27 Mar 2026Updated: May 2026
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% | ~14.95% to 15.60% depending on gain quantum |
| 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 — 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 under Section 197 before the sale is registered.
How to apply: The application is filed online through the Income Tax portal (incometax.gov.in) under the 'Request for lower or nil rate of TDS' module. The certificate specifies the applicable rate and is issued to the buyer, who then deducts at that rate instead of the standard 12.5% or higher.
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 under 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 196D at 20% plus surcharge and cess. Under most DTAAs, the rate is reduced to 10–15%. To claim the DTAA rate, the NRI must submit a Tax Residency Certificate (TRC) and Form 10F (now filed online on the ITR portal) to the company's registrar before the dividend 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 |
|---|---|---|
| UAE | 20% | Nil (subject to conditions) |
| USA | 20% | 15% or 25% |
| UK | 20% | 10% or 15% |
| Singapore | 20% | 15% |
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.
Form 15CA and Form 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 15CA: Filed online by the remitter (or NRI) on the Income Tax portal before the remittance. Declares the nature of payment and applicable tax deducted.
- Form 15CB: CA certificate required for remittances above ₹5 lakh in aggregate during the financial year (with certain category exemptions). Certifies the TDS position, applicable DTAA provision, and that taxes have been properly deducted.
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 2026 for AY 2026–27 (for NRIs not subject to tax audit).
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 And Associates advises NRIs on TDS compliance, Lower Deduction Certificate applications, Form 15CA/CB certification, DTAA claims, and ITR filing. Based in Kakkanad, Kochi. Contact: letstalk@rtaandassociates.com