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Capital gains = Sale Consideration - Cost of Acquisition. (purchase cost to NRI).
NRIs selling property in India have to
get their capital gain computed by the income tax officer. Once the NRI seller
procures this report from the assessing
officer, they must furnish the same to the buyer who may then subtract the 20% on
the capital gain value.
If Non-Resident Indians sell their property located in India after retaining it at least for two years, then they have to pay a long-term capital gain tax at the rate of 22.88%, under Section 195 of the Income Tax Act, 1961. However, NRIs can lower down this TDS deduction with the help of exemptions and deductions available under the same Act. According to Section 197, every buyer who purchases property from NRI seller, needs to deduct a TDS at the rate of 22.88% on gross sales proceeds. In such a situation, first paying TDS at the rate of 22.88% and then claiming the refund after filing an income tax return, which may take months, would be tedious.
Instead, NRI sellers can avail a lower or No TDS Deduction Certificate by applying for Form 13 online from the Income Tax Department in case their actual tax rate is lower than 22.88%. This will help NRIs to save themselves from the hassle as well as avoid locking their money through TDS Deductions at the rate of 22.88% of the sales proceeds for months.
It is advisable to apply for low or no TDS Deduction Certificate under Section 197 of the Income Tax Act, as soon as one finds a prospective buyer and the sale value of the property is fixed.
The Income Tax Department may ask for the following documents to issue a Nil or Lower Tax Deduction Certificate.
If Non-Resident Indians sell their property located in India after retaining it at least for two years, then they have to pay a long-term capital gain tax at the rate of 22.88%, under Section 195 of the Income Tax Act, 1961. However, NRIs can lower down this TDS deduction with the help of exemptions and deductions available under the same Act. According to Section 197, every buyer who purchases property from NRI seller, needs to deduct a TDS at the rate of 22.88% on gross sales proceeds. In such a situation, first paying TDS at the rate of 22.88% and then claiming the refund after filing an income tax return, which may take months, would be tedious.
Instead, NRI sellers can avail a lower or No TDS Deduction Certificate by applying for Form 13 online from the Income Tax Department in case their actual tax rate is lower than 22.88%. This will help NRIs to save themselves from the hassle as well as avoid locking their money through TDS Deductions at the rate of 22.88% of the sales proceeds for months.
It is advisable to apply for low or no TDS Deduction Certificate under Section 197 of the Income Tax Act, as soon as one finds a prospective buyer and the sale value of the property is fixed.
The Income Tax Department may ask for the following documents to issue a Nil or Lower Tax Deduction Certificate.
- Passport
- PAN
- Sale Agreement / Sale Deed
- Income Tax Returns
- Bank account statement
- Any other document deemed relevant
If NRIs sell their property located in India after retaining it at least for two
years, they are liable to pay Long-term
Capital Tax at the rate of 22.88%. However, this tax rate can be lowered or cut down
with the help of TDS deductions
available under the IT Act, 1961.
Under the Income Tax Act, 1961, Tax Deducted at Source or TDS deduction is the tax paid by the receiver of goods and services on the overall transfer amount from the provider, under certain situations. The framework for TDS deductions is reasonably clear when it comes to domestic transactions. However, there is a fair amount of confusion about tax imposition for Non-Residents Indians who want to sell any property that they may have in India. This article explores how much income tax is payable and TDS deductions in case of NRIs who want to sell property in India.
NRIs who are selling house property situated in India have to pay capital gain tax. The tax that is payable on the profit depends on whether it is a short term or long-term capital gain.
Under the Income Tax Act, 1961, Tax Deducted at Source or TDS deduction is the tax paid by the receiver of goods and services on the overall transfer amount from the provider, under certain situations. The framework for TDS deductions is reasonably clear when it comes to domestic transactions. However, there is a fair amount of confusion about tax imposition for Non-Residents Indians who want to sell any property that they may have in India. This article explores how much income tax is payable and TDS deductions in case of NRIs who want to sell property in India.
NRIs who are selling house property situated in India have to pay capital gain tax. The tax that is payable on the profit depends on whether it is a short term or long-term capital gain.
| Nature of Capital Gains | Duration | TDS |
| LTCG | Property held for > 2 years | 20% |
| STCG | Property held for ≤ 2 years | 30% |
Yes, there are exemptions available from TDS on sale of property for NRIs. One such
exemption is available if the property sold is a residential property with a sale
value of up to Rs. 2 crore, and the proceeds are reinvested in another residential
property within two years of the sale.
