TDS when an NRI sells property in Mumbai, and how to reduce it
When a non-resident sells a flat in Mumbai, the buyer must deduct tax from the price. Because the deduction is calculated on the full sale value rather than the gain, it is often far more than the tax actually owed. Planning before the sale deed avoids locking up that money for months.
By Ryan Vaz, FCA · · 7 min read
For a resident seller, the buyer deducts 1 per cent TDS only where the consideration is ₹50 lakh or more. None of that applies when the seller is a non-resident. The buyer must deduct tax at the rate applicable to the non-resident's capital gain, on the whole amount paid, under the provision for payments to non-residents (section 195 of the 1961 Act, now section 393 of the Income-tax Act, 2025).
What the buyer must do
- Obtain a TAN (Tax Deduction Account Number). The simplified PAN-based challan used for resident sellers is not available.
- Deduct tax at the applicable rate, plus surcharge and cess, from each payment, including advances.
- Deposit the tax by the 7th of the following month and file the quarterly TDS statement for non-resident payments.
- Issue a TDS certificate to the seller, who uses it to claim credit in their Indian return.
The rates
Property held for more than 24 months produces a long-term capital gain. For transfers on or after 23 July 2024, the rate on long-term gains is 12.5 per cent, without indexation for non-residents. Property held for 24 months or less produces a short-term gain taxed at slab rates, and the buyer usually deducts at 30 per cent.
Surcharge depends on the amount: 10 per cent where the payment exceeds ₹50 lakh and 15 per cent where it exceeds ₹1 crore, with surcharge on capital gains capped at 15 per cent. Health and education cess of 4 per cent is added on top. The effective rate on a long-term sale above ₹1 crore is therefore about 14.95 per cent of the sale value.
Worked example
Rahul, who lives in Singapore, sells a Borivali flat bought in 2012 for ₹60 lakh. The sale price is ₹1.5 crore.
| Item | Amount (₹) |
|---|---|
| Sale consideration | 1,50,00,000 |
| Cost of acquisition | 60,00,000 |
| Long-term capital gain | 90,00,000 |
| Tax on gain at 12.5% + 10% surcharge + 4% cess | 12,87,000 |
| TDS by buyer on full price at 12.5% + 15% surcharge + 4% cess | 22,42,500 |
| Excess deducted, recoverable only as a refund | 9,55,500 |
Without planning, almost ₹9.6 lakh is held by the tax department until Rahul files his return and the refund is processed. If he reinvests the gain to claim an exemption, the excess is larger still.
The lower deduction certificate
A non-resident seller can apply to the Assessing Officer, through the TRACES portal, for a certificate authorising the buyer to deduct tax at a lower or nil rate based on the estimated actual tax. The application is supported by the purchase deed, sale agreement, computation of gain and details of any planned exemption.
The certificate is specific to the buyer and the transaction, and it takes time to issue, so the application should be made as soon as the sale terms are agreed. The buyer then deducts at the rate in the certificate.
Exemptions that reduce the tax
- Reinvestment of the long-term gain in a residential house in India, within the prescribed period and subject to the overall cap
- Investment of up to ₹50 lakh of the gain in specified bonds within six months of the transfer
Where an exemption is planned, it should be included in the lower deduction application, otherwise TDS will be deducted on gains that end up exempt.
After the sale
The seller files an Indian return for the year, reporting the gain, claiming the TDS credit and any exemption, and receiving the refund of the excess. Proceeds credited to an NRO account can be remitted abroad up to USD 1 million per financial year, with Form 15CA and, above the specified limits, a chartered accountant's certificate in Form 15CB.
This article is general information based on the law as understood on 19 October 2026. Rules, thresholds and form numbers change, and the facts of each case matter. It is not professional advice.