Property sales in India trigger different TDS requirements based on the seller's residency status. According to reports from Mint, when purchasing from a resident seller, buyers must deduct 1% TDS on the higher of sale consideration or stamp duty value if the amount exceeds ₹50 lakh. For example, a property purchase of ₹80 lakh with stamp duty value of ₹85 lakh would result in ₹85,000 TDS deduction. However, when the seller is an NRI, the rules change significantly under Section 393(2) of the Income Tax Act, 2025. The Income Tax Department's current guidance states that for non-resident sellers, the applicable TDS reporting mechanism is different from the resident-deductee mechanism using Form 26QB.
NRI property sales are taxed based on capital gains classification, with long-term capital gains (property held for more than 24 months) taxed at 12.5% and short-term capital gains (24 months or less) taxed at applicable slab rates. As reported by Mint, the effective tax rate can be significantly higher due to surcharge and health and education cess. For instance, an NRI selling property for ₹60 lakh after holding it for more than 24 months with 10% surcharge would face an effective TDS rate of 14.30%, resulting in ₹8.58 lakh TDS deduction. The tax treatment is not necessarily the same as a sale by a resident seller, with different provisions applying to non-resident sellers.
Property sales by NRIs must comply with multiple legal and regulatory frameworks beyond tax considerations. According to legal experts, repatriation of sale proceeds is governed by applicable foreign-exchange rules and is not an automatic consequence of completing a property sale. RBI guidance provides conditions for repatriation of sale proceeds of immovable property by NRIs/PIOs, including conditions relating to how the property was acquired and the source of funds. Different rules can apply depending on whether the property was acquired using foreign exchange, NRO funds, inheritance or other permitted routes. The authorized dealer bank may require supporting documents, undertakings, tax-related certificates and other documentation before processing the remittance.
In practice, buyers often deduct TDS on gross sale value unless the NRI seller obtains a lower or nil deduction certificate from the income-tax department. According to Mint reports, the actual tax liability may be lower after considering exemptions, deductions, or reinvestment benefits, allowing the NRI to claim a refund while filing the income tax return. For NRIs selling property from outside India, the transaction should be planned before signing the sale documents, as issues involving title, Power of Attorney, registration, tax deduction, bank documentation and repatriation can affect completion. Common documents required include identity and PAN documents, title documents, previous sale deeds, property records, and where applicable, inheritance, succession, co-ownership and Power of Attorney documents.
