Lower / NIL TDS Certificate for NRIs Selling Property in India

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 in 2026.

Why this matters before you sell

For a resident seller, the buyer deducts a small 1% TDS on property above ₹50 lakh. For an NRI seller the rule is very different: under Section 195, 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. Where it is short-term, the rate jumps to the slab rate, effectively around 30% 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 12.5% of ₹1.5 crore — about ₹18.75 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.

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. A TRACES account is a prerequisite, so set that up early.

3. File Form 128 on TRACES

From 1 April 2026, Form 128 replaced the old Form 13 for lower-deduction applications, in line with the new Income-tax Act, 2025. It is filed online through the TRACES portal 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 return form — the buyer must file Form 27Q for an NRI seller, not Form 26QB (which is for resident sellers). Trying to deduct without a TAN — until 30 September 2026, the buyer still needs a TAN for NRI property transactions; the simplified PAN-based mechanism applies only from 1 October 2026. And assuming TDS is on the gain — without a certificate, it is on the full sale value, every time.