TDS on Buying Property
from an NRI
The buyer must deduct TDS under Section 195 on the full sale consideration — not just the gain. Here are the current LTCG/STCG rates, surcharge, the Lower Deduction Certificate route, Form 27Q and the 15CA/15CB repatriation steps for FY 2025-26.
When you buy immovable property from an NRI seller, you (the buyer) must deduct TDS under Section 195 on the entire sale consideration, not merely the capital gain. If the NRI held the property for more than 24 months it is long-term and the base rate is 12.5% (no indexation, w.e.f 23 July 2024); if held for 24 months or less it is short-term, taxed at slab, so TDS is deducted at the peak 30%. Add the applicable surcharge and 4% cess. Section 195 has no minimum threshold — the ₹50 lakh limit of Section 194-IA does not apply to an NRI seller. The NRI can reduce this via a Lower Deduction Certificate under Section 197.
TDS Rates — Buying Property from an NRI (FY 2025-26)
The base TDS rate depends on how long the NRI held the property. Surcharge is added on the consideration slab and 4% health & education cess on top. See the full TDS rate chart 2025-26.
| Nature of gain | Holding period | Base TDS | + Surcharge & cess |
|---|---|---|---|
| Long-term capital gain (LTCG) | More than 24 months | 12.5% | Effective ~13–14.95% |
| Short-term capital gain (STCG) | 24 months or less | 30% | Effective ~31.2–39% |
| NRI seller has LDC u/s 197 | Any | As per certificate | As specified (can be 0%) |
| NRI seller — no PAN (s.206AA) | Any | 20% or higher | Higher of 195 rate or 20% |
LTCG base cut from 20%+indexation to 12.5% w.e.f 23 Jul 2024 (Budget 2024). Surcharge on LTCG under s.112/112A is capped at 15%; on STCG it follows the normal NRI surcharge slabs (up to 37% on income above ₹5 crore). 194-IA (1%) applies only to a resident seller.
A buyer often assumes TDS applies only to the profit. Under Section 195 the buyer must deduct on the entire sale consideration. On a ₹2 crore flat that is 12.5% of ₹2 crore (~₹25 lakh) plus surcharge and cess — even if the NRI's actual gain is far smaller. This is exactly why the NRI should obtain a Lower Deduction Certificate before completion.
Lower Deduction Certificate — Section 197
Because default TDS is on the full price, it usually far exceeds the NRI's real tax on the gain. The NRI seller should apply to the jurisdictional Assessing Officer via Form 13 on the income-tax portal for a Lower / Nil Deduction Certificate (LDC) under Section 197. The application sets out cost of acquisition, improvement, exemptions under Section 54 / 54EC and any DTAA relief.
Without LDC — ₹2 cr LTCG flat
With LDC — actual gain ₹40 lakh
The LDC binds the buyer to deduct only the certificate rate, freeing ~₹20 lakh of the NRI's money that would otherwise sit with the department until the ITR refund. Section 206AB (the higher rate for non-filers) was omitted w.e.f 1 April 2025, so only a missing PAN (Section 206AA, 20%) now bumps the rate — get the NRI's PAN and LDC in place early.
Selling or buying NRI property? We handle the Section 197 LDC and Form 27Q end to end.
Talk to a TDS Expert →Form 15CA & 15CB — Sending Proceeds Abroad
An NRI cannot freely remit sale proceeds abroad without certifying that Indian tax has been paid. Two forms are involved:
- Form 15CB — a certificate from a practising Chartered Accountant confirming the nature of the remittance, the applicable rate, DTAA relief and that TDS has been correctly deducted.
- Form 15CA — an online declaration filed on the income-tax portal by the remitter, quoting the 15CB certificate number, submitted before the bank processes the transfer.
- For aggregate remittances up to ₹5 lakh in a financial year, a simplified 15CA Part A suffices without a 15CB; above that, Part C of 15CA plus a 15CB is required.
A common error is filing Form 26QB (the challan-cum-return for resident-seller 194-IA transactions). NRI property purchases run the full non-resident TDS process: the buyer needs a TAN, deposits via Challan 281 and files Form 27Q quarterly. Using 26QB for an NRI seller is a defective filing.
Compliance Checklist for the Buyer
The buyer — resident or NRI — is the deductor and is personally liable if TDS is missed. Failure makes the buyer an assessee-in-default under Section 201, with interest and a penalty under Section 271C.
- Obtain a TAN before the first payment
- Confirm the seller's residential status & PAN
- Deduct u/s 195 on the full consideration, each payment
- Check for an LDC u/s 197 and deduct at that rate
- Deposit TDS via Challan 281 by the 7th of next month
- File quarterly Form 27Q (not 26QB)
- Issue Form 16A to the NRI seller
- 15CB + 15CA before any repatriation abroad
| Situation | Section | Rate | Return |
|---|---|---|---|
| Buying from an NRI seller | 195 | 12.5% / 30% + s/c | Form 27Q |
| Buying from a resident seller (≥ ₹50L) | 194-IA | 1% | Form 26QB |
| NRI seller with LDC | 197 | As certified | Form 27Q |
Get the seller's status right first — it decides the section, rate, TAN requirement and return. See our detailed guide on TDS on property (194-IA) for resident-seller deals.
TDS on NRI Property — Frequently Asked Questions
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Buying or Selling NRI Property? Get the TDS Right.
From confirming residential status and TAN to the Section 197 Lower Deduction Certificate, Form 27Q, Form 16A and 15CA/15CB repatriation — TaxClue's CA-led team handles the full Section 195 process, 100% online across India.