NRI TDS on Property Sale and How to Get a Lower-Deduction Certificate
When the seller is an NRI, TDS under Section 195 applies at a flat rate on the entire sale consideration — not on the gain alone — which routinely locks up far more capital than the seller's actual tax liability unless a lower-deduction certificate is obtained in advance.
Standard TDS rate on NRI sale (plus surcharge/cess)
20%+
TDS rate for resident sellers above ₹50L (Sec 194-IA)
1%
TDS base for NRI sellers (not just gain)
Full value
Typical Section 197 certificate processing time
30–45 days
What the data says
Under Section 195, a buyer purchasing from an NRI must deduct TDS at roughly 20% (plus applicable surcharge and cess, effectively 22–23%+ for many slabs) on the full sale consideration for long-term capital assets — regardless of the seller's actual computed gain or tax liability.
This contrasts sharply with a resident seller, where TDS under Section 194-IA is a flat 1% on consideration above ₹50 lakh, adjusted against final tax at assessment.
Worked example: NRI sells a flat for ₹1.5Cr with an actual LTCG of ₹30L (tax due at 12.5% = ₹3.75L). Without a certificate, standard TDS at ~23% of ₹1.5Cr locks up roughly ₹34.5L — nearly 10x the actual tax due — refundable only after filing a return.
Apply for a Section 197 lower-deduction certificate before the sale closes to align TDS with actual liability; model the gap between standard TDS and actual tax at /knowledge/calculators/nri-tds.
How EstateVeda executes this
Compute the actual expected LTCG and tax liability on the proposed sale before finalising the transaction.
File Form 13 with the jurisdictional Assessing Officer requesting a Section 197 lower/nil-deduction certificate.
Present the certificate to the buyer at the time of payment so TDS is deducted at the certified rate instead of the standard rate.
If no certificate is obtained, file the ITR promptly post-sale to claim a refund of excess TDS deducted.
Risks we underwrite against
Applying for the certificate too close to the sale date risks the transaction closing before approval comes through, forcing standard-rate TDS.
Errors in the Form 13 computation of expected gain can delay or reduce the certified lower rate granted.
EstateVeda verdict
Every NRI seller should apply for a Section 197 certificate at least 6–8 weeks before an anticipated sale — the cash-flow benefit versus waiting for a refund is substantial.
Frequently asked questions
What TDS rate applies when buying property from an NRI?
The buyer must deduct TDS at roughly 20% plus applicable surcharge and cess on the entire sale consideration under Section 195, unless the seller holds a Section 197 lower-deduction certificate specifying a reduced rate.
How is NRI TDS different from resident seller TDS?
Resident sellers face a flat 1% TDS under Section 194-IA on consideration above ₹50 lakh; NRI sellers face TDS at roughly 20%+ on the full consideration under Section 195, a much larger upfront deduction.
How long does a Section 197 certificate take to obtain?
Processing typically takes 30–45 days from filing Form 13, so NRI sellers should apply well before the anticipated sale closing date to avoid standard-rate deduction.