When an NRI sells property in India, the buyer is required to deduct TDS on the entire sale price — not on the profit. On a typical sale that can mean lakhs of rupees parked with the tax department for a year or more. A lower or NIL TDS certificate fixes that, bringing the deduction down to your actual tax. Here is how it works for the tax year 2026-27.

Why this matters before you sell

For a resident seller, the buyer deducts 1% TDS where the consideration and the stamp-duty value are each ₹50 lakh or more, through a challan-cum-statement in Form 141 (earlier Form 26QB) and without needing a TAN. For an NRI seller the rule is very different: under section 393(2) of the Income-tax Act, 2025 (Table Sl. No. 17; section 195 of the 1961 Act), the buyer must deduct TDS on the full sale consideration, at the rate applicable to your capital gain.

Where the property has been held for more than 24 months, the gain is long-term and TDS is deducted at 12.5% (without indexation), plus surcharge and cess — the rate that applies to transfers made on or after 23 July 2024. Surcharge is 10% where the consideration exceeds ₹50 lakh and 15% where it exceeds ₹1 crore (the ceiling for capital-gains income), and the health and education cess is 4%; the effective deduction is therefore 13.0%, 14.30% or 14.95%. Where the gain is short-term, the deduction falls under the “any other income” rate of 30%, again plus surcharge and cess.

The catch is that this is deducted on the whole sale value, not on your gain. Sell a property for ₹1.5 crore on which your actual taxable gain is, say, ₹30 lakh, and the buyer may still deduct 14.95% of ₹1.5 crore — about ₹22.4 lakh — when your real tax might be a fraction of that. You would get the excess back only after filing a return and waiting for a refund. The certificate is what stops that cash from being locked up in the first place. These matters are handled by the firm; see NRI services for the nature of services.

The short version

The NRI seller applies online in Form 128 (which replaced Form 13 from 1 April 2026) under section 395(1) of the Income-tax Act, 2025 for a certificate that lets the buyer deduct TDS at your real rate instead of on the full sale value. Start 30–60 days before the sale; budget four to eight weeks.

How to get the certificate, step by step

1. Work out your actual capital gains

The heart of the application is an honest computation of your gain. Long-term or short-term depends on whether you held the property for more than 24 months. From this you arrive at the tax actually payable — the number you are asking the Assessing Officer to deduct against, instead of the full sale value.

2. Gather your documents

You will need the sale agreement, the original purchase deed, your PAN, passport/OCI proof, and the capital-gains computation.

3. File Form 128 online

Form 128 (earlier Form 13) is the application for a lower or nil deduction certificate under section 395(1) of the Income-tax Act, 2025 (section 197 of the 1961 Act), prescribed by the Income-tax Rules, 2026 notified on 20 March 2026. It is filed online to your jurisdictional Assessing Officer.

4. Work with the Assessing Officer

The officer will usually raise queries — on the cost of acquisition, improvement costs, or the basis of your gain. Answering them quickly and with clean workings is what keeps the file moving.

5. Hand the certificate to your buyer

Once issued, the certificate states the rate of deduction, the buyer's TAN, the maximum transaction value and a validity period. Give it to the buyer before the proceeds are paid — they are then legally bound to deduct at that lower rate.

The single most expensive mistake we see is sellers who skip the certificate to save time, then wait a year for a refund of tax that was never really owed.

Common mistakes that cost NRIs money

A few errors come up again and again. Applying too late — the certificate takes weeks, so a last-minute application means the sale closes with full TDS deducted. Using the wrong statement — for an NRI seller the buyer reports the deduction in the quarterly statement in Form 144 (earlier Form 27Q), not in the Form 141 challan-cum-statement (earlier Form 26QB), which is only for purchases from resident sellers. Getting the TAN position wrong — a buyer paying a non-resident seller has needed a TAN (applied for in Form 134); from 1 October 2026 the Finance Act, 2026 removes that requirement for buyers who are resident individuals or Hindu undivided families, while companies, firms and other buyers still need one, and the procedure for TAN-less deductors is yet to be prescribed by the CBDT. And assuming TDS is on the gain — without a certificate, it is on the full sale value, every time.

SL
Reviewed by CA. Sunil Kumar Lahoti Partner, S K Lahoti Associates, Chartered Accountants.

Frequently asked questions

No, but without it the buyer must deduct TDS on the full sale value, not just the gain, which often locks up far more cash than the actual tax. The certificate brings the deduction down to your real liability.

Plan for roughly four to eight weeks from application to issue, depending on the Assessing Officer and how complete your documentation is. Start the process 30 to 60 days before the sale closes.

The NRI seller applies, online in Form 128. The buyer is the one who deducts and deposits the TDS, and relies on the certificate to deduct at the lower rate.

References

Position stated as on 5 September 2026 · sources checked 5 September 2026.

  1. Income-tax Act, 2025 (30 of 2025), in force from 1 April 2026 — section 393(1) (deduction on payments to residents, including the transfer of immovable property), section 393(2) and (3) (deduction on payments to non-residents), section 395(1) (certificate for lower or nil deduction; section 197 of the Income-tax Act, 1961) and section 397 (tax deduction account number). Act text, CBDT
  2. Income-tax Rules, 2026 — Notification No. 22/2026 [F. No. 370142/41/2025-TPL] / G.S.R. 198(E), 20 March 2026 (CBDT) — prescribing Form 128 (earlier Form 13), Form 141 (earlier Forms 26QB, 26QC, 26QD and 26QE), Form 144 (earlier Form 27Q) and Form 134 (earlier Form 49B). CBDT table of forms under the 2026 Rules against the 1962 Rules
  3. CBDT, Tax Reference Tables as per the Income-tax Act, 2025 (as amended by the Finance Act, 2026): “TDS Rates” (section 393(2), Table S. No. 17 — long-term capital gains 12.5%; any other income 30%), “Tax Rates” (surcharge of 10% and 15% with a 15% ceiling on capital-gains income under sections 196 to 198; health and education cess 4%) and “TDS – Purchase of Immovable property” (resident transferors: 1%, the ₹50 lakh threshold, no TAN, Form 141). Tax Reference Tables, CBDT
  4. Finance Act, 2026 (4 of 2026), assented to on 30 March 2026 — section 87, substituting section 397(1)(c) of the Income-tax Act, 2025 with effect from 1 October 2026 (no tax deduction account number for a resident individual or Hindu undivided family deducting on the consideration for immovable property under section 393(2), Table Sl. No. 17); First Schedule, Part I-B, Paragraph F (surcharge) and section 3(15) (cess). Gazette of India, 31 March 2026
  5. Finance (No. 2) Act, 2024 (15 of 2024), section 30 — long-term capital gains on transfers on or after 23 July 2024 taxed at 12.5% without indexation, now section 197(1) of the Income-tax Act, 2025. Gazette of India, 16 August 2024