TDS on NRI Property Sale & Rental Income (Section 195)
TDS on payments to NRIs is governed by Section 195 of the Income-tax Act, 1961. Unlike resident transactions, there are no basic exemption thresholds for NRI TDS.
| Transaction type | TDS Rate & applicability | Key requirement |
|---|---|---|
| TDS on Rent (Section 195) | 31.2% TDS (30% tax + 4% cess) applied to gross rental income. | No basic limit of Rs. 2.4 Lakh. Tenant must obtain a TAN to deduct and deposit this tax. |
| LTCG Property Sale TDS | 20.8% TDS (20% tax + 4% cess + applicable surcharge) on gross sale value. | Applies if the property was held for more than 24 months. Indexation rules apply based on acquisition date. |
| STCG Property Sale TDS | 30.9% to 42.74% TDS on gross sale value depending on the slab. | Applies if the property was held for 24 months or less. |
| Lower TDS Certificate (Section 197) | Application via Form 13 on the e-filing portal to reduce TDS rate. | Enables the buyer to deduct TDS only on the actual capital gains rather than the total sale value. |
Capital gains exemptions and buyer obligations
- No 50 Lakh Threshold: Unlike resident property sales where TDS is 1% under Section 194-IA (only if sale > 50 Lakh), NRI property sales are subject to TDS on the entire sale price under Section 195.
- Section 54 Exemption: NRI can save LTCG tax by investing in another residential house property in India (capped at Rs. 10 Crore).
- Section 54EC Exemption: NRI can save LTCG tax by investing in NHAI/REC capital gains bonds within 6 months of sale (capped at Rs. 50 Lakh).
- Buyer TAN Obligation: The buyer must obtain a TAN to deduct NRI TDS under Section 195 and file Form 27Q quarterly.
Documents for property sale or rent tax filings
- Purchase deed and date of acquisition.
- Sale agreement / sale deed draft.
- Cost of improvement details (renovation, building, etc. with invoices).
- Form 13 Lower TDS certificate (if obtained).
- TAN certificate of the buyer or tenant.
Faq TDS NRIs Section 195: year and source check
Last fact-checked: 18 June 2026.
AY 2026-27 means FY 2025-26 income and is filed under the Income-tax Act, 1961. Tax Year 2026-27 means FY 2026-27 income under the Income Tax Act, 2025. Do not mix the two.
Verify stay days, TRC validity, DTAA rates, NRO interest, and Form 15CA/15CB requirements against official CBDT guidelines, notifications, and portal utilities before taking a filing position.
FAQs
What is the TDS rate when buying a property from an NRI?
The TDS rate is 20.8% for Long-Term Capital Gains (held > 24 months) and 30.9% (or higher depending on surcharge) for Short-Term Capital Gains, deducted on the total sale consideration.
How can an NRI seller avoid high TDS on property sales?
The NRI seller can apply online for a Lower TDS Certificate under Section 197 using Form 13 on the e-filing portal. This directs the buyer to deduct tax only on the estimated capital gains instead of the entire sale price.
Does a tenant have to deduct TDS when renting from an NRI landlord?
Yes. Under Section 195, the tenant must deduct TDS at 31.2% on the gross rent, irrespective of the rent amount. The tenant must also obtain a TAN (Tax Deduction and Collection Account Number) to deposit the tax.
Frequently Asked Questions
1. What is Tax Deducted at Source (TDS) as it relates to TDS for NRI Section 195?
TDS is a system where the payer deducts tax before making payments for TDS for NRI Section 195 and deposits it with the government. The receiver receives the net amount, and the TDS amount is reflected in their Form 26AS/AIS, which can be claimed against final tax liability.
2. What is the TDS rate and threshold limit applicable for TDS for NRI Section 195?
The TDS rate and threshold depend on the specific section under which TDS for NRI Section 195 falls (e.g. 10% under Section 194J for professional fees above ₹30,000; 1% or 2% under Section 194C for contract payments above ₹30,000/₹1,00,000; 10% under Section 194-I for rent above ₹2.4 lakh).
3. What is Tax Collected at Source (TCS) and how does it relate to TDS for NRI Section 195?
TCS is collected by the seller from the buyer at the time of sale of specific items or services linked to TDS for NRI Section 195 (e.g. LRS transfers, overseas tour packages, car purchases exceeding ₹10 lakh). The seller deposits the collected tax, which appears as a credit for the buyer.
4. What is the difference between Form 16, Form 16A, and Form 16B?
Form 16 is an annual certificate issued by employers showing salary paid and TDS deducted. Form 16A is a quarterly certificate for non-salary payments (like interest, professional fees, or rent). Form 16B is a certificate for TDS deducted on the purchase of immovable property.
5. What is Form 26AS, and how is it used?
Form 26AS is a consolidated annual tax statement that shows details of TDS deducted, TCS collected, advance tax/self-assessment tax paid, and tax refunds issued against your PAN. Taxpayers use it to verify tax credits before filing their ITR.
6. What are the due dates for filing quarterly TDS returns?
TDS returns must be filed quarterly: Q1 (April-June) by July 31; Q2 (July-Sept) by October 31; Q3 (Oct-Dec) by January 31; and Q4 (Jan-March) by May 31 of the financial year.
7. What is the penalty for late filing of TDS returns?
A late fee of ₹200 per day under Section 234E is charged for late filing of TDS returns, capped at the total TDS amount. Additionally, a penalty under Section 271H (ranging from ₹10,000 to ₹1,00,000) can be levied for non-filing.
8. What is the due date for depositing TDS with the government?
TDS must be deposited by the 7th of the following month in which the deduction was made. For the month of March, the TDS deposit due date is April 30.
9. What is the TDS rate on rent under Section 194-I?
Under Section 194-I, TDS on rent is deducted at 10% for renting land, building, or furniture, and 2% for renting plant, machinery, or equipment. It is applicable if total rent paid during the FY exceeds ₹2,40,000.
10. What is the TDS rate on professional and technical services under Section 194J?
Under Section 194J, TDS is deducted at 10% on professional fees, royalty, and non-compete fees. A lower rate of 2% applies to technical fees, call center operations, and royalty for sale/distribution of cinematographic films. It applies if payment exceeds ₹30,000 in a FY.
11. What is Section 194C TDS on contractors?
Section 194C requires TDS to be deducted at 1% for payments to individuals or HUFs, and 2% for payments to other entities (companies, firms, etc.). It applies if a single payment exceeds ₹30,000 or aggregate payments exceed ₹1,00,000 in a FY.
12. What is the TDS rate on purchase of immovable property under Section 194-IA?
The buyer of property must deduct 1% TDS under Section 194-IA if the purchase consideration or stamp duty value of the property is ₹50 lakh or more. TDS must be paid using Form 26QB within 30 days from the end of the month of purchase.
13. How is TDS deducted on payments to Non-Resident Indians (NRIs) under Section 195?
Under Section 195, TDS must be deducted on any taxable payment made to an NRI at the maximum marginal rate (e.g. 30% for short-term gains, plus applicable surcharge and cess) unless a lower tax certificate is obtained from the Income Tax officer.
14. What is the TCS rate on Liberalised Remittance Scheme (LRS) overseas transfers?
Under Section 206C(1G), TCS on LRS transfers is: 5% for education/medical purposes exceeding ₹7 lakh; 0.5% if funded by an education loan; 5% for overseas tour packages up to ₹7 lakh and 20% above ₹7 lakh; and 20% for all other remittances (investments, gifts) exceeding ₹7 lakh.
15. What happens if a payee does not furnish their PAN?
If the payee fails to provide their PAN, TDS/TCS is deducted at higher rates under Section 206AA / 206CC. The rate will be the higher of: the rate specified in the Act, the rate in force, or a flat 20% (5% for certain sections).