84,50,000 |
| Tax at 12.5% | ₹10,56,250 |
| Surcharge at 10% (total income about ₹87.5 lakh) | ₹1,05,625 |
| Health and education cess at 4% | ₹46,475 |
| Actual tax liability | about ₹12.08 lakh |
Without Form 13: the buyer applies 14.95% (12.5% + 15% surcharge + cess) to ₹1.5 crore, which is about ₹22.4 lakh of TDS. About ₹10.3 lakh is over-deducted and stays locked until your refund arrives.
With Form 13: the certificate lets the buyer deduct roughly ₹12 lakh, so the extra ₹10 lakh reaches your NRO account on the sale date.
With a ₹50 lakh 54EC investment: taxable LTCG falls to ₹34.5 lakh. Total income drops below ₹50 lakh, so the surcharge disappears. Tax becomes 12.5% of ₹34.5 lakh plus cess, about ₹4.49 lakh, which saves around ₹7.6 lakh. The cost is ₹50 lakh locked for five years in bonds paying roughly 5–5.25% taxable interest. That trade-off depends on your cash needs. You can run your own numbers in the NRI property sale calculator.
The US tax on the same sale (for US residents and citizens)
If you're a US citizen, green card holder or US tax resident, the US taxes your worldwide income, including this sale. Report it on Form 8949 and Schedule D, computed in dollars:
- Cost is converted at the exchange rate on the purchase date and sale price at the rate on the sale date. Rupee depreciation often makes the dollar gain much smaller than the rupee gain.
- Held more than a year, the gain is taxed at US long-term rates (0/15/20%). Higher earners may also owe the 3.8% Net Investment Income Tax.
- You claim the Indian tax actually owed as a foreign tax credit on Form 1116. The credit is limited to the US tax on that income. Excess TDS that India refunds to you is not creditable.
For Ravi, assume ₹60/$ in 2014 and ₹96/$ in September 2026: cost about $106,700, net proceeds about $154,700, US gain around $48,000. US tax at 15% is about $7,200. His Indian tax of about ₹12.08 lakh (about $12,600) exceeds that, so the foreign tax credit wipes out the regular US tax. The unused credit can generally be carried back one year or forward ten years. NIIT is usually not offset by the foreign tax credit, so budget for it if your income is above the threshold. The India–US treaty gives India the first right to tax gains on Indian property. See our India–US DTAA guide. UAE residents pay no home-country income tax, so the Indian tax is final.
Repatriating the sale proceeds
Sale proceeds are normally credited to your NRO account (see our NRE vs NRO explainer). From there, FEMA gives you two routes:
- US$1 million per financial year from NRO balances, which covers property sale proceeds, inheritance and other assets. You need Form 145 and, above ₹5 lakh, a CA certificate in Form 146.
- Property bought with foreign money: if you paid with inward remittances or NRE/FCNR funds (including home-loan EMIs paid from NRE), you can generally repatriate up to the amount originally paid in foreign exchange. This is allowed for no more than two residential properties. Your bank will want the purchase deed and remittance proof. Confirm with your AD bank how it applies the two-property limit and the interaction with the $1 million route.
Above $1 million, spread remittances across financial years. Our repatriation guide covers the paperwork.
Common mistakes NRIs make
- Assuming indexation applies. It doesn't for NRIs after 23 July 2024. Old spreadsheets understate the tax.
- Letting the buyer file Form 26QB. That form is for resident sellers. If it's used, your TDS credit won't appear.
- Skipping Form 13 on a large sale, then waiting a year for a refund that is only paid into an Indian account.
- Unchecked residential status. After long India stays, confirm you are still an NRI with the residential status calculator.
- Missing the 54EC six-month deadline or failing to use the Capital Gains Account Scheme before the ITR due date.
- Not filing ITR-2 in India. TDS isn't the final tax. You file to settle the liability, claim exemptions and get refunds. See our NRI ITR filing guide.
- Ignoring an outstanding loan. The lender must release the title first. See our NRI home loan guide.
Checklist before you sign
- Pull the purchase deed, stamp duty receipts, improvement bills and (if inherited) the will, succession or probate documents.
- Compute LTCG or STCG without indexation, and check the circle rate under Section 50C.
- Decide on Section 54/54EC/54F reinvestment and whether you can afford the lock-in.
- Apply for a Form 128 (formerly Form 13) certificate on TRACES four to six weeks before registration.
- Confirm the buyer has a TAN and knows to file Form 27Q.
- Collect Form 16A, file ITR-2 in India, then your home-country return with the foreign tax credit.
- Repatriate from NRO through Form 145/146.
A note on section numbers: the Income-tax Act, 2025 came into force on 1 April 2026 and renumbers many provisions: TDS on payments to non-residents is section 393(2) (was 195), lower-deduction certificates are section 395 with Form 128 (was 197 and Form 13), LTCG on property is section 197 (was 112), and the Section 54, 54EC and 54F exemptions are now sections 82, 85 and 86. The substance described here carries over; check the ITR utility's labels with your CA before filing.
Bottom line
Plan for three things: TDS is on the full sale value, tax is 12.5% without indexation, and repatriation follows FEMA limits. Form 13 and a clear 54EC decision can release lakhs on the sale date. If the sale is part of a bigger move, such as funding a US home, clearing Indian loans or returning to India, map it into your whole cross-border plan through our NRI planning hub. This article is general information, not tax advice. Confirm your case with a CA and, if you're a US taxpayer, a CPA.
Want the sale, the tax on both sides and the reinvestment decision modelled together? Get your complete NRI plan.