NRI Selling Property in India: TDS, Capital Gains and the New PAN-Based Rule (2026)

Selling a flat or a piece of land in India is one of the most common tax situations NRIs face, and one of the most expensive to get wrong. The buyer must deduct TDS on the whole sale price, not only on your gain. Without planning, a large part of your money can be held up until you file your return and get a refund.

This guide covers the rules under the Income-tax Act, 2025, which applies from 1 April 2026, including the PAN-based TDS rule for buyers from 1 October 2026.

1. How the gain is taxed

Short-term or long-term?

• Held for 24 months or less: short-term capital gain (STCG), taxed at your slab rates.
• Held for more than 24 months: long-term capital gain (LTCG), taxed at 12.5%, plus surcharge and cess. This is under section 197 of the 2025 Act, which replaces section 112 of the 1961 Act.

No indexation for NRIs

Since 23 July 2024, LTCG on property is taxed at 12.5% without indexation. Resident individuals and HUFs who bought land or a building before 23 July 2024 can choose between 12.5% without indexation and 20% with indexation. NRIs do not get this choice. They pay 12.5% without indexation.

How the gain is worked out

Sale price, minus transfer costs (brokerage, legal fees), minus what you paid for the property and any improvements. For property bought before 1 April 2001, the fair market value on 1 April 2001 can be used as the cost, but only up to its stamp-duty value.

2. TDS: what the buyer must deduct

When the seller is an NRI, the buyer deducts TDS under section 393(2) of the 2025 Act (old section 195).

• There is no ₹50 lakh threshold. That limit applies only when the seller is resident. For an NRI seller, TDS applies from the first rupee.
• TDS is calculated on the full sale price, not on the gain, unless a lower or nil TDS certificate has been obtained (see below).
• Rates usually applied: 12.5% for LTCG and slab rate, usually 30%, for STCG, plus surcharge (up to 15% on capital gains) and 4% cess.
• If the NRI has no PAN, TDS is deducted at a higher rate (usually 20% or the normal rate, whichever is higher).

Example: An NRI sells a flat for ₹1.2 crore that they bought in 2012 for ₹50 lakh. Their actual gain is ₹70 lakh, so the actual tax is about ₹9.8 lakh before surcharge. But without a certificate the buyer deducts about 12.5% of ₹1.2 crore, which is ₹15 lakh plus surcharge and cess. The extra amount is locked up until the refund comes.

3. What changes from 1 October 2026: PAN instead of TAN

Until now, a buyer purchasing from an NRI needed a TAN and had to file a quarterly TDS return. Most individual home-buyers found this hard. Under the Finance Act, 2026:

• From 1 October 2026, resident individuals and HUFs buying from an NRI can deposit TDS using their PAN on a single challan-cum-statement, in the same way as purchases from resident sellers.
• Companies and firms buying property still need a TAN.
• The TDS rates have not changed. Only the way TDS is deposited is simpler.

For deals completed before 1 October 2026, the TAN-based process still applies.

4. Reducing the TDS: the lower or nil TDS certificate

The NRI seller can apply to the Assessing Officer (TDS) on Form 128, which replaced Form 13, under section 395 of the 2025 Act. The officer can then allow TDS on the actual expected tax instead of on the full price. Apply well before the sale is registered, because a certificate covers only payments made after it is issued. A step-by-step guide is in the next article in this series.

5. Reducing the tax: reinvestment exemptions

NRIs can claim these exemptions just like residents. The new house must be in India. If you have not invested by the return due date, the unused amount can be deposited in the Capital Gains Account Scheme.

6. After the sale: repatriation and filing

• Sale proceeds go into your NRO account. You can send up to USD 1 million per financial year abroad from NRO balances or asset sales, under RBI rules, once the CA certificate (Form 146, old 15CB) and the declaration (Form 145, old 15CA) are filed.
• File your ITR to report the gain, claim exemptions and get back any extra TDS. The TDS certificate the buyer gives you appears in your Annual Information Statement.

Checklist for NRI sellers

1. Make sure your PAN is active and linked, and your NRO account is in order.
2. Get a CA to work out the capital gain and the expected tax.
3. Apply for the Form 128 lower TDS certificate before the agreement or registration.
4. Make sure the buyer deducts and deposits TDS correctly. From 1 Oct 2026 individual buyers use their PAN; others use TAN.
5. Collect the TDS certificate from the buyer.
6. Reinvest under section 82, 85 or 86 if you want the exemption.
7. Repatriate using Forms 145/146 and file your ITR.

Frequently asked questions

Is there TDS if the sale price is below ₹50 lakh?
Yes. For NRI sellers there is no threshold, so TDS applies on any amount.

Can an NRI claim the 20% with-indexation option?
No. That option is only for resident individuals and HUFs on land or buildings bought before 23 July 2024.

Does the buyer still need a TAN?
For deals on or after 1 October 2026, a resident individual or HUF buyer can use their PAN. Companies and firms still need a TAN.

How do I get back extra TDS?
File your income tax return in India. The refund is issued after processing. Getting a lower TDS certificate in advance avoids the delay.

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Selling property in India from abroad? Garvita Jain & Co. handles the capital gains calculation, the lower TDS certificate, buyer TDS compliance, Forms 145/146 and your ITR. Contact us here, or at contact@garvitajainandco.com or +91 98678 16597.

This article is general information based on the law as of October 2026 and is not professional advice.

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Sources

Official

• Income Tax Department, Section 197 (Tax on long-term capital gains)
• Income Tax Department, Exemptions from capital gains
• Income Tax Department, Non-Resident FAQs
• RBI Master Circular, remittance facilities for NRIs (USD 1 million) (check the latest RBI Master Direction on Remittance of Assets on rbi.org.in)

Professional / CA publications

• Dinesh Aarjav & Associates, Budget 2026 relief for NRI property sale TDS
• Vakilsearch, TDS on NRI property sale: PAN replaces TAN from 1 Oct 2026
• TDSMAN, TDS on payments to non-residents, s.393(2)
• Foros, Capital gains exemptions s.82–88 mapping
• DBS, NRIs selling property (indexation not available)