TDS When an NRI Sells Property in India: Rates, Rules and the Section 197 Certificate

TDS is the single most misunderstood cost when an NRI sells Indian property, including a Dholera plot. The rule that surprises people is that tax is deducted at source on the full sale value by default, not on the profit. That can lock up a large amount of cash until a refund comes through, unless you plan ahead. This entry explains who deducts, at what rate, and how the section 197 certificate can bring the deduction down to the real tax on the actual gain.

DholeraPulse is an independent intelligence desk. It does not sell plots or file anyone's taxes. This is general information about how the mechanism works, not personal tax or legal advice. Rates, surcharge slabs and thresholds change between budgets, so confirm the current numbers with a Chartered Accountant before you transact.

The buyer deducts, not the seller

When the seller is a non-resident, the responsibility to deduct TDS sits with the buyer under the Income Tax Act. The buyer must obtain a TAN (Tax Deduction Account Number), deduct the correct tax before releasing payment, deposit it with the government, file the TDS return, and issue the seller a TDS certificate (Form 16A). This is different from a sale between two residents, where a simpler 1 percent TDS on transactions above a threshold applies. Because an NRI sale is handled under the non-resident provisions, both sides should agree the mechanics in writing before completion.

Long-term versus short-term

The rate depends on how long the NRI held the property. If the property was held long enough to be a long-term capital asset, TDS is deducted at the long-term capital gains rate, plus the applicable surcharge and health and education cess. If it was held for a shorter period and the gain is short-term, the amount is deducted at the NRI's applicable income-tax slab rate, again with surcharge and cess. The holding-period threshold and the exact rates are set by the Income Tax Act and can change, so the categories matter more than any single percentage. The gain side is explained in capital gains tax on a Dholera plot.

The section 197 lower-deduction certificate

This is the most useful tool an NRI seller has. Under section 197 of the Income Tax Act, the seller can apply to the Assessing Officer for a certificate authorising deduction at a lower rate, or nil, based on the actual expected capital gain rather than the full sale value. If your real taxable gain is modest, the certificate can cut the TDS dramatically and stop a large sum being blocked. The application should be made before the sale is completed, because the buyer needs the certificate in hand to deduct at the reduced rate. Plan for the processing time.

1. Estimate the actual capital gain, using cost, indexation where applicable and any exemptions.
2. Apply to the Assessing Officer under section 197 for a lower or nil deduction certificate before completing the sale.
3. Give the certificate to the buyer so TDS is deducted at the reduced rate, not on the full sale value.
4. The buyer deposits the TDS, files the return and issues Form 16A.
5. Reconcile everything in your income-tax return, claiming any refund if TDS still exceeded the final tax.

Why TDS and repatriation are linked

For an overseas seller, TDS is not just a tax step, it is the gate to getting money out of India. A bank will not remit sale proceeds abroad until it is satisfied the tax has been dealt with, which is evidenced through the TDS deduction and the Chartered Accountant certificate. So the TDS process feeds directly into the repatriation process. The outward-remittance mechanics, including the USD 1 million per financial year limit and forms 15CA and 15CB, are set out in repatriating sale proceeds from India.

A note for Dholera sellers

None of this changes because a plot is in Dholera rather than elsewhere in India, the TDS rules are national. What Dholera adds is the upfront diligence: an NRI can only hold and sell eligible Non-Agricultural property, so keep the record of N.A. status and the registered sale deed, because your Chartered Accountant will need them. See FEMA rules for NRIs for the eligibility side and how to buy a plot in Dholera for the documents that make a later sale clean.

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