27 Mar 2026Updated: 23 October 2026 | Regi Tom Antony & Associates, Chartered Accountants, Kochi
From 1 April 2026 the Income-tax Act, 2025 applies: the TDS provisions discussed here (sections 195, 197 and others of the 1961 Act) are consolidated in sections 393 to 397, and several forms have new numbers. References below give both where it matters.
TDS on NRI Property Sale — Section 195
When an NRI sells property in India, the buyer is legally required to deduct TDS under Section 195 before making payment. This applies regardless of the buyer's residential status — resident Indian buyers are equally obligated.
Current TDS rates on property sale by NRI (post Finance (No. 2) Act, 2024):
| Gain Type | TDS Rate | Effective Rate (with surcharge + cess) |
|---|---|---|
| Long-Term Capital Gain (LTCG) — held > 24 months | 12.5% | 13% to 14.95% (surcharge on capital gains is capped at 15%) |
| Short-Term Capital Gain (STCG) — held ≤ 24 months | Slab rate | Up to 30% + surcharge + cess |
TDS is deducted on the total sale consideration, not just the gain component — unless a Lower Deduction Certificate (LDC) has been obtained from the Income Tax Department.
Lower Deduction Certificate — Form 128, Section 395 (formerly Section 197)
If your actual capital gains tax liability (after cost of acquisition, reinvestment exemptions under Sections 54/54EC/54F, and applicable DTAA relief) is lower than TDS computed on the full consideration, you should apply for a Lower Deduction Certificate in Form 128 under section 395 (formerly Form 13 under section 197) before the sale is registered.
How to apply: From 1 April 2026 the application is made in Form 128 on the TRACES portal (it was Form 13 before). The certificate specifies the applicable rate and is given to the buyer, who then deducts at that rate instead of the standard rate. For property sales on or after 1 October 2026, the buyer can deposit the TDS through a PAN-based challan without a TAN.
Not applying for an LDC where one is available is the most common — and most expensive — mistake NRIs make in property transactions. Excess TDS refunded through ITR can take 6–12 months.
TDS on Rental Income from NRI-Owned Property
Any person paying rent to an NRI for property situated in India is required to deduct TDS under Section 195 at 30% (plus applicable surcharge and cess). This is a flat rate — it does not matter whether the rent is above or below ₹50,000 per month.
The tenant must obtain a TAN, deduct TDS at 30%, deposit it, and issue Form 16A to the NRI landlord. This TDS credit appears in the NRI's Form 26AS and is available as a tax credit when filing the ITR.
If the NRI has obtained a Lower Deduction Certificate (Form 128, section 395; formerly section 197) for rental income (based on applicable DTAA rates), the tenant deducts at the LDC rate instead.
TDS on Interest from NRO Accounts
Interest credited to an NRO (Non-Resident Ordinary) account is taxable in India and subject to TDS under Section 195 at 30% plus surcharge and cess. The bank deducts this automatically.
Key distinction:
- NRO account interest: Taxable, TDS at 30%
- NRE account interest: Fully exempt from Indian tax (Section 10(4)); no TDS
- FCNR(B) deposit interest: Exempt from Indian tax; no TDS
NRIs should not conflate their NRE and NRO interest income. Only NRO interest needs to be reported in the ITR.
TDS on Dividends Paid to NRIs
Dividends paid by Indian companies to NRI shareholders attract TDS under section 195 (section 393 of the Income-tax Act, 2025 from 1 April 2026) at 20% plus surcharge and cess. Section 196D applies to foreign institutional and portfolio investors, not to individual NRIs. Under most DTAAs the rate is reduced to 10–15% for individual shareholders. To claim the treaty rate, the NRI must give the company or its registrar a Tax Residency Certificate (TRC), Form 10F (filed online) and a beneficial-ownership declaration before the record date.
DTAA Relief on TDS — How It Works
India has Double Taxation Avoidance Agreements (DTAAs) with over 95 countries. For NRIs from countries with a favourable DTAA, the applicable TDS rate may be lower than the domestic rate.
Examples:
| Country | Domestic TDS (dividends) | DTAA rate for an individual shareholder |
|---|---|---|
| UAE | 20% + surcharge + cess | 10% |
| USA | 20% + surcharge + cess | 25% (15% for a company holding at least 10%), so the domestic rate is lower |
| UK | 20% + surcharge + cess | 10% (15% in specified cases) |
| Singapore | 20% + surcharge + cess | 15% (10% for a company holding at least 25%) |
Treaty rates are indicative; check the specific treaty article and any limitation-of-benefits conditions before applying them.
To claim DTAA benefit at the TDS stage, submit the following to the payer (bank, company, or buyer):
- Tax Residency Certificate (TRC) from the country of residence
- Form 10F (filed online on the Income Tax portal — paper submission has been discontinued)
- Self-declaration of beneficial ownership
If DTAA benefit is not claimed at source, the excess TDS is recoverable as a refund through the ITR.
Forms 145 and 146 (formerly 15CA and 15CB) — Remittance Compliance
When an NRI receives payment from India and wishes to remit it abroad (for example, sale proceeds or rental income from an NRO account), compliance under Section 195 extends to the remittance stage:
- Form 145 (formerly Form 15CA): Filed online by the remitter on the Income Tax portal before the remittance, declaring the nature of payment and the tax deducted.
- Form 146 (formerly Form 15CB): A CA's certificate required for taxable remittances above the prescribed limit. It certifies the TDS position, any DTAA provision relied on, and that tax has been properly deducted or paid.
The AD bank (authorised dealer) will not process the international wire transfer without these documents.
ITR Filing — Claiming TDS Credit and Refund
All TDS deducted under Section 195 is credited to the NRI's PAN and reflected in Form 26AS and the Annual Information Statement (AIS) on the Income Tax portal. To claim refund of excess TDS or set off TDS against actual tax liability, the NRI must file an ITR for the relevant assessment year.
Key deadline: 31 July after the end of the year for NRIs not subject to tax audit. For tax year 2026-27, the first year under the Income-tax Act, 2025, that is 31 July 2027.
Filing the ITR is the only way to recover excess TDS. NRIs who do not file because their income is below the exemption limit will lose the TDS refund unless they file.
Regi Tom Antony & Associates advises NRIs on TDS compliance, Lower Deduction Certificate applications, Form 145/146 (formerly 15CA/CB) certification, DTAA claims, and ITR filing. Based in Kakkanad, Kochi. Contact: letstalk@rtaandassociates.com
Dedicated NRI guidance
For an in-depth, up-to-date guide on selling property and the TDS that applies to NRIs, visit NRIBlueprint.com — our dedicated NRI tax & advisory site — or contact Regi Tom Antony & Associates for personalised help.