Selling Property in India as an NRI
Selling property in India from abroad involves a much larger tax withholding than most NRIs expect, plus a law change in 2026 that renumbered the sections governing all of it. Here's what actually happens at closing, and what you can do about the withholding amount before the sale.
This guide explains how the rules generally work and is not tax, legal, or investment advice. Rates, thresholds, and form numbers change with each Union Budget and Finance Act, and your own situation (which country you live in, your visa or citizenship status, how the asset was funded) can change the answer. Confirm your specific case with a chartered accountant or tax advisor before you file anything or move money. This page covers TDS mechanics and repatriation. It does not cover capital gains tax planning, which depends heavily on your specific purchase history and should go through a CA before you list the property.
How much gets withheld
Unlike a resident-to-resident sale, there's no minimum sale value below which TDS doesn't apply. Withholding applies from the first rupee.
- Property held over 24 months (long-term): TDS around 12.5%, plus surcharge and a 4% cess, generally landing in the 13% to just under 15% range depending on income level. Surcharge on this category is capped, which is why the top end stays under 15% even for large gains.
- Property held 24 months or less (short-term): taxed at your applicable income slab rate, which can run well above 30% once surcharge and cess are added, since the surcharge cap that applies to the long-term rate doesn't apply here.
This is withholding, not your final tax bill. If your actual capital gains tax liability is lower than what got withheld, you claim the difference back by filing an Indian tax return.
Lowering the withholding before the sale: Form 128
Rather than let the buyer withhold tax on the full sale price and wait for a refund, you can apply to the Assessing Officer for a certificate authorizing a lower or nil TDS deduction, based on your actual estimated capital gains rather than the full sale value. This form was renamed Form 128 (from the older Form 13) effective 1 April 2026, filed electronically through the TRACES portal. The critical timing detail: this has to be applied for and obtained before the sale closes. It can't fix withholding that already happened.
The indexation question
Before the 2024 Budget, sellers could adjust their purchase cost for inflation ("indexation") before calculating capital gains, taxed at 20%. The 2024 Budget replaced this with a flat 12.5% rate without indexation, while giving resident individuals and HUFs a one-time choice between the two methods for property bought before the change. Multiple sources report that NRIs were left out of that grandfathered choice and pay the flat 12.5%-without-indexation rate regardless of when they bought the property, a position that has been challenged in at least one High Court petition. As of this writing there's no confirmed resolution. If this affects a sale you're planning, get current guidance from a CA rather than relying on any article, including this one, for the final word on it.
The 2026 section renumbering
India's Income-tax Act, 2025 took effect 1 April 2026. The TDS rule for buying property from an NRI seller, previously Section 195, now sits under Section 393(2). The lower-TDS certificate provision, previously Section 197, is now Section 395. If your lawyer, CA, or buyer's paperwork still cites "Section 195," that's the old numbering and not necessarily wrong, since it describes the same underlying rule, just not the currently governing section number for a 2026 transaction.
Getting the proceeds out of India
Sale proceeds are typically credited to your NRO account and repatriated from there. See NRI Money Repatriation for the USD 1 million/year mechanics and the Form 145/146 paperwork your bank will require alongside proof of TDS payment and the sale deed.
Frequently asked questions
Why is TDS on an NRI property sale so much higher than for a resident seller?
Because it applies to the full sale value from the first rupee, with no threshold, and at rates tied to capital gains tax brackets rather than the flat 1% withholding a resident-to-resident sale usually sees. It is a withholding amount, not the final tax bill, and can be recovered or reduced through the certificate process described below.
Can I get less TDS deducted than the standard rate?
Yes. You can apply for a lower or nil TDS certificate before the sale, so the buyer withholds based on your actual estimated capital gains rather than the full sale value. This has to be applied for before the transaction, not after.
Can NRIs use indexation to reduce capital gains on a property sale?
This is genuinely unsettled. The 2024 Budget removed indexation for most property sales in favor of a flat lower rate, and gave resident individuals and HUFs a one-time choice to keep the older indexed method for property bought before the change. NRIs appear to have been excluded from that choice, and the exclusion has been challenged in court. Confirm the current position with a CA before filing, since this could change.
How do the sale proceeds actually get to me abroad?
Proceeds are typically credited to your NRO account, then repatriated under the standard rules: up to USD 1 million per financial year for most cases, or in full for up to two residential properties originally funded through NRE or FCNR remittance. See the repatriation guide for the full breakdown.