NRI selling property in India: capital gains and TDS

Which law applies

The Income-tax Act, 2025 applies to events on or after 1 April 2026; the Income-tax Act, 1961 applies only to earlier events. Rates and thresholds are the same under both, says the Income Tax Department. Section numbers changed: section 195 became section 393(2); section 54 became section 82; section 54EC became section 85; section 54F became section 86.

How the gain is taxed

• Long term or short term. A building or land held for not more than 24 months before transfer is a short-term asset (section 2(101)(a)); beyond 24 months it is long term.
• Long-term rate. Section 197(1)(b) taxes the long-term gain at 12.5%.
• No indexation for NRIs. The option to ignore the excess tax by comparing with 20% on an indexed cost (section 197(3)) is for “an individual or a Hindu undivided family, being a resident”, and for land or buildings acquired before 23 July 2024. A non-resident has the 12.5% rate without indexation.
• Short term. The short-term gain is added to total income. The Act’s rate section I read gives a special rate only for long-term gains; the slab rates are in section 202 for individuals.
• Stamp duty value. If the price is below the stamp duty value, that value is deemed to be the sale price (section 78(1)), but if the stamp duty value does not exceed 110% of the price, the actual price is used (section 78(1)(b)). This is why circle rate and guidance value matters to a seller.
• Surcharge and cess. They are added at rates fixed by the annual Finance Act. Payotte has not read the enacted Finance Act 2026, so no percentage is stated here; see the Income Tax Department’s rate pages.

What the buyer must deduct

Section 393(2), Table Sl. No. 17 covers “any other sum chargeable under the provisions of this Act” paid to “any non-resident (not being a company) or a foreign company”. The payer is “any person” and the rate is “rates in force”. Note 3(b) says the duty applies whether or not the non-resident has a residence, place of business or business connection in India.

In practice:

• Filing. From 1 October 2026, a buyer who is a resident individual or resident HUF reports this deduction in Form 141, Schedule E. The portal says there is “no single prescribed TDS rate for Form 141”; the rate comes from the Act or from a certificate under section 395. Other buyers use the TAN-based TDS forms. A CBDT notification of 24 September 2026 updates forms for non-resident property transactions; Payotte could not read it, so check the portal.
• Dates. Tax deducted must be paid within 30 days of the end of the month, and the challan-cum-statement furnished within one month from the end of the month in which tax was deducted.
• Certificate. The buyer must give the seller a certificate of the tax deducted (section 395(4)); the seller needs it to claim credit in the Indian return.
• PAN. Section 397(2) sets the deduction at not less than 20% where the person entitled to the payment has no valid PAN. Get a PAN before the sale.

Lowering the deduction

• Seller’s application. Under section 395(1) the payee may apply to the Assessing Officer to deduct tax “at a lower rate or no deduction”. If the officer is satisfied, a certificate is issued and the buyer deducts at that rate until the certificate expires. A pending application is not a certificate.
• Buyer’s application. Under section 395(2) the buyer may ask the Assessing Officer to determine what share of the sum is chargeable to tax, when the whole sum is not chargeable, and then deducts only on that share.
• Ask your chartered accountant which form and portal path applies; Payotte has not read the prescribed form.

Reinvestment relief

An NRI who is an individual may claim relief on long-term gains if conditions are met:

• Section 82 (formerly 54). Gain on a residential house reinvested in a house in India bought one year before or two years after the sale, or built within three years. Two houses are allowed if the gain does not exceed ₹2 crore; cost and gain are capped at ₹10 crore.
• Section 85 (formerly 54EC). Gain on land or building reinvested within six months in a specified long-term asset, up to ₹50 lakh.
• Section 86 (formerly 54F). Gain on an asset other than a residential house reinvested in a house in India.

See capital gains exemptions and capital gains tax on property.

What differs by state

Tax on the gain is central. The state decides stamp duty and registration charges and the circle rate that sets the stamp duty value; see stamp duty calculator. Selling an agricultural plot is limited to residents under the RBI rules. Societies and municipalities may ask for dues clearance before a transfer; see resale flat housing society transfer.

Which professional to consult

A chartered accountant for the certificate and the return; a property lawyer (advocate) enrolled with the State Bar Council for the sale deed (property lawyer); a registered valuer if the stamp duty value is disputed (registered valuer).