Question 1

Why is TDS on NRI property sale different from resident seller transactions?

Accepted Answer

When buying from a resident Indian, TDS is a simple 1% of sale consideration under Section 194IA. When buying from an NRI, Section 195 applies — TDS must be deducted on the capital gains component at 20% for LTCG or 30% for STCG, plus surcharge and cess. This requires computing the NRI's capital gains first, which involves the purchase price, cost of improvement, and indexation — making the calculation significantly more complex.

Question 2

Does the buyer need a TAN for NRI property purchase?

Accepted Answer

Yes. Unlike the resident seller case where the buyer can use their PAN to file Form 26QB, buying from an NRI under Section 195 requires the buyer to obtain a TAN (Tax Deduction Account Number) and file quarterly TDS returns in Form 27Q. BSP Associate assists buyers in TAN procurement and all 27Q compliance.

Question 3

What is the effective TDS rate on NRI property sale after surcharge and cess?

Accepted Answer

For LTCG, the base rate is 20%. Surcharge applies at 10% if gains are between ₹50 lakh and ₹1 crore, and 15% if gains exceed ₹1 crore. Health and Education Cess is 4% on tax plus surcharge. The effective rate therefore ranges from 20.8% to 23.92% on LTCG. For STCG, the base rate is 30% with similar surcharge and cess structure.

Question 4

What is a Section 197 lower TDS certificate and how does the NRI seller obtain it?

Accepted Answer

The NRI seller can apply to the Income Tax Officer having jurisdiction over their PAN for a lower deduction certificate under Section 197 (Form 13). If the NRI plans to reinvest the gains under Section 54 or invest in bonds under Section 54EC, the actual tax liability may be nil or very low. The certificate specifies a lower TDS rate for the buyer to apply. Without this certificate, TDS at the full rate is deducted and the NRI must file an ITR and wait for a refund.

Question 5

Who is responsible for correct TDS deduction — buyer or seller?

Accepted Answer

The buyer is legally responsible for deducting the correct TDS and depositing it with the government. If the buyer under-deducts TDS, they become an assessee in default and are liable to pay the shortfall with interest and penalties. The NRI seller cannot be penalised for the buyer's failure to deduct, but the NRI must still pay the tax through advance tax or ITR if TDS falls short.

NRI TDS on Property Sale

What's Included

Documents Required

Frequently Asked Questions

Explore More Services

Let's Sort Your Taxes & Compliance Together