TDS on NRI income for tax year 2026-27 is deducted under section 393(2) of the Income-tax Act, 2025 (old section 195): 30% on rent and NRO interest, 12.5% on long-term capital gains from property, 20% on dividends, and 12.5% or 20% on listed shares and equity funds, plus surcharge and 4% cess. If that is more than the tax you actually owe, you can apply in Form 128 (old Form 13) for a lower or nil TDS certificate before the money is paid, or claim the excess back as a refund in your return.
The certificate matters most on a property sale, where a buyer without one deducts on the whole sale price rather than on your gain. The worked example below shows how big that gap is.
What are the TDS rates on NRI income in 2026-27?
Section 393(2) has a table of payments to non-residents. Most of what an NRI receives (rent, NRO interest, sale proceeds, dividends) falls under its last row, serial number 17: "any other sum chargeable", taxed at the "rates in force". Those rates are in Part II of the First Schedule to the Finance Act, 2026. For a non-resident Indian individual they are:
| Income | TDS rate (before surcharge and cess) | Where the rate comes from |
|---|---|---|
| Rent from a property in India | 30% | "Whole of the other income", Part II item 1(b)(i)(O) |
| Interest on NRO deposits and savings | 30% | Same item: NRO interest isn't "investment income" from a foreign exchange asset |
| Interest on NRE and FCNR deposits | Nil | NRE interest is exempt under Schedule IV, Sl. No. 1 |
| Long-term capital gains on property (held over 24 months) | 12.5% | Item 1(b)(i)(D); section 197 rate (old 112) |
| Short-term gains on property | 30% | "Other income" |
| Long-term gains on listed shares and equity funds (held over 12 months) | 12.5% on gains above ₹1,25,000 | Item 1(b)(i)(C); section 198 (old 112A) |
| Short-term gains on listed shares and equity funds | 20% | Item 1(b)(i)(E); section 196 (old 111A) |
| Dividends from Indian companies | 20% | Item 1(b)(i)(N) |
Two things sit on top of these rates.
- Surcharge: for a non-resident individual, 10% of the tax if the amount paid and subject to TDS is over ₹50 lakh (up to ₹1 crore), and 15% between ₹1 crore and ₹2 crore. Surcharge on capital gains and dividends never goes above 15%.
- Health and Education Cess of 4% on tax plus surcharge. The Finance Act exempts residents from cess on TDS, not non-residents, so it applies to every NRI deduction.
Two older rules still apply. Without a valid PAN, section 397(2) pushes TDS to at least 20%. Section 397(2)(c) allows exceptions for non-residents who meet prescribed conditions, but it's simpler to give every payer your PAN. And the payer deducts at the time of credit or payment, whichever comes first.
Why does property sale TDS hit NRIs so hard?
Serial number 17 taxes the "sum chargeable", which for a property sale is your capital gain, not the price. But a buyer has no way to check your purchase cost or improvement bills. So in practice, a buyer without a certificate deducts on the full sale price, and you wait for a refund on the difference.
There is one welcome change for 2026-27. Section 397(1)(c)(iii), as amended by the Finance Act, 2026, says a resident individual or HUF buying immovable property from a non-resident no longer has to get a TAN for that one deduction. That used to be a common reason buyers backed out or stalled. I couldn't confirm which challan form the portal now uses for this case, so ask the buyer's CA to check before the registration date.
Worked example: NRI selling a ₹1 crore flat bought for ₹60 lakh
Illustrative only. An NRI sells a flat for ₹1,00,00,000 that cost ₹60,00,000 and was held for more than 24 months, so the gain is long-term. I've ignored improvement costs, brokerage and other Indian income, and used the Finance Act, 2026 rates above. All figures are in rupees, so no exchange rate is involved. The numbers were computed with a script.
| No certificate (TDS on full price) | With a certificate (TDS on the gain) | |
|---|---|---|
| Amount TDS is worked out on | ₹1,00,00,000 | ₹40,00,000 |
| Tax at 12.5% | ₹12,50,000 | ₹5,00,000 |
| Surcharge | ₹1,25,000 (10%, amount over ₹50 lakh) | Nil (amount under ₹50 lakh) |
| Cess at 4% | ₹55,000 | ₹20,000 |
| Total TDS | ₹14,30,000 (14.3% of the price) | ₹5,20,000 |
| Cash you receive at registration | ₹85,70,000 | ₹94,80,000 |
The actual tax on a ₹40 lakh long-term gain, with no other Indian income, is ₹5,20,000 (12.5% plus cess). Without a certificate about ₹9.1 lakh sits with the government until your return is processed. With one, the TDS roughly matches the final tax. Note that the lower basic-exemption adjustment in section 197(2) is only for residents, and so is the old 20%-with-indexation option for land and buildings bought before 23 July 2024 (section 197(3)), so neither helps an NRI here.
FinPlann's NRI property sale calculator runs the same sums with your own figures, and the full sale process is in selling property in India as an NRI.
How do you get a lower or nil TDS certificate?
The certificate is issued under section 395(1), which does the job of the old section 197 certificate, on an application in Form No. 128 (old Form 13), under rule 213 of the Income-tax Rules, 2026. The steps:
- Get the payer's details first. Under rule 213(8) the certificate is issued in the name of the person deducting tax and covers a specified payment up to a specified amount. For a sale, you need the buyer's name and PAN and the agreed price.
- Prepare your numbers. Rule 213(3) has the Assessing Officer look at your estimated tax for the year, your tax for the last four tax years, any tax still owed under either Act, and tax already paid or deducted. Have the purchase deed, improvement bills and a capital gains computation ready.
- File Form 128 with your Assessing Officer. The Finance Act, 2026 also added section 395(6), which lets a "prescribed income-tax authority" issue or reject certificates after electronic verification. The Rules I read (print of 22 September 2026) don't yet prescribe that authority, so don't count on an automatic route.
- Give the certificate to the payer before the payment. Under section 395(1)(c) the payer must then deduct at the certified rate while it's valid. Rule 213(7) limits it to the period of the tax year stated on it.
Apply as soon as you have a buyer and a price. A certificate that arrives after the payment is no use to the buyer.
There's a second route. Under section 395(2), the successor to the old section 195(2) application, the payer can apply in Form No. 129 (rule 214) for the Assessing Officer to fix the taxable proportion of a payment to a non-resident. It's less common for property, because it puts the paperwork on the buyer.
What are Forms 145 and 146 (old 15CA and 15CB)?
When money leaves India for a non-resident, including when you move sale proceeds from your NRO account abroad, the remitter files Form 145 (old 15CA) online under rule 220 before the bank releases the money.
- Part A: payments up to ₹5,00,000 in the tax year.
- Part B: above ₹5 lakh where you have a section 395(1) or 395(2) certificate or order.
- Part C: above ₹5 lakh with a chartered accountant's certificate in Form 146 (old 15CB), which confirms the tax position and the treaty claim.
RBI separately caps NRO repatriation at US$1 million per financial year, with documents. The banking side is covered in how to repatriate money from India, and the full list of renamed forms is in old vs new income tax form numbers.
How do you claim excess TDS back?
File an income-tax return for the tax year in which the income arose, show the income and the TDS, and the excess comes back as a refund. Before filing, match each payer's TDS certificate (Form 131, old 16A) against your Annual Information Statement (Form 168, old 26AS). TDS a payer deducted but never deposited won't show there, and you can't claim it until they fix it.
A return is also how you use a treaty rate the payer didn't apply, set off losses, or claim the ₹1,25,000 exemption on listed equity gains if a broker deducted more than needed. The NRI ITR filing guide covers which form to use.
Can a DTAA lower the TDS?
Yes, for some income. Under section 159(4), the Act applies only to the extent it's more beneficial than the treaty. To claim a treaty rate, section 159(8) requires a tax residency certificate from your country of residence plus the information in Form No. 41 (old Form 10F), which you give the payer.
The treaty doesn't always win. The India-US treaty, for example, caps tax on interest at 15% (Article 11) against the Act's 30% on NRO interest, so the treaty helps there. But it caps dividends to individuals holding small stakes at 25% (Article 10), which is higher than the Act's 20%, so the Act rate applies. Article 13 leaves capital gains to each country's domestic law, so property and share gains get no treaty relief. Other treaties differ: check yours before assuming. More in the US-India DTAA guide.
Whether the foreign country then gives you credit for the Indian tax depends on your full situation there, so check that side with a tax preparer in that country.
Checklist before you receive a large payment in India
More NRI tax and banking guides are on the NRI hub.
| Step | Form (old form) |
|---|---|
| Give every payer your PAN | Avoids the 20% floor in section 397(2) |
| Want a treaty rate? Get a TRC and fill the treaty information form | Form 41 (10F) |
| Expect TDS above your real tax? Apply for a lower or nil certificate | Form 128 (13) |
| Collect each payer's TDS certificate | Form 131 (16A) |
| Check TDS against the annual statement | Form 168 (26AS) |
| Moving money abroad | Forms 145 and 146 (15CA and 15CB) |
| Claim the excess back | Income-tax return for that tax year |
Common mistakes
- Applying after the deal closes. A certificate only works on payments made after the payer has it. Once the buyer has deducted 14.3% of the price, your only route is the refund.
- Assuming NRE and NRO interest are taxed alike. NRE interest is exempt. NRO interest carries 30% TDS plus cess, unless a treaty rate applies.
- Quoting old form numbers for 2026-27 payments. Form 13, 15CA and 10F are now 128, 145 and 41. Payments in FY 2025-26 still use the old ones.
- Skipping the return because "TDS already covered it". If TDS was higher than your tax, the only way to get it back is to file.
- Expecting a DTAA to cut tax on a property sale. Under the India-US treaty it doesn't, since gains are left to domestic law.
