Overview
When an NRI sells property in India, two things happen that don't apply to resident sellers: the buyer must deduct tax at a much higher rate before paying you, and moving your proceeds abroad afterward requires its own paperwork. Understanding both upfront can save you months of delay and a lot of unnecessarily locked-up cash.
LTCG vs STCG Tax Rates
| Holding period | Classification | Tax treatment |
|---|---|---|
| More than 24 months | Long-Term Capital Gains (LTCG) | 20% (plus applicable surcharge and cess) on indexed gains |
| 24 months or less | Short-Term Capital Gains (STCG) | Taxed at your applicable slab rate, generally higher than LTCG |
Indexation adjusts your purchase cost for inflation before calculating the gain, which usually reduces the taxable amount on long-held property.
TDS Deduction by the Buyer
This is the part that surprises most NRI sellers: the buyer is legally required to deduct TDS on the entire sale consideration (not just the gain) at the time of payment, and deposit it with the Income Tax Department — before you see the rest of the proceeds.
Default TDS Rates
- LTCG: 20% (plus surcharge and cess) on the sale consideration.
- STCG: TDS at rates that can approach 30% (plus surcharge and cess), reflecting slab-rate taxation.
- These are deducted regardless of your actual profit unless you've obtained a lower-rate certificate.
Why This Matters
- TDS is calculated on the full sale price by default, not your actual capital gain — which can lock up far more cash than your real tax liability.
- The excess TDS is refundable when you file your ITR, but that can mean waiting many months for a refund.
- A Lower/Nil TDS Certificate avoids this problem upfront (see below).
Lower/Nil TDS Certificate (Form 13)
If your actual tax liability on the sale is lower than the default TDS rate would deduct — which is common, since default TDS often applies to the full sale price rather than the net gain — you can apply to the Assessing Officer before the sale closes for a certificate authorizing a lower (or nil) TDS rate.
Apply via Form 13
Submit Form 13 on the income tax portal, with computation showing your actual expected capital gain and tax liability, well before the sale transaction closes.
Provide supporting documents
Purchase deed, sale agreement, cost of improvements, and any exemption claims you plan to make (Sections 54/54EC/54F).
Receive the certificate
If approved, the Assessing Officer issues a certificate specifying the exact lower (or nil) TDS rate the buyer should apply — share this with the buyer before they make payment.
Buyer deducts at the approved rate
With the certificate in hand, the buyer deducts TDS at the lower approved rate instead of the default rate, so significantly less of your proceeds gets locked up until refund.
Exemptions Under Sections 54, 54EC, 54F
- Section 54: Exemption on LTCG from selling a residential property, if the gain is reinvested in another residential property in India within the prescribed timelines.
- Section 54EC: Exemption by investing the capital gain (up to a specified limit) in specified bonds (e.g., NHAI, REC) within 6 months of the sale.
- Section 54F: Exemption when selling a non-residential asset (e.g., land, a non-residential property) and reinvesting the net sale proceeds in a residential property, subject to conditions.
Repatriating Sale Proceeds Abroad
Once taxes are settled, sale proceeds are typically credited to your NRO account and can be repatriated abroad under the RBI's Liberalised Remittance Scheme (LRS), generally capped around USD 1 million per financial year. Your bank will require:
- Form 15CA (and usually 15CB, certified by a chartered accountant) confirming applicable taxes are accounted for.
- Proof of the source of funds — sale deed, TDS certificates, and your ITR if the sale has already been reported.
- KYC and source-of-funds documentation your bank's NRI/forex desk requires for large transfers.
See our Remittances & Money Transfer guide for a full comparison of ways to move the funds abroad once they're cleared.