Summary of this article
Buyers generally deduct TDS under Section 195
PAN-based TDS compliance simplifies transactions from October 2026
Repatriation requires tax compliance and banking documentation
As Non-Resident Indians (NRIs) look to monetise their real estate holdings in India, selling a property can appear to be a straightforward transaction. However, unlike resident sellers, NRIs face more challenges due to distance, legalities, taxation, and even compliance rules before they make a sale. Understanding the different aspects of such sales can help sellers to avoid penalties, delays and even fraud.
TDS Rules For Sale
When NRIs sell properties in India, the buyer must generally deduct TDS under Section 195 of the Income-tax Act, 1961, which is subject to applicable provisions. Unlike transactions involving resident sellers, NRI property sales are subject to non-resident deduction rules.
The tax rate applicable depends on the capital gains. Whether they are short-term or long-term, along with the relevant tax rates, surcharge and cess. Generally, property that is held for more than 24 months is qualified for long-term capital gains treatment, while property held for less than 24 months is treated under short-term capital gains.
TDS may be calculated on the sale consideration rather than the actual capital gain, potentially resulting in a substantial upfront deduction. Eligible NRIs can apply for a lower or nil TDS certificate from the Tax Department.
“TDS is applied at the relevant rates, depending on the nature of the capital gains and applicable tax provisions. NRIs should therefore establish their tax liability before completing the sale and explore whether they qualify for a lower or nil TDS certificate to avoid excess tax being withheld,” adds Ankur Choudhary, CEO and Co-Founder of Belong.
PAN Requirement
NRIs should provide their PAN to facilitate tax deduction, reporting and income-tax return filing. Buyers must ensure that TDS is reported correctly against the seller’s PAN. NRIs should verify the applicable filing procedure and ensure that the buyer deposits the deducted tax correctly. The seller should obtain the relevant TDS certificate and reconcile the deduction whenever filing an income tax return.
“For NRIs selling property in India, one of the biggest administrative hurdles has now been reduced. From October 1, 2026, resident individuals and Hindu Undivided Families (HUFs) purchasing property from a non-resident seller can use their PAN instead of obtaining a Tax Deduction and Collection Account Number (TAN) to deduct and deposit TDS. The transaction can be reported through the newly introduced Form 141, Schedule E. Earlier, buyers had to obtain a TAN specifically for the transaction, adding another registration and compliance step to the process. This could make purchasing property from an NRI more cumbersome than buying from a resident Indian. The change simplifies the process for buyers and could help reduce delays in closing property transactions involving NRI sellers,” adds Choudhary.
Repatriation of Property Sale Proceeds
NRIs can repatriate eligible property sale proceeds abroad, as per the Reserve Bank of India (RBI) regulations, banking procedures and applicable tax compliance requirements. Transfers are generally processed through an authorised dealer bank, which requests the sale deed, acquisition documents, and evidence of tax payment, wherever applicable.
“Selling a property and transferring the proceeds overseas are two separate processes, each with its own requirements. NRIs should retain the purchase and sale deeds, evidence of the original investment, tax payment records and relevant bank statements. The gains from an Indian property will qualify to be deposited in an NRO account, which has a USD 1 million limit on repatriating the money outside India. To move those gains outside the NRO account to an NRI's overseas bank account, the documentation required depends on the source of funds, the property's ownership history and the applicable RBI framework,” adds Choudhary.
By understanding one’s responsibilities and obligations for an NRI sale, complying with the updated PAN-based procedure where applicable and following RBI requirements, NRIs can manage property sales in India more effectively.
