Property sale in India: NRI sellers face different TDS rules from residents—here’s what to know

Selling a property in India can trigger very different TDS requirements depending on whether the seller is a resident or a non-resident Indian (NRI). While a buyer generally deducts 1% TDS when purchasing a property from a resident, the same rule does not apply when the seller is an NRI.

For NRI property sales, the buyer has to consider the tax applicable to the seller’s capital gains and deduct TDS at the rates in force. Here’s what you need to know.

What happens when the seller is a resident?

Under Section 393(1) of the Income Tax Act, 2025, a buyer purchasing immovable property other than agricultural land has to deduct TDS if the consideration or stamp duty value is ₹50 lakh or more.

• 1% of the higher of the sale consideration or stamp duty value
• The rule applies to purchases from a resident seller.

For example, if a buyer purchases a house from a resident for ₹80 lakh and the stamp duty value is ₹85 lakh, the TDS deducted from the payment to the resident seller would be ₹85,000, since the higher value is used for calculating TDS.

How is the TDS rate different for an NRI seller?

When the seller is an NRI, Section 393(2) applies to sums chargeable to tax payable to a non-resident. The buyer therefore does not simply apply the resident seller’s 1% rate.

Instead, the applicable rate in force has to be considered based on the nature of the seller’s taxable income from the property.

The capital gain is the profit on which the NRI may have to pay tax after considering the deductions or exemptions. TDS is the amount the buyer withholds from the payment and deposits with the government.

However, in practice, buyers often deduct TDS on the gross sale value unless the NRI seller obtains a lower or nil deduction certificate from the income-tax department.

What rate applies to an NRI’s capital gain?

• Long-term capital gain (property held for more than 24 months): Taxed at 12.5%.
• Short-term capital gain (property held for 24 months or less): Taxed at the applicable slab rate. For TDS purposes, the rate is 30% for an individual or firm and 35% for a foreign company.
• Health and education cess: A 4% cess is applicable on the tax and surcharge.
• Surcharge on LTCG: 10% where total income exceeds ₹50 lakh and 15% where it exceeds ₹1 crore. For LTCG on property, the surcharge is capped at 15%.
• Surcharge on STCG: 10% for income above ₹50 lakh, 15% above ₹1 crore, 25% above ₹2 crore, and 37% above ₹5 crore.

This means the effective rate can be higher than the headline 12.5% or 30% rate.

How much could the buyer deduct from an NRI’s payment?

An NRI sells a property for ₹60 lakh after holding it for more than 24 months. If the seller’s total income results in a 10% surcharge, the effective TDS rate would be:

• Basic tax: 12.5%
• Surcharge: 10% of tax = 1.25%
• Tax + surcharge: 13.75%
• Health and education cess: 4% of 13.75% = 0.55%
• Effective TDS rate: 14.30%
• On ₹60 lakh: ₹8.58 lakh TDS

This means the buyer may deduct ₹8.58 lakh from the ₹60 lakh payment and deposit it with the government. If the actual tax liability is lower after considering exemptions, deductions, or reinvestment benefits, the NRI can claim a refund while filing the income tax return.

Disclaimer: This is only for informational and educational purposes. Please consult a qualified expert for the latest laws and regulations.