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.
NRI Property Tax Services: 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. How do DTAA provisions and NRI tax compliance apply to income from NRI Property Tax Services?
Under Double Taxation Avoidance Agreements (DTAA), NRIs can claim lower withholding tax (TDS) rates on income from NRI Property Tax Services by submitting a Tax Residency Certificate (TRC) and Form 10F online.
2. What are the reporting requirements for residents holding foreign assets related to NRI Property Tax Services?
Resident taxpayers holding foreign shares, bank accounts, or investments related to NRI Property Tax Services must disclose them in Schedule FA (Foreign Assets) of their ITR to avoid heavy Black Money Act penalties.
3. What is the Double Taxation Avoidance Agreement (DTAA)?
DTAA is a bilateral treaty signed between India and a foreign country to prevent double taxation of the same income in both countries by capping withholding tax rates or providing tax credits.
4. What documents are mandatory to claim DTAA treaty benefits?
Taxpayers must submit: (1) A Tax Residency Certificate (TRC) issued by the tax authority of their country of residence. (2) Form 10F filled out online. (3) A valid Indian PAN.
5. Is interest earned on NRE and NRO accounts taxable?
Interest earned on NRE (Non-Resident External) and FCNB accounts is fully tax-free in India. Interest earned on NRO (Non-Resident Ordinary) accounts is taxable at your slab rate, and subject to 30% TDS.
6. How does Form 10F work, and how is it filed?
Form 10F is a self-declaration filed by non-residents containing details like nationality, tax identification number, and address. It must be filed online on the Income Tax e-filing portal using a digital signature or net banking verification.
7. What is the TDS rate on payments made to NRIs?
TDS on payments to NRIs is governed by Section 195. It is deducted at the maximum rate applicable to the type of income (e.g. 30% on rent/NRO interest, 12.5% on long-term capital gains, 20% on dividends), subject to lower rates under DTAA.
8. Can an NRI claim the Section 87A tax rebate?
No. The Section 87A rebate (which makes tax zero up to ₹12 lakh under the New Regime) is only available to resident individuals. NRIs do not qualify for this rebate and must pay tax on taxable income exceeding basic limits.
9. Which ITR form should an NRI file for FY 2025-26?
NRIs must file ITR-2 (for capital gains, salary, or property income) or ITR-3 (if they have business/professional income). NRIs cannot file ITR-1 (Sahaj).
10. Do NRIs need to declare foreign bank accounts in their Indian ITR?
No. NRIs do not need to report foreign bank accounts, foreign stocks, or assets in Schedule FA. Only resident taxpayers are mandatory to report foreign assets.
11. What is Schedule FA and who must file it?
Schedule FA (Foreign Assets) is a mandatory schedule in ITR-2/ITR-3 for resident taxpayers. It requires reporting details of all foreign assets (shares, mutual funds, bank accounts, property) held at any time during the calendar year.
12. What is the penalty for failing to file Schedule FA?
Under the Black Money Act, resident taxpayers who fail to disclose foreign assets in Schedule FA or underreport value face a flat penalty of ₹10 lakh per year, plus interest and potential prosecution.
13. How do I claim Foreign Tax Credit (FTC) in India?
To claim credit for taxes paid in a foreign country on double-taxed income, you must file Form 67 online on the e-filing portal along with proof of tax payment/withholding before filing your ITR.
14. Are capital gains on Indian mutual funds taxable for NRIs?
Yes, capital gains are taxable for NRIs. Equity LTCG is taxed at 12.5% (>12 months), STCG at 20%. Debt mutual fund gains are taxed at slab rates. The fund house will deduct TDS on redemptions.
15. Can an NRI buy agricultural land in India?
Under FEMA regulations, an NRI or OCI cannot purchase agricultural land, plantation property, or farmhouse in India. They can, however, inherit such properties or buy commercial/residential properties.