NRI Property Selling Got (Just) A Bit Easier

Starting October 1, 2026, buyers won’t need a separate account just to pay us when we sell property in India while being an NRI. Our sales will arguably close a bit faster and our money will reach us quicker.

The Problem: How TDS Works on Our Property Sale
When we sell property in India—a flat, a house, land—the buyer must deduct TDS (Tax Deducted at Source) before paying us. This is a legal requirement under Section 195 of the Income Tax Act. The buyer holds back tax money and deposits it with the government on our behalf.
But here’s where it gets painful: To deposit that TDS (Tax Deducted at Source), the buyer needed to first apply for and obtain a TAN (Tax Deduction and Collection Account Number). A completely separate account. Just for this one transaction. Just for us.

The timeline? Few weeks minimum. Often longer. Buyers confused about the process. Form errors. Follow-ups. Delayed closings. For NRI (Non-Resident Indian) property sellers like us, this wasn’t just inconvenient, to say the least. Many buyers struggled to deal with the complexity.

CRITICAL: TDS is Calculated on ENTIRE Sale Value, Not Capital Gains
This is the most important detail that we need to understand: Section 195 requires the buyer to deduct TDS on the ENTIRE property sale price—not on the profit (capital gain) we actually made.

Budget 2026: The TAN Requirement was dropped
Starting October 1, 2026, buyers no longer need a TAN (Tax Deduction and Collection Account Number) to deposit TDS (Tax Deducted at Source) when purchasing property from NRIs (Non-Resident Indians).

Instead, they simply use their PAN (Permanent Account Number)—the account number the NRI already had.

That’s it. No new applications. No waiting weeks. No complexity. Buyer calculates the TDS and deposits it using the NRI’s existing PAN (Permanent Account Number) through a standard challan (tax deposit form), and the process moves forward.

Understanding TDS Rates for NRI Property Sales (Section 195)
Long-Term Asset: Property like real estate held for more than 2 years and listed securities held for more than a year. TDS rate is 12.5% (without any indexation benefit) plus applicable surcharge and cess, unless NRI seller applies for a lower deduction certificate under Section 197 (Form 13).
Short-Term Asset: Property held for 2 years or less. TDS rate is 30% on the ENTIRE sale value, plus applicable surcharge and cess.

Critical Detail: Both LTCG and STCG rates apply to the entire sale consideration, not to capital gains only, unless we obtain a lower TDS certificate under Section 197.

Note on PAN: If the seller doesn’t provide PAN to the buyer, higher TDS will be deducted under Section 206AA—typically 20% or higher of the sale value.

Filing an ITR (Income Tax Return) in India can help claim refund of excess TDS paid.

The Solution: Form 13 Lower TDS Certificate (Section 197)
To avoid excessive TDS on the full sale value, we can apply for a lower or nil TDS deduction certificate under Section 197 using Form 13. This application must be filed BEFORE the property sale, typically 30-40 days in advance.

For NRIs in USA: India-USA DTAA and US Global Taxation
The India-USA Double Taxation Avoidance Agreement (DTAA) allows India and US to tax capital gains from immovable property situated in India. Article 13 of the treaty states: ‘Each Contracting State may tax capital gains in accordance with the provisions.’ This means the capital gains from property in India is taxed in India.

US tax residents selling Indian property must report the capital gain on Form 1040 (Schedule D) and can claim the Indian tax paid as a Foreign Tax Credit (FTC) on Form 1116, preventing double taxation. FTC is limited to the US tax on that income—if Indian tax exceeds US tax liability, only the US tax portion is covered.

Section Reference: Section 195 of the Income Tax Act, 2025 (covers TDS on NRI property sales). Section 197 (Form 13) for lower/nil deduction certificate applications. Section 206AA for higher TDS if PAN not provided.

Shiva Duvvuru, FCA (India), CPA | email:Admin@taxcircle.com