Lower TDS Certificate for NRIs Selling Property and Foreign Companies Paid from India

How much TDS does a buyer deduct when an NRI sells property in India?

The buyer deducts at the "rates in force" for a non-resident, plus surcharge and 4% cess. For an individual NRI that means 12.5% on long-term capital gains and 30% on short-term gains, before surcharge and cess. Non-resident sellers get none of the concessions resident sellers get. There is no ₹50 lakh threshold and no flat 1% rate. The deduction falls under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17), which covers "any other sum chargeable" under the Act paid to a non-resident, at "rates in force". Those rates are set each year in Part II of the First Schedule to the Finance Act. For tax year 2026-27 the rates for a non-resident individual are:

Property is a long-term capital asset once you have held it for more than 24 months. Section 2(101) of the Income-tax Act, 2025 treats anything held for "not more than twenty-four months" as short-term. The 12.5% rate comes from section 197(1) of the Income-tax Act, 2025 (section 112 of the Income-tax Act, 1961). The grandfathering option for land or buildings acquired before 23 July 2024, which lets you pay 20% with indexation where that is cheaper, is limited by section 197(3) to an individual or HUF "being a resident". NRIs get the flat 12.5% on unindexed gains. The 25% surcharge tier applies where the seller is taxed under the default regime in section 202. Sellers who opt out of it face a 37% surcharge on short-term gains where the amount subject to deduction exceeds ₹5 crore.

Why is TDS deducted on the full sale price and not just the gain?

The law taxes only the gain. In practice the buyer deducts on the whole price because they have no reliable way to work out your gain, and they carry the risk if they get it wrong. Section 393(2) requires deduction on the sum "chargeable" to tax. A buyer who deducts too little is treated as an "assessee in default" under section 398 of the Income-tax Act, 2025. They owe the shortfall plus interest at 1% a month from the date tax was deductible and 1.5% a month from deduction to payment. Faced with that exposure, buyers and their lawyers almost always deduct on the gross consideration unless the seller hands them a certificate from the Assessing Officer. This is the single biggest reason NRIs apply. The certificate moves the question of how much is chargeable from the buyer's guesswork to the tax department's decision.

Worked example: capital gains tax vs TDS on the full price

On a ₹1.5 crore sale with a ₹73.5 lakh gain, the NRI's actual tax is about ₹10.5 lakh, but the buyer will withhold ₹22.4 lakh without a certificate. That leaves ₹11.9 lakh locked with the tax department until the refund comes through.

Priya is an Indian citizen living in Dubai. She sells a flat in Pune in November 2026 (tax year 2026-27) for ₹1,50,00,000. She bought it in 2015 for ₹75,00,000 including stamp duty and registration, and pays ₹1,50,000 in brokerage on the sale. She has no other Indian income that year.

Without a certificate, ₹11,91,450 more than her real liability is deducted. Priya can recover it only by filing an Indian income-tax return for tax year 2026-27, due by 31 July 2027 for an individual with no business or professional income, and waiting for it to be processed. With a lower deduction certificate, the Assessing Officer can authorise the buyer to deduct at a rate that matches her computed liability. In this illustration that is about 7% of the price. The cash stays with her from day one.

It can go further. Suppose Priya invests ₹50 lakh of the gain in long-term specified bonds within six months, under section 85 of the Income-tax Act, 2025 (section 54EC of the Income-tax Act, 1961). Section 85 caps that investment at ₹50 lakh. Her taxable gain falls to ₹23,50,000 and her tax to ₹3,05,500 (12.5% plus cess, with no surcharge below ₹50 lakh). The gap between TDS on the full price and her real tax is then almost ₹19.4 lakh. If she buys a residential house in India with the whole gain under section 82 of the Income-tax Act, 2025 (section 54 of the Income-tax Act, 1961), she can apply for a nil certificate.

A short-term sale shows the problem even more starkly. Sell the same flat within 24 months of buying it and the buyer deducts 30% plus 15% surcharge plus cess, which is ₹53,82,000, or 35.88% of the price. That is deducted even if your real gain is small.

What is a lower TDS certificate, and who can apply?

It is a certificate issued by the Assessing Officer under section 395(1) of the Income-tax Act, 2025 that authorises a named payer to deduct tax at a lower rate, or not at all, on a specified payment to you. The applicant is always the payee, the person receiving the money. The Assessing Officer issues the certificate "on being satisfied that the total income of the payee justifies" the lower deduction. Once it is issued, the payer must deduct at the certified rate "till its validity". The Income Tax Department's guidance on Form 128 confirms that any person, resident or non-resident, can apply for income that is subject to TDS. The department puts the number of applications at about 1.2 lakh a year over the last five years.

Under the Income-tax Rules, 2026 the Assessing Officer weighs four things before issuing a certificate:

• the tax payable on your estimated income for the tax year
• the tax paid or payable on your returned, assessed or estimated income for the last four tax years
• any existing liability under the 2025 Act or the 1961 Act
• advance tax, TDS and TCS already at your credit for the year

This is why an outstanding tax demand, or four years of missing returns, weighs against an application.

Three kinds of applicant use it most:

• NRIs and OCIs selling Indian property, whose real tax on the gain is far below TDS on the price. The gap is widest where they reinvest under section 82, 85 or 86 or where the gain is small.
• Foreign companies earning from India, where the income is taxable in India only in part, only on a net basis, or not at all. Common examples are a composite contract mixing taxable fees with reimbursements, or business income with no permanent establishment in India. See our guides to royalty taxation and fees for technical services.
• Non-residents with losses or credits, such as carried-forward losses or large TDS already at their credit, which reduce what they will finally owe.

Form 128 (formerly Form 13): how to apply for a lower or nil TDS certificate

From 1 April 2026 the application is Form 128, filed electronically on the TRACES portal and e-verified. The Income Tax Department's form note maps it directly: Form 13 under the 1962 Rules is Form 128 under the 2026 Rules, and section 197 of the 1961 Act is section 395(1) of the 2025 Act. The steps the department lists are:

1. Log in to TRACES as a taxpayer, using your PAN.
2. Go to the Form 128 filing option under e-file.
3. Complete the online form. Part A covers the applicant, Part B the category and request, and Part C existing tax liabilities and income particulars. Annexure I carries the payer details for TDS.
4. Upload supporting documents.
5. E-verify and submit.
6. The Assessing Officer or the automated system processes the application.
7. If approved, the certificate becomes available to download and is also visible to the payer on TRACES.

The department says Form 128 "may be filed any time during the Tax Year for which the certificate is sought". Timing still matters in practice, because the certificate only governs deductions made while it is valid. Tax the buyer has already deducted cannot be un-deducted, and the only way back is a refund. File as soon as the price and buyer are fixed, well before the sale deed is registered.

Two further points apply under the 2025 Act:

• PAN is essential. Section 397(2)(f)(ii) says that if you do not furnish a valid Permanent Account Number in an application under section 395(1), "no certificate under such provisions shall be granted". Without a PAN the buyer must also deduct at the higher rate under section 397(2), unless the documents listed in the Rules are given to the buyer. For non-residents these are the seller's name, email, contact number and overseas address, a tax residency certificate and a foreign tax identification number (see section 397 higher TDS without PAN).
• An e-verified route now exists in the Act. The Finance Act, 2026 inserted section 395(6) from 1 April 2026. It lets the application also be filed before a "prescribed income-tax authority", which can issue or reject it on electronic verification. The conditions are left to the Rules, so whether a particular application qualifies is something we check at the time of filing.

How long is a lower TDS certificate valid?

Only for the period of the tax year stated on it, only for the named payer, and only up to the amount stated. The Income-tax Rules, 2026 say the certificate is valid "for such period of the tax year, as may be specified in the certificate, unless it is cancelled by the Assessing Officer". It is issued in the name of the person responsible for deducting tax and is valid only for "a specified payment from the specified deductor, to the extent of the amount specified". The Assessing Officer can cancel it under section 395(5) after giving you a reasonable opportunity to be heard.

In practice this means three things. If the buyer changes, you need a new certificate. If payment slips from March into April, the certificate for the old tax year does not cover it. If the price goes up, the certificate covers only the amount stated on it. Plan the application around the actual payment schedule, including any instalments.

Does the buyer need a TAN to buy property from an NRI?

Until 30 September 2026, yes. From 1 October 2026, a resident individual or HUF buying from a non-resident no longer needs one. Section 397(1)(c)(iii) of the Income-tax Act, 2025, substituted by the Finance Act, 2026 with effect from 1 October 2026, exempts "a resident individual or Hindu undivided family" from obtaining a Tax Deduction and Collection Account Number (TAN) for tax deducted on "any consideration for the transfer of any immovable property under section 393(2) [Table: Sl. No. 17]". The Income-tax (Fifth Amendment) Rules, 2026 (Notification 121/2026, G.S.R. 830(E), 22 September 2026) make this work from 1 October 2026:

• The buyer pays the tax within 30 days from the end of the month of deduction with a PAN-based challan-cum-statement in Form 141, which has a new Schedule E for property bought from non-residents.
• Schedule E records the property, every buyer and seller, the stamp duty value, the sale consideration, whether the gain is long or short-term, the TDS rate, and the certificate number of any section 395(1) certificate obtained by the seller. For a seller without a PAN it also records the seller's tax residency certificate number and foreign tax identification number.
• The buyer gives the seller a TDS certificate in Form 132 within 15 days of the Form 141 due date.
• Where there is more than one buyer, each files a separate form.

The relief is narrow. A buyer that is a company, firm or other entity, or a buyer who is themselves a non-resident, still needs a TAN. That buyer deposits the tax by the 7th of the following month (30 April for deductions made in March), files the quarterly TDS statement in Form 144 (formerly Form 27Q), and issues the certificate in Form 131.

Do I need Form 15CA and 15CB (now Forms 145 and 146) to send the money abroad?

Form 145 (formerly Form 15CA) is filed for payments to non-residents. Form 146 (formerly Form 15CB), the chartered accountant's certificate, is needed only where the taxable remittance is above ₹5 lakh in the tax year and no certificate or order has been obtained from the Assessing Officer. The Income-tax Rules, 2026 split Form 145 into four parts, set out in the heading "Furnishing of information for payment to a non-resident, not being a company, or to a foreign company":

So a lower deduction certificate does more than cut the tax. It moves the remittance into Part B and removes the Form 146 step. Our Form 145/146 filing guide covers the portal mechanics.

For an NRI, sale proceeds usually land in an NRO account. Under the RBI's Master Direction on Deposits and Accounts, NRO balances can be repatriated by NRIs and PIOs "up to USD 1 million", subject to the FEMA remittance-of-assets conditions. The bank will ask for the Form 145 acknowledgement, and for Form 146 where Part C applies. See our repatriation guide and NRE vs NRO comparison.

Failing to furnish Form 145, or furnishing inaccurate information, carries a penalty of ₹1,00,000 under section 462 of the Income-tax Act, 2025 (section 271-I of the Income-tax Act, 1961). An accountant who certifies incorrect information in a report or certificate faces a penalty of ₹10,000 per certificate under section 463.

TDS on payments to foreign companies: royalties, technical fees and services

An Indian payer deducts on royalties, fees for technical services and other taxable sums paid to a foreign company at the rates in force, the treaty rate, or a certified lower rate, whichever the paperwork supports. For tax year 2026-27, Part II of the First Schedule sets 20% for royalty and fees for technical services under approved or policy-compliant agreements, and 35% on "any other income" of a foreign company. Surcharge for a foreign company is 2% where the amount subject to deduction is above ₹1 crore and 5% above ₹10 crore, plus 4% cess.

There are three ways to deduct less:

• Treaty rate at source. Where a DTAA rate is lower, the payer can apply it without any certificate. The foreign company must provide its tax residency certificate and file Form 41 (formerly Form 10F). The treaty benefit at source is available only with that form filed. See our country pages for the US, the UK and Singapore.
• Payee's certificate under section 395(1). The foreign company applies in Form 128 where its real liability is below even the treaty rate, for example because of losses, net-basis taxation, or income that is only partly taxable.
• Payer's determination under section 395(2) (section 195(2) and (3) of the Income-tax Act, 1961). The Indian payer asks the Assessing Officer to fix what proportion of a composite payment is chargeable. Tax is then deducted only on that proportion. This suits contracts that mix taxable services with reimbursements or equipment.

Either kind of certificate or order takes the payment into Part B of Form 145. For group payments, see our cross-border payments service and how to calculate TDS on cross-border payments.

When is a lower TDS application refused or reduced?

Applications fail for three reasons: the Assessing Officer is not satisfied that your total income justifies the lower rate, the application is incomplete, or a legal precondition such as a valid PAN is missing. The problems we see most often are:

• No computation, or a weak one. The Rules require the officer to weigh your estimated income and tax. A bare application with no capital gains computation, purchase deed, cost records or proof of transfer expenses gives the officer no basis to go below the default rate.
• Claiming indexation. Non-residents cannot use the pre-23 July 2024 indexation option, which is limited to residents by section 197(3). A computation built on indexed cost will not survive review.
• Relying on a treaty to reduce tax on Indian property. India keeps the right to tax gains on Indian immovable property under its treaties with the US and UK (each state taxes capital gains under its domestic law), Canada (gains "may be taxed in both Contracting States"), and the UAE, Singapore and Australia (gains from immovable property may be taxed where it is situated). The relief comes in your home country as a foreign tax credit, not as lower Indian TDS.
• Unexplained reinvestment claims. An exemption under section 82, 85 or 86 needs evidence of the new asset, a booking or allotment, or at least a clear plan and timeline. Otherwise the officer may certify only part of it.
• Outstanding demands or missing past returns. The Rules require the officer to consider existing liability and the last four tax years.
• No PAN, or a PAN that is not operative. No certificate can be granted without a valid PAN.
• Wrong payer details, or a late application. A certificate is buyer-specific and amount-specific. A mismatch with the actual buyer, or payments already made, limits what it can do.

If the certificate is refused or comes back at a higher rate than you expected, you are no worse off than without one. The buyer deducts at the rates in force and you claim the excess back through your return.

What if TDS has already been over-deducted? The refund route

File an Indian income-tax return for the tax year of the sale, report the gain and exemptions, claim credit for the TDS, and the excess is refunded after processing. For an NRI individual with no business or professional income, the due date is 31 July after the end of the tax year. For a sale in tax year 2026-27, that is 31 July 2027. Before filing, check that the buyer has deposited the tax and reported it correctly, because your credit depends on it:

• Form 141 or Form 144, depending on the buyer's route
• the TDS certificate the buyer issued (Form 132 or Form 131)
• your annual tax statement

Our NRI tax filing guide covers the return itself. The refund route works, but it is slow. For most sellers the certificate is the better route whenever the gap between TDS and real tax is large.

Notes for sellers in the US, UK, UAE, Singapore, Canada and Australia

• UAE: with no personal income tax at home, there is no foreign tax credit to absorb Indian tax. Every rupee over-deducted is pure cash drag until the Indian refund, so the certificate matters most here. See India-UAE capital gains under the DTAA.
• US, UK, Canada and Australia: India taxes the gain first. Your home country normally gives a credit for Indian tax actually payable, not for excess TDS that India will later refund. Match the certificate to your real Indian liability and keep the Indian computation for your home return. See the US, UK, Canada and Australia capital gains pages.
• Singapore: gains on Indian immovable property may be taxed in India under Article 13(1) of the treaty. See India-Singapore capital gains.
• Selling through a power of attorney: your attorney in India can sign the sale deed. The Form 128 application, PAN and TRACES login still belong to you as the payee. See our NRI power of attorney guide.

Common mistakes that cost NRIs money

1. Treating the resident rule as the NRI rule. The 1% TDS and ₹50 lakh threshold apply only to resident sellers. For a non-resident, the deduction is under section 393(2) at the rates in force.
2. Applying after the token and first instalments are paid. The certificate governs only what is paid while it is valid. Deductions already made have to be recovered through a refund.
3. Letting the buyer file the wrong form. From 1 October 2026, resident individual buyers use Form 141 with Schedule E. Corporate and non-resident buyers use a TAN and Form 144. A wrong filing can leave your credit missing.
4. Forgetting the second buyer. With joint buyers, each deducts on their share and each files separately. The certificate must name the payers correctly.
5. Assuming Form 146 is always needed. With a section 395 certificate, the remittance goes through Part B of Form 145, with no Form 146.
6. Not filing the Indian return. Even with a certificate, you must file a return for the tax year of sale to settle the final tax and claim any balance.

Related reading

Read NRI property: FEMA, tax and repatriation, the complete NRI taxation guide, our glossary entries on section 395 certificates and section 393(2) withholding, and the withholding tax rates by country table. For wider planning, see tax advisory and our DTAA master guide.