Selling real estate in India as a Non-Resident Indian (NRI) involves specific statutory compliance under the Income Tax Act 1961 and RBI’s Foreign Exchange Management Act (FEMA). Understanding the tax withholding and repatriation framework is vital to prevent unnecessary fund locks.
1. The High TDS Challenge for NRIs (Section 195)
When a resident Indian sells a property, the buyer deducts TDS at 1% under Section 194-IA. However, when an NRI sells property, the buyer is legally obligated under Section 195 to deduct TDS at the highest slab:
- Long-Term Capital Asset (Held > 24 Months): TDS at 20% (plus surcharge & 4% cess), reaching an effective rate of 20.8% to 23.92% on the total sale consideration, NOT on the profit.
- Short-Term Capital Asset (Held ≤ 24 Months): TDS at 30% (plus surcharge & cess).
2. How to Avoid Excessive TDS: Section 197 Lower TDS Certificate
To avoid having 20%+ deducted from the gross sale price, an NRI seller should apply for a Lower/Nil TDS Deduction Certificate under Section 197 from the Income Tax Assessing Officer:
- The application is submitted online on the TRACES portal via Form 13 before the sale deed is executed.
- The Assessing Officer calculates tax strictly on the actual capital gains (taking into account indexed acquisition costs, home improvement expenses, and capital gains exemptions under Section 54/54EC).
- The certificate specifies the exact reduced TDS rate (often between 2% to 6%), saving the NRI millions of rupees in upfront deductions.
3. Repatriation of Sale Proceeds: Form 15CA & Form 15CB
Once the sale consideration is credited into the NRI seller’s NRO (Non-Resident Ordinary) Bank Account, transferring funds to an overseas foreign bank account or NRE account requires statutory clearance:
- Form 15CB: A formal certification issued and digitally signed by an independent Chartered Accountant verifying that appropriate taxes on the remitted capital have been paid in full.
- Form 15CA: An online electronic undertaking submitted on the Income Tax e-filing portal by the remitter citing the CA's 15CB acknowledgment number.
- Annual Repatriation Limit: NRIs are permitted to repatriate up to USD 1 Million per financial year out of their NRO account under RBI’s Liberalised Remittance Scheme (LRS).
4. Key Documents Checklist for NRI Real Estate Sales
- Original Purchase Deed & Stamp Duty receipt.
- Current Sale Agreement / Agreement to Sell.
- Indian PAN Card of both NRI Seller and Buyer.
- Bank statement showing receipt of sale funds in NRO Account.
- Proof of NRI tax residency (Foreign Passport / OCI Card / Tax Residency Certificate - TRC).
Expert NRI Assistance by Chaitanya & Associates
Our dedicated international taxation desk assists global clients across the US, UK, UAE, Singapore, Canada, and Australia with end-to-end Section 197 certificate procurement, 15CA/15CB issuance with UDIN authentication, and smooth bank repatriation coordination. Schedule an NRI Consultation today.