NRI Selling Property in India: TDS, Form 128 and the No-TAN Rule from October 2026

When an NRI sells property in India, the buyer must withhold tax on the whole sale price, not on the profit, and usually at around 13% to 15%. On a flat sold for Rs 1.5 crore that can mean more than Rs 22 lakh withheld when the actual tax on the gain is less than half that. The fix is a lower deduction certificate in Form 128, applied for before the sale. Two other things changed recently. Since 1 October 2026, a resident individual buying from an NRI no longer needs a TAN to deposit the tax. And NRIs do not get the option of 20% with indexation that resident sellers can use on property bought before 23 July 2024.

How the gain is taxed

For a resident seller of land or a building bought before 23 July 2024, the tax is the lower of 12.5% without indexation and 20% with indexation. That relief is written for resident individuals and HUFs only, so an NRI pays 12.5% on the full un-indexed gain. For property acquired before 1 April 2001, the fair market value on that date can be used as the cost, and a well-supported valuation is the main lever an NRI seller has.

The gain is computed on the higher of the agreed price and the stamp duty value where the stamp duty value is more than 10% above the price, so a sale below the circle rate can be taxed on a price that was never received.

What the buyer must withhold

The buyer cannot know the seller’s cost, so in practice the tax is withheld on the whole sale price at the rate for long-term gains, with surcharge based on the amount paid. The usual 1% rule and Rs 50 lakh threshold for buying from a resident do not apply when the seller is a non-resident.

Without the certificate, the seller recovers the excess only by filing an Indian return and waiting for the refund. The figures above are illustrative; the actual rate depends on the seller’s total Indian income and the surcharge band.

The Form 128 certificate

The seller applies on TRACES in Form 128 under section 395(1), which replaced Form 13 and section 197 from 1 April 2026. The application needs the sale agreement, the purchase deed, evidence of cost and improvements, a computation of the gain, the seller’s PAN and the buyer’s details. The Assessing Officer issues a certificate naming the buyer and the rate. Apply as soon as the price is agreed: the certificate cannot be applied to a payment already made. Our guide to Form 128 for non-residents sets out the process and the common reasons for refusal.

No TAN for most buyers from 1 October 2026

Until 30 September 2026, every buyer from an NRI had to obtain a TAN, deposit the tax by challan and file a quarterly non-resident TDS return, which held up many closings. From 1 October 2026, a buyer who is a resident individual or HUF deducts the tax and deposits it with a PAN-based challan-cum-statement in Form 141, using its new Schedule E, within 30 days from the end of the month in which the tax is deducted. A company, firm or non-resident buyer still needs a TAN and the regular quarterly return. The rate and the amount do not change, only the procedure. If the NRI seller has no PAN, the buyer must withhold at the higher rate that applies without a PAN, so the seller should have one before the sale.

Reducing the tax itself

• Buying another house in India. The long-term gain on a residential property is exempt to the extent it is reinvested in one residential house in India, bought within one year before or two years after the sale, or built within three years, subject to an overall cap of Rs 10 crore.
• Capital gains bonds. Up to Rs 50 lakh of the gain can be invested within six months in specified bonds with a five-year lock-in.
• Not yet reinvested by the return date. The unused amount can be parked in the Capital Gains Account Scheme before the return due date.

These reliefs were in sections 54 and 54EC of the 1961 Act and continue under the 2025 Act. A certificate in Form 128 can take a planned reinvestment into account if the application explains it.

Getting the money out of India

Sale proceeds are credited to the NRI’s NRO account. An NRI can remit up to USD 1 million a financial year from NRO balances, including sale proceeds, after tax. Where the property was bought with money brought in from abroad, the amount originally paid in foreign exchange can be repatriated for up to two residential properties, with any balance going through the USD 1 million route. The bank will ask for Form 145 and, for a taxable remittance, an accountant’s certificate in Form 146; see Form 145 and Form 146.

A sale checklist for NRI sellers

1. Confirm your residential status for the year of sale; see NRI residential status.
2. Gather the purchase deed, payment proofs and improvement bills, and a 2001 valuation if the property is older.
3. Compute the gain and decide on any reinvestment.
4. Apply for Form 128 as soon as the price is agreed.
5. Give the buyer the certificate and confirm how they will deposit the tax: Form 141 for a resident individual buyer, TAN-based for a company.
6. File your Indian return for the year and claim any refund.
7. Repatriate through the NRO account with Form 145 and Form 146.

Our NRI tax advisory team handles Form 128 applications, the computation and the repatriation for NRIs in the UAE and elsewhere.

Written by Vijay Dhawan, Managing Partner, LexVerge LLP. This article is general information, not tax or legal advice. Rates, thresholds and form numbers change; confirm the current position for your facts before acting.