NRI Selling Property in India: TDS Rules and How to Get a Refund

Selling property in India as an NRI involves a tax mechanism that works differently from how residents experience it. Instead of calculating and paying tax yourself, the buyer is responsible for deducting TDS from your sale proceeds and depositing it with the government — often at rates higher than your actual liability. The refund process exists precisely because this over-deduction is common.

This guide walks you through the TDS rules, how to minimise TDS before the sale, and how to reclaim excess tax after.

How Property Sale Tax Works for NRIs

When you sell a residential or commercial property in India as a non-resident, the following sequence happens:

1. The buyer deducts TDS from the sale price before paying you
2. The buyer deposits the TDS with the government using Form 26QB within 30 days
3. The buyer issues you Form 16B (TDS certificate)
4. You declare the sale in your Indian ITR, calculate actual tax on the capital gain, and claim a refund for any TDS overpaid

This is the mandatory route — there is no way to opt out of TDS as an NRI seller. But you can reduce the TDS rate in advance through Section 197.

TDS Rates for NRI Property Sale (FY 2025-26)

Important post-Budget 2025 change: For properties sold after 23 July 2024, LTCG is taxed at 12.5% without indexation benefit. The old rate of 20% with indexation no longer applies. This affects your actual tax liability when calculating the refund.

Calculating Your Actual Capital Gain

Your real tax liability is based on your net capital gain, not the full sale price. The calculation:

• Sale consideration (what the buyer pays you)
• Less: Cost of acquisition (what you originally paid, or inherited value)
• Less: Cost of improvement (documented renovation or construction costs)
• Less: Transfer expenses (brokerage, legal fees, stamp duty on purchase)
• = Net capital gain

On this net gain, LTCG tax is 12.5% (post July 2024). If the buyer deducted TDS on the full sale price — which is common when no Section 197 certificate was obtained — the overpaid amount is your refund.

Applying for Lower TDS Under Section 197

The smartest move is to apply for a lower or nil TDS certificate before the sale. This reduces the amount locked up with the tax department while you wait for a refund.

Apply using Form 13 on the income tax e-filing portal. You'll need:

• Sale agreement or draft sale deed
• Purchase deed showing original cost
• Proof of indexed cost of acquisition (if applicable)
• Bank account details for the sale proceeds
• ITR for the last 2–3 years

Processing time is typically 2–4 weeks. If approved, the certificate specifies the reduced TDS rate. Present this to the buyer before the sale is completed so they deduct at the lower rate.

How to Claim a TDS Refund

If TDS was deducted at the standard rate and is higher than your actual tax liability:

1. File ITR-2 for the relevant assessment year before 31 July (or 31 December for belated returns)
2. In Schedule CG, enter the property sale details: sale price, cost, capital gain
3. Your ITR will compute the actual tax owed on the gain
4. The excess TDS (already reflected in your Form 26AS) will show as a refund due
5. Pre-validate your Indian bank account on the portal to receive the refund via NECS

Refunds are typically processed within 3–6 months of filing, faster if there are no discrepancies in Form 26AS.

Repatriating Sale Proceeds Abroad

Once the sale is complete and taxes settled, you can repatriate the net proceeds through your NRO account. The limit is USD 1 million per financial year. You need:

• Form 15CA (online self-declaration)
• Form 15CB (CA certificate confirming taxes paid)
• Proof of TDS deduction (Form 16B) and tax payment
• Sale deed and original purchase document

Submit these to your bank to initiate the foreign remittance. The bank is required to verify compliance before releasing funds abroad.