What is the TDS Rate on Property Sale by NRIs?

One point worth investigating is whether you can apply for a lower or nil TDS certificate before the buyer makes the payment.

If the expected tax liability is significantly lower than the amount that would otherwise be withheld, a certificate issued by the appropriate income-tax authority may allow deduction at a lower rate, subject to the applicable provisions and approval.

It is important to arrange this early. I would not assume that the buyer can simply agree to deduct less because you have calculated a smaller capital gain.

Also, make sure the buyer understands the compliance procedure that applies to a non-resident seller. The procedure has changed over time, and the current Income Tax Department instructions should be checked for the transaction date.

If too much tax is deducted, the seller may be able to claim a refund by filing the appropriate Indian income tax return, provided the applicable conditions are met. That can mean waiting for the tax return to be processed, so it is worth discussing the withholding position before the sale is completed.

For your situation, I would first confirm the date of purchase, expected sale price, and estimated capital gain. Those figures will help a tax professional assess the likely deduction more accurately.

In my case, understanding the holding period was the first step.

For an ordinary immovable property, the distinction between long-term and short-term capital gains generally depends on whether the property was held for more than 24 months. However, the applicable tax rate and calculation also depend on the transfer date and the relevant tax provisions.

For transfers on or after July 23, 2024, the general long-term capital gains rate for many property sales is 12.5% without indexation, subject to applicable rules and exceptions.

Short-term gains can be taxed differently. You should not automatically apply the long-term rate just because the property was purchased a few years ago without confirming the exact acquisition and transfer dates.

Another issue is the buyer's TDS calculation. The buyer may need to withhold tax based on the applicable rules for a non-resident payment, rather than simply deducting tax from the profit you expect to make.

I would get a professional to calculate the likely tax and review whether an application for lower deduction is appropriate. The certificate, if granted, may help prevent excessive withholding.

Keep copies of the purchase deed, improvement invoices, sale agreement, PAN, and other relevant records. These can be useful when establishing the capital gains calculation.

I went through something similar when selling my apartment in India while living in the UK.

The buyer initially thought that the usual 1% property TDS rule would apply. After checking the seller's non-resident status, we learned that the transaction had to be handled under the provisions applicable to payments to a non-resident.

That made a significant difference to the amount the buyer needed to consider deducting.

One important distinction is between TDS and your final capital gains tax. The final tax calculation depends on factors such as the acquisition cost, eligible improvement costs, sale consideration, holding period, and applicable tax provisions. The amount withheld during the sale does not necessarily equal your final tax liability.

I would suggest getting a capital gains calculation prepared before agreeing on the payment arrangements. That gives you a clearer idea of the likely deduction and whether a lower-deduction certificate may be worth pursuing.

Also, don't rely on an old online calculator without checking which financial year and tax rules it uses. The rules for property transfers changed in July 2024, and current procedures should be verified before the transaction.

The TDS rate on property sale by an NRI is 20% on more than 2 years of property held and 30% on property held for less than 2 years. This is because of the TDS section 195 of the Income Tax Act. Here are some of how to purchase a property from an NRI. Get a TAN, pay all their taxes in a challan no. 3281, file a TDS return in Form 27Q, and get your TDS certificate with Form 16A.

Here are some of the points that will help you while buying a property from an NRI. It includes NRIs asking for a TDS of 1% which is legally wrong. Buyers should take a TDS no and the TDS of the NRI assets. TDS will be deducted from the transaction value. So you need to keep these points in mind while chasing property from an NRI.