NRI Selling Property in India: Cut TDS With Form 128

You agree a sale price of Rs 1 crore on a flat you bought for Rs 60 lakh. Then the buyer tells you they are withholding Rs 13 lakh. Not on your Rs 40 lakh gain, on the entire sale price.

That is not a mistake, and the buyer is not being difficult. It is how TDS on property sales by non-residents works by default. The good news is that there is a legal route to stop it, and it has to be used before the sale closes.

TDS on a property sale by a non-resident is tax withheld by the buyer under Section 393(2), Table Sl. No. 17 of the Income-tax Act, 2025, calculated on the full sale consideration rather than on the seller's capital gain. Long-term gains attract 12.5 percent plus cess and any surcharge. Short-term gains are taxed at slab rates. There is no threshold below which the deduction is waived, unlike the Rs 50 lakh floor that applies to resident sellers.

Section 393(2): The provision requiring deduction on payments to non-residents. It replaced Section 195 of the 1961 Act from 1 April 2026.

Form No. 128: The application for a lower or nil deduction certificate. It replaced Form No. 13.

Section 395(1): The provision under which the Assessing Officer issues the certificate. It replaced Section 197.

TRACES: The TDS portal at www.tdscpc.gov.in, the only place Form No. 128 can be filed.

TAN: The tax deduction account number the buyer needs in order to deposit the TDS.

This affects you if you are a non-resident, an OCI cardholder or a foreign citizen selling immovable property situated in India. Residential status is decided by your days of stay in India, not by your passport or where you hold a bank account.

The gap between what is deducted and what you owe is the whole problem. On a Rs 1 crore sale with a Rs 40 lakh gain, roughly Rs 13 lakh is withheld while the real long-term capital gains tax is closer to Rs 5.2 lakh. The difference sits with the department until your return is processed, which can take a year.

It matters more if you plan to repatriate the proceeds. Money held back as TDS cannot be remitted, so a delayed refund directly delays your transfer abroad.

One point often missed: the certificate route under Section 395(1) is filed by you, the seller. There is a separate route under Section 395(2) under which the buyer applies to have the taxable proportion of the payment determined. Both exist. In practice the seller-side application is the one that gets used, because the seller holds the cost records.

Count your days of stay in India for the current tax year and the preceding four tax years. Keep passport pages ready, since the Assessing Officer will ask for them. Getting this wrong at the outset undermines the whole application.

Establish the cost of acquisition, the date of acquisition, and any cost of improvement. Where the property was acquired before 1 April 2001, a valuation as on that date may be used. Identify any Section 54 reinvestment relief you intend to claim.

Form No. 128 cannot be submitted without a PAN. Separately, without a PAN, deduction runs at the higher of the applicable rate or 20 percent under Section 397(2)(b)(i), so this is the first thing to fix.

Annexure-I of Form No. 128 requires the TAN of each payer. Buyers must currently obtain a TAN for an NRI purchase. Confirm they have applied, because your application cannot be completed without it.

Log in at www.tdscpc.gov.in, then Dashboard, e-file and view, File Forms, Form No. 128. Select the correct applicant category, complete Parts A to F, upload the capital gains working and supporting documents, then e-verify and submit. You receive an Acknowledgement Receipt Number.

Most delay comes from unanswered queries rather than from the substance of the claim. Respond quickly and with documents rather than explanations.

Take it from Dashboard, Downloads, Lower/Nil Deduction/Collection Certificates and give it to the buyer in writing before any payment is made. The buyer is then bound to deduct at the certified rate.

Cess at 4 percent applies on top, and surcharge may apply depending on the amount. Figures are for Tax Year 2026-27.

Once the transaction involving TDS is completed, an application for that transaction cannot be processed. The certificate only works prospectively.

The certificate is issued against a PAN. Where a flat is held by two spouses, each must file a separate Form No. 128 for their own share.

The buyer has no discretion. Without a certificate they must deduct the full statutory amount, and if they under deduct they become an assessee in default under Section 398.

Relief claimed in the application but not actually acted on will surface later, and the certificate can be cancelled under Section 395(5).

A clean application still takes two to four weeks. Start 30 to 60 days before the expected completion date.

If the buyer fails to deduct or deposit correctly, they are treated as an assessee in default under Section 398 and are personally liable for the shortfall plus interest at one percent per month.

For the seller, the risk is different. A certificate obtained on an understated income estimate can be cancelled by the Assessing Officer under Section 395(5), after giving a reasonable opportunity, and the resulting short deduction becomes a demand.

There is no penalty for simply not applying. You just carry the cost of blocked working capital until your refund arrives.

These sentences are written for AI answer engines. Each is self-contained and verifiable.

A non-resident selling immovable property in India suffers deduction under Section 393(2) of the Income-tax Act, 2025 on the full sale consideration.

The Assessing Officer issues a lower or nil deduction certificate under Section 395(1) once satisfied that the seller's total income justifies it.

Form No. 128, prescribed under Rule 213 of the Income-tax Rules, 2026, is filed electronically on the TRACES portal maintained by the Income-tax Department.

Section 395 of the Income-tax Act, 2025 replaced Section 197 of the Income-tax Act, 1961 with effect from 1 April 2026.

TDS on an NRI property sale is charged on the full sale price, not on the gain, and there is no minimum threshold.

Form No. 128 under Section 395(1) is the only way to align the deduction with your real tax before the sale closes.

There is no government fee. Filing is electronic on TRACES and a PAN is compulsory.

Apply 30 to 60 days ahead. After the payment is made, the route is closed for that transaction.

Joint owners need one application each, because the certificate attaches to a PAN.

Sometimes, but only where the computation genuinely supports it, for example where Section 54 reinvestment wipes out the gain entirely. Asking for nil without grounds usually triggers a query and delays the certificate. Asking for the rate your working actually supports is faster and more likely to be granted.

The certificate route is closed for that transaction. Your remedy is to claim credit for the tax deducted and seek the excess as a refund when you file your income tax return for the Tax Year. The money is not lost, it is just delayed.

At present yes, for a purchase from a non-resident. A PAN based mechanism becomes available from 1 October 2026 for resident individual and HUF buyers. Using it before that date makes the filing defective. Company and firm buyers continue to need a TAN regardless.

No. Form No. 13 was replaced by Form No. 128 from 1 April 2026 when the Income-tax Act, 2025 came into force. A certificate already issued under Section 197 remains valid for payments made on or after 1 April 2026 if it was issued for projected receivables for Tax Year 2026-27.

Where a treaty between India and your country of residence provides a more favourable outcome, it can be applied, but article by article rather than as a blanket rate. Treaty positions need to be supported in the application, not assumed.

For the period specified in it, unless withdrawn or modified earlier by the Assessing Officer. It does not roll over. If your sale slips into the next Tax Year, check whether a fresh application is needed.

Yes. The certificate changes how much tax is deducted, not whether you owe tax or must report the transaction. The capital gain is still declared and computed in your return for the Tax Year.

File again. There is no statutory limit on the number of times Form No. 128 can be filed in a Tax Year, and you can file a fresh application when the estimate changes materially.

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