When a resident sells property in India, the buyer deducts one per cent. When a non-resident sells the same property, the buyer deducts tax computed on the entire sale consideration, not on the gain. There is no threshold and no exemption for small transactions.
On a flat sold for Rs. 1.5 crore that produced a gain of Rs. 25 lakh, roughly Rs. 22 lakh can leave the table before the seller sees a rupee, against a real tax liability closer to Rs. 3.7 lakh.
The difference is recoverable, but only through a return filed after the tax year ends, and a refund that commonly takes six to eighteen months. For a seller who is trying to remit the proceeds abroad, that is a long time for the money to sit with the department.
A certificate under Section 395(1) of the Income-tax Act, 2025, applied for in Form No. 128, fixes this at the source. It tells the buyer to deduct at a rate that matches the computed capital gain rather than the statutory default. CorporateWalla computes the gain, files Form 128 on TRACES, answers the Assessing Officer, and gives the buyer a certificate they can safely act on.
Two separate provisions govern property TDS, and confusing them is the single most expensive mistake in these transactions.
Resident seller. The buyer deducts under Section 393(1) of the Income-tax Act, 2025, the successor to the old Section 194-IA. The rate is one per cent, it applies only where the consideration or stamp duty value is Rs. 50 lakh or more, and it is charged on the consideration.
Non-resident seller. The buyer deducts under Section 393(2), Table Serial Number 17, the successor to the old Section 195. This covers any sum chargeable to tax under the Act paid to a non-resident, other than salary. There is no Rs. 50 lakh threshold. Tax is deducted from the first rupee, and it is computed on the sale consideration rather than on the gain, because the buyer has no way of knowing the seller cost of acquisition.
Buyers who assume the one per cent rule applies to an NRI seller create a shortfall that the department recovers from the buyer, with interest, not from the seller. This is why a certificate protects both sides of the transaction, not just the seller.
Section 393(2) prescribes deduction at the rates in force, which means the rate that applies to the nature of income arising to the non-resident. For a property sale that is the capital gains rate, plus surcharge and health and education cess.
Where the property was held for more than 24 months the gain is long term and the rate is 12.5 per cent without indexation. Surcharge on capital gains is capped, so the effective deduction usually lands in this range.
| Surcharge applicable | Effective rate with 4 per cent cess |
|---|---|
| Nil | 13.00 per cent |
| 10 per cent | 14.30 per cent |
| 15 per cent | 14.95 per cent |
Where the property was held for 24 months or less the gain is short term and is taxed at the slab rates applicable to the seller. Because the buyer cannot know the seller slab, buyers routinely deduct at the maximum, so a short term sale is where the overdeduction is most severe.
Note carefully that these percentages are applied to the whole sale price. A seller with a small gain, or with a capital loss, still faces the full deduction. The rate itself is not the problem. The base it is applied to is.
An NRI sells a Pune apartment in September 2026 for Rs. 1,50,00,000. It was bought in 2016 for Rs. 1,20,00,000. The long term capital gain is Rs. 30,00,000. Assume a 15 per cent surcharge applies.
| Position | Amount |
|---|---|
| Sale consideration | Rs. 1,50,00,000 |
| Cost of acquisition | Rs. 1,20,00,000 |
| Long term capital gain | Rs. 30,00,000 |
| Actual tax on the gain at 14.95 per cent effective | Rs. 4,48,500 |
| TDS without a certificate, 14.95 per cent on the consideration | Rs. 22,42,500 |
| Excess locked up until the refund is processed | Rs. 17,94,000 |
With a Form 128 certificate, the buyer deducts against the computed gain rather than the consideration, and roughly Rs. 18 lakh stays with the seller instead of being recovered through a refund cycle. Where the seller also claims a reinvestment exemption, the certificate can bring the rate close to nil.
The Income-tax Act, 2025 came into force on 1 April 2026 and repealed the Income-tax Act, 1961. The application that non-residents and their advisers knew as Form 13 under Section 197 no longer exists.
| Position under the 1961 Act | Position from 1 April 2026 |
|---|---|
| Application: Form No. 13 | Application: Form No. 128 |
| Lower or nil deduction: Section 197 | Lower or nil deduction: Section 395(1) |
| Payer application for non-residents: Section 195(2) | Payer application: Section 395(2), Rule 214 |
| TDS on payments to non-residents: Section 195 | Section 393(2), Table Serial Number 17 |
| Quarterly non-resident return: Form 27Q | Form No. 144 |
| Remittance forms: Form 15CA and 15CB | Form No. 145 and Form No. 146, Rule 220 |
| Application rules: Rules 28, 28AA, 28AB, 29, 37G, 37H | Rule 213 of the Income-tax Rules, 2026 |
A certificate already issued under the old Section 197 stays alive in one situation only. It remains valid for payments or credits made on or after 1 April 2026 if it was issued for lower or nil deduction in respect of projected receivables for tax year 2026-27. A certificate covering an earlier year does not carry forward. The general mechanism, including the annexures and the certificate ceiling, is set out on our lower deduction certificate page.
This is the most consequential development for NRI property sales this year, and the timing matters because it is weeks away rather than months.
Today, a resident buyer purchasing property from a non-resident must obtain a TAN in order to deduct and deposit the tax, and must file the quarterly return in Form No. 144. For a buyer who will never deduct tax again, that is a registration, a processing delay and a recurring filing obligation attached to a single transaction. It is a common reason buyers walk away from NRI-owned property or push for a discount.
The Finance Act, 2026 amends Section 397 so that a resident individual or Hindu undivided family is not required to obtain a TAN where tax is deducted on consideration for the transfer of immovable property and the seller is a non-resident. The buyer instead deducts using their own PAN and reports the deduction quoting the seller PAN in a challan-cum-statement, the same way a resident-to-resident purchase already works. The amendment takes effect from 1 October 2026.
If your sale is scheduled near the boundary, the compliance track differs on either side of 30 September 2026. That is worth deciding deliberately rather than by accident.
The Act provides separate mechanisms for the payee and the payer, and picking the wrong one costs weeks.
Section 395(1), the seller route. The non-resident payee applies in Form No. 128 for a certificate authorising deduction at a lower or nil rate. This is the route that suits almost every NRI property sale, because the seller is the party who holds the cost records, the reinvestment plan and the treaty position, and the seller is the one carrying the cash flow cost.
Section 395(2), the buyer route. Governed by Rule 214. The person responsible for paying a non-resident applies for a determination of the appropriate proportion of the sum that is chargeable to tax. It is used where the buyer needs certainty for their own protection, or where the seller is unresponsive or unwilling to apply. Note that the payer route determines the chargeable proportion, which is a different question from certifying a rate for the payee.
Section 393(6), not available here. The self declaration route, furnished in Form No. 121 for tax years beginning on or after 1 April 2026, is the successor to Form 15G and 15H. It is a resident mechanism and does not help a non-resident seller.
Rule 213(3) of the Income-tax Rules, 2026 lists what the Assessing Officer takes into consideration before issuing the certificate.
For non-residents this list has a particular sting. Many NRIs have not filed Indian returns for years because their Indian income was below the threshold or was already fully withheld. The four year history is still examined. An old demand under the repealed Act still counts, and where one is blocking the file it is an income tax notice matter. Both are recurring reasons NRI applications stall, and both are fixable before filing rather than after a query lands.
The departmental FAQ requires the computation of estimated total income and tax liability for the tax year, a computation of income for any of the preceding four tax years for which a return was not filed, and a note on income claimed to be exempt. For a property sale, the file that actually gets approved contains rather more.
Form No. 128 is furnished electronically on the TRACES portal at www.tdscpc.gov.in. There is no offline route and it is not filed on the income tax e-filing portal, which is where a large number of first time applicants lose time.
There is no statutory limit on the number of applications in a tax year, and an application may be withdrawn at any time before it is processed. Both matter when a transaction structure changes mid-negotiation.
Under Rule 213(8) the certificate is issued in the name of the person responsible for deducting the tax, under advice to the applicant. In a property sale that means the certificate names your buyer, not you. If the buyer changes, the certificate does not travel with the property.
It is valid only for a specified payment from the specified deductor, to the extent of the amount specified in it. Three limits therefore apply: the named buyer, the nature of the payment, and a monetary ceiling. Under Rule 213(7) it is valid for the period of the tax year stated in it, unless cancelled earlier by the Assessing Officer.
For instalment sales this is where things break. If the consideration is paid across instalments that cross the ceiling, or across a tax year boundary, the later payments are not protected. Check the ceiling and the period against the payment schedule in the agreement before the first instalment is released.
The departmental position is that the application cannot be processed once the transaction involving TDS is complete. The certificate operates prospectively and cannot reverse a deduction already made.
In practice that means the certificate has to be in hand before the buyer makes any payment, including the advance paid at agreement stage. NRIs frequently discover the mechanism after the sale deed is registered and the buyer has already deducted at the full rate. At that point the only route left is a refund claim in the return.
Build the application into the transaction timetable, not alongside it. Start once the buyer is identified and the consideration is agreed, and write the certificate into the agreement as a condition, so the buyer is contractually aware that a lower rate is coming.
The certificate reflects the tax the seller will actually owe, so exemptions the seller intends to claim can be brought into the computation rather than left for the return. The reinvestment provisions are renumbered under the Income-tax Act, 2025 but remain available to non-residents on the same footing as residents.
Section 82, formerly Section 54. Relief for long term gains on a residential house reinvested in another residential house in India.
Section 86, formerly Section 54F. Relief where the net consideration from any other long term asset is reinvested in a residential house.
Section 85, formerly Section 54EC. Relief for gains on land or building invested in specified bonds within six months, subject to the monetary cap.
Where a reinvestment is genuinely planned and can be evidenced, folding it into the Form 128 computation is what moves a certificate from a lower rate towards a nil rate. Where it is only an intention, it is better left out, because an exemption claimed and not carried through creates an advance tax shortfall and interest.
Where a double taxation avoidance agreement gives a better outcome than the domestic rate, the treaty position is part of the case put to the Assessing Officer, supported by a tax residency certificate from the country of residence and the prescribed declaration. For immovable property situated in India, most treaties leave the taxing right with India, so treaty relief is more commonly relevant to interest, dividends, royalties and technical fees than to a property sale. It is worth checking rather than assuming either way.
A separate and much blunter rule sits behind all of this. Where the payee does not furnish a valid PAN, Section 397(2) requires deduction at the higher of the applicable rate or twenty per cent. Rule 217 prescribes the conditions under which the higher rate does not apply to non-residents.
For a property seller the practical instruction is simple: confirm well before the transaction that the PAN exists, is operative, and is correctly reflected as a non-resident PAN. An inoperative PAN will override the benefit of any certificate.
The certificate handles the deduction. Three obligations follow it.
The buyer deposits and reports. For transactions on the pre-October track, or where the buyer is a company or firm, the buyer files the quarterly return in Form No. 144, the successor to Form 27Q, and issues the deduction certificate to the seller. The seller needs that certificate to claim credit. That is the same quarterly obligation covered by our TDS return filing service.
The seller files a return. An Indian return of income for the tax year, reporting the capital gain, claiming the exemptions actually carried through, and reconciling the TDS credit. Even where a nil certificate was obtained, the return is what closes the position. That is NRI income tax return filing.
The proceeds are remitted. Remittance abroad runs on Form No. 145 and Form No. 146 under Rule 220, which replace Form 15CA and Form 15CB. Form 15CA and 15CB submitted for remittances on or before 31 March 2026 remain valid under the transitional rules. Separately, the foreign exchange side is governed by the remittance of assets framework, which permits remittance up to the prescribed annual limit out of balances held in an NRO account, with documentation the bank will ask for. The tax certificate and the banking documentation are two different files and both need to be ready.
Professional fees only. There is no government fee for a Form No. 128 application.
| Engagement | Indicative professional fee |
|---|---|
| Form 128 for NRI property sale: capital gain computation and filing | From Rs. 20,000 |
| Additional co-owner on the same property | From Rs. 8,000 each |
| Form 128 for NRI rental income or other India-source receipts | From Rs. 12,500 |
| Treaty position and tax residency certificate support | From Rs. 10,000 |
| Buyer side application under Section 395(2), Rule 214 | On quote |
| Response to Assessing Officer queries | First two rounds included |
| Form 145 and Form 146 for remittance abroad | From Rs. 7,500 per remittance |
| NRI income tax return for the year of sale | From Rs. 9,000 |
Request a fixed quote for your property sale. Send us the purchase and sale figures, the holding period and the buyer position, and a CA comes back with a number and a timetable. Talk to our NRI tax team.
An NRI certificate application is a capital gains computation wearing a compliance jacket. The rate the Assessing Officer certifies is only as good as the cost base, the holding period and the exemption position behind it, and for property bought decades ago or received by inheritance, establishing that base is most of the work.
We compute the gain from the underlying documents, put the exemption position on a footing that will survive a query, file Form 128 on TRACES, handle the Assessing Officer, and brief the buyer so that the certified rate is actually applied rather than misread. We also flag the point most sellers miss: whether the certificate ceiling and validity period cover the full payment schedule in the agreement.
CorporateWalla is a brand of DSG Corporate Financial Advisors LLP, a chartered accountancy and company secretarial practice with its office at 129A Bangur Avenue, Block A, Kolkata 700055, working with clients across India and with non-residents in several jurisdictions.
Official sources: incometaxindia.gov.in, incometax.gov.in, and the TRACES portal at tdscpc.gov.in. Form No. 128 is filed on TRACES and nowhere else.
No. From 1 April 2026 the application is made in Form No. 128 under Section 395(1) of the Income-tax Act, 2025, prescribed under Rule 213 of the Income-tax Rules, 2026. A certificate already issued under the old Section 197 remains valid for payments on or after 1 April 2026 only if it was issued in respect of projected receivables for tax year 2026-27.
Because deduction on a payment to a non-resident is governed by Section 393(2), Table Serial Number 17, which applies to the sum paid rather than to the gain embedded in it. The buyer has no way of verifying your cost of acquisition, so the law does not ask them to. A Form 128 certificate is the mechanism that substitutes the computed gain for the gross consideration.
For a property held more than 24 months the gain is long term and the rate is 12.5 per cent without indexation, plus surcharge and 4 per cent cess, giving an effective 13.00, 14.30 or 14.95 per cent depending on the surcharge slab. For a property held 24 months or less the gain is short term and taxed at slab rates, and buyers commonly deduct at the maximum. There is no Rs. 50 lakh threshold for a non-resident seller.
Until 30 September 2026, yes. From 1 October 2026 a resident individual or Hindu undivided family buyer will not need a TAN and can deduct using their PAN through a challan-cum-statement, following the Finance Act 2026 amendment to Section 397. A company, firm or LLP buyer still needs a TAN. The challan-cum-statement form for these transactions is to be notified.
Before any payment is made, including the advance at agreement stage. The application cannot be processed once the transaction involving TDS is complete, and the certificate cannot reverse a deduction already taken. Allow time for the Assessing Officer to raise queries, and make the certificate a condition in the sale agreement.
It is possible where the computed liability is nil, for example where the gain is fully absorbed by a reinvestment exemption or where the sale produces a capital loss. It depends on the Assessing Officer being satisfied on the computation, and on the exemption being evidenced rather than merely intended.
Yes. The reliefs formerly in Sections 54, 54EC and 54F continue under the Income-tax Act, 2025 as Sections 82, 85 and 86 respectively, and are available to non-residents. Where a reinvestment is planned and can be evidenced, it can be built into the Form 128 computation rather than left to the return.
Each co-owner has their own capital gain, their own tax position and their own PAN, so each needs a separate certificate for their share. A single certificate does not cover a co-owner who is not named in it.
Form No. 128 cannot be submitted without a PAN. Separately, where a valid PAN is not furnished, Section 397(2) requires deduction at the higher of the applicable rate or twenty per cent, and Rule 217 sets the conditions under which that higher rate does not apply to non-residents. Sort the PAN position out well before the transaction, since an inoperative PAN can override the benefit of the certificate.
Remittance now runs on Form No. 145 and Form No. 146 under Rule 220 of the Income-tax Rules, 2026, which replace Form 15CA and Form 15CB. Forms 15CA and 15CB filed for remittances on or before 31 March 2026 remain valid under the transitional rules. The foreign exchange side is handled separately under the remittance of assets framework through your bank, out of NRO balances and subject to the prescribed annual limit.
The useful first step is not the application. It is establishing what the gain actually is: the cost of acquisition you can evidence, the holding period, the transfer expenses, and whether a reinvestment exemption is real enough to put in front of an Assessing Officer. For inherited property, or property bought decades ago, that is most of the engagement.
Send us the purchase documents, the draft agreement and your PAN and passport position, and we will tell you what rate the computation supports and whether the timetable still allows a certificate. Call or WhatsApp +91 72783 76654, or email info@corporatewalla.com. A CA calls back within 30 minutes.
Talk to our NRI tax team before you sign the sale deed, while a certificate can still change what the buyer deducts. Call 72783 76654. Mon–Sat, 10:00 AM – 7:00 PM IST.
