NRI selling land: the TDS that hits, and how to right-size it

Which law applies now — and why do section numbers look new?

India replaced the Income-tax Act 1961 with the Income-tax Act 2025, effective 1 April 2026 — so FY 2026-27 deals cite new numbers with old aliases: TDS on payments to non-residents is section 393(2) (old 195); the resident-seller 1% provision is section 393(1) (old 194-IA); lower-deduction certificates come under section 395(1) via Form 128 (old 197/Form 13). Events dated on or before 31 March 2026 stay under the old Act. Every figure below is the new-Act, FY 2026-27 position, verified against the official Finance Bill 2026 schedule and e-filing guidance on 17 July 2026.

How much TDS on a long-term sale?

Land or building held over 24 months is long-term; the rate is 12.5% without indexation — and note carefully: the resident-only option to elect 20% with indexation for pre-July-2024 purchases is not available to non-residents. On top ride surcharge — 10% above ₹50 lakh, 15% above ₹1 crore, capped at 15% for property capital gains — and the 4% health-and-education cess. Effective TDS therefore runs about 13% up to ₹50 lakh, 14.3% to ₹1 crore, and 14.95% above it.

The sting is the base: with no certificate on file, deduction in practice runs on the entire sale consideration, not the gain. On a ₹2 crore sale with a ₹1.2 crore purchase cost, that is the difference between tax on ₹80 lakh and deduction referenced to ₹2 crore — cash-flow captivity until refund season.

How do you right-size the deduction before the deed?

Apply — before the sale — for a lower or nil deduction certificate under section 395(1), Form 128, showing the actual computed gain; the assessing officer's certificate then binds the buyer's deduction to reality. It takes documents (purchase deed, improvement proofs, the agreed price) and lead time, and it is routinely the single highest-value piece of paper in an NRI exit. Where a tax treaty gives a better outcome, "rates in force" language lets it apply; that is chartered-accountant territory, coordinated early, not at the registry.

What must the buyer do — and why should a seller care?

Your buyer becomes a tax deductor: TAN registration, deduction at the correct rate, deposit, and the non-resident quarterly statement (the old Form 27Q lane) with a TDS certificate to you. Sellers care because buyer non-compliance strands your credit: the deducted money is only usable against your return when it lands correctly against your PAN. Build the buyer's obligations into the agreement — deduction rate, deposit timeline, certificate delivery — the way this practice papers everything else: in writing, before money.

Comparison worth knowing: had the seller been resident, the buyer's job is a flat 1% on the higher of price or stamp-duty value at ₹50 lakh and above. The gulf between 1% and ~13–15% is why sellers must state residency plainly — and why buyers must ask.

How do you lawfully shrink the deduction?

With the lower-deduction certificate, applied for before the deed — under the new Income-tax Act's machinery (section 395(1), Form 128; the successor to the old section 197 and Form 13). The logic: the statutory deduction runs on the sale price, but your actual tax runs on the gain — so a long-held parcel with a modest gain can carry a deduction several times its real liability. The certificate, issued by the tax officer against your computation, instructs the buyer to deduct at the true figure instead; without it, the excess sits with the department until a refund cycle you will experience from abroad. Start the application when the deal turns serious, not when the deed is drafted — and remember the buyer's half of the machinery is real too: deducting against an NRI seller puts them into the non-resident withholding-and-filing track, so a buyer hearing "NRI seller" for the first time at the registry has been failed by everyone in the deal.

The NRI seller's tax checklist

1. Confirm holding period — the 24-month line decides everything.
2. Compute the real gain with your CA; gather purchase and improvement proofs.
3. File Form 128 early; target certificate-in-hand before deed date.
4. Write TDS mechanics into the agreement to sell.
5. Collect the TDS certificate; reconcile against your PAN; file the return.
6. Plan repatriation under the correct RBI lane — separate guide.