The sale of a flat by an NRI is the transaction where the most money gets stuck. A buyer who follows the law deducts tax on the entire sale price, not the gain — on a ₹2 crore flat that is ₹26 lakh or more withheld, against an actual tax bill that may be a fraction of that, with the refund arriving a year later. Every part of this can be managed if it is planned before the agreement is signed.
1. Why the buyer deducts on the whole price
When the seller is a non-resident, the buyer must deduct tax under section 393 (195 of the 1961 Act) — not the 1% under section 393 (194-IA) that applies to resident sellers. Section 393 (195) requires deduction on the sum "chargeable to tax", but since the buyer cannot compute the seller's gain, the department's position and the safe course for the buyer is to deduct on the full consideration at the rate applicable to the gain: for property held more than 24 months, 12.5% plus surcharge and 4% cess (roughly 13% to 14.95% depending on the amount); for property held 24 months or less, the seller's slab rate, which for most sales means 30% plus surcharge and cess. The buyer needs a TAN, deposits the tax by the 7th of the following month, files Form 27Q each quarter and issues Form 16A to the seller.
2. The Form 13 lower-deduction certificate
The solution is an application under section 395 (197 of the 1961 Act) — Form 13, filed online on TRACES — asking the Assessing Officer to certify a lower rate or a specific amount, based on the actual computed gain. The application needs the purchase deed and cost, improvement costs, the draft sale agreement, the buyer's PAN and TAN, and the computation. The certificate is issued to the buyer's TAN and typically takes three to six weeks. With it in hand the buyer deducts only the tax on the real gain — and if a section 82 (54 of the 1961 Act) or 85 (54EC of the 1961 Act) reinvestment is planned, the certificate can reflect that too. Apply once the buyer is identified and before the registration date; a certificate cannot be obtained after the sale.
3. How the gain is computed
| Item | Position for sales from 23 July 2024 |
|---|---|
| Holding period for long-term | More than 24 months |
| Long-term rate | 12.5% plus surcharge and cess, without indexation; the option to pay 20% with indexation on property bought before 23 July 2024 is available only to resident individuals and HUFs |
| Short-term rate | Slab rates — effectively 30% plus surcharge and cess for most NRIs |
| Cost of inherited or gifted property | Cost to the previous owner, and their holding period counts; for property acquired before 1 April 2001, fair market value as at that date may be taken |
| Stamp duty value | If the sale price is below the ready reckoner value by more than 10%, the ready reckoner value is deemed the consideration |
4. Exemptions that NRIs can still claim
- Section 82 (54) — gain from a residential house reinvested in one residential house in India (two houses once in a lifetime if the gain is up to ₹2 crore), bought within one year before or two years after, or constructed within three years. Exemption capped at ₹10 crore of investment.
- Section 85 (54EC) — up to ₹50 lakh in NHAI, REC, PFC or IRFC bonds within six months of sale, locked in for five years.
- Section 86 (54F of the 1961 Act) — gain from land or a commercial property reinvested in a residential house, subject to owning not more than one other house.
- Unused amounts must be parked in a Capital Gains Account Scheme account before the return due date to preserve the claim.
5. Getting the money out
Sale proceeds are credited to the seller's NRO account. From there, up to USD 1 million per financial year can be repatriated, supported by the sale deed, the TDS certificate, and Form 15CA together with a chartered accountant's certificate in Form 15CB confirming that tax has been paid. If the property was bought with funds from an NRE or FCNR account, the amount originally invested can be repatriated outside the USD 1 million limit for up to two residential properties. Banks apply these rules strictly; assemble the file before asking for the transfer.
6. The return
File ITR-2 for the year of sale, report the gain in Schedule CG, claim the TDS shown in Form 26AS, and receive any excess as a refund into a pre-validated NRO account. If the buyer deducted on the full price without a certificate, the refund is real money and the return is the only way to get it. Under the India–UAE treaty, gains on immovable property in India remain taxable in India, so there is no treaty relief to claim — the planning is all on the Indian side.
Before you sign the agreement
Send us the purchase documents and the proposed price. We compute the gain, apply for the Form 13 certificate on your behalf, guide the buyer's TAN and Form 27Q compliance, and prepare the 15CA/15CB for repatriation. Start here.
Tax, GST and business setup advisors — Mumbai and Thane. Contact us to discuss your situation.
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