Introduction
Selling a property is not just about signing the sale deed and receiving payment. In many cases, the buyer has to deduct TDS before making payment to the seller.
This becomes more important when the seller is an NRI, or when the actual tax liability is lower than the TDS being deducted.
Many property sellers in Delhi NCR face this issue at the time of sale:
The answer may be yes, if the facts support it. A lower or nil TDS certificate can help reduce excess TDS deduction in genuine cases.
This guide explains TDS on immovable property and lower deduction certificate for resident sellers, NRI sellers, buyers, business owners, and families selling property in India.
Planning to sell property?
Get the seller’s residential status, TDS section, capital gain and lower deduction certificate requirement checked before signing the sale deed.
Table of Contents
- Why This Topic Matters
- Who Needs This Service or Information
- Key Points You Should Know
- TDS on Property Sale by Resident Seller
- TDS on Property Sale by NRI Seller
- NRI Property Sale TDS Rate
- Lower or Nil TDS Certificate
- Documents Required
- Step-by-Step Process
- Common Mistakes to Avoid
- How a CA Can Help
- Local Relevance
- Frequently Asked Questions
- Conclusion
- About the Author
Why This Topic Matters
Property transactions usually involve large amounts. Even a small mistake in TDS can create a big cash flow issue.
For resident sellers, TDS is generally 1% under Section 194-IA if the property value crosses the prescribed limit. Section 194-IA applies where the buyer purchases immovable property other than rural agricultural land, and the tax is deducted at 1% when the sale consideration or stamp duty value is ₹50 lakh or more.
For NRI sellers, the position is different. If the seller is non-resident, TDS is not deducted under Section 194-IA. It is deducted under Section 195.
This difference is very important.
In NRI property sale cases, buyers often become cautious and may deduct TDS at a higher rate on the sale value unless a proper lower deduction certificate is available. This can block lakhs of rupees until the seller files an income tax return and claims a refund.
A lower or nil deduction certificate can help avoid unnecessary excess TDS where the actual capital gain tax is lower.
Check Section 194-IA and 1% TDS threshold.
Check Section 195, TAN, TDS return and rate carefully.
Useful where actual tax is lower than expected TDS.
Wrong deduction may block a large amount until ITR refund.
Who Needs This Service or Information
This guide is useful for:
House, flat, shop, plot or commercial property sellers.
NRIs selling property in India and planning TDS compliance.
Buyers purchasing property from resident or NRI sellers.
Families selling inherited property with co-owners.
- Property sellers planning exemption under Section 54 or Section 54EC.
- Business owners selling office, shop, warehouse, or commercial property.
- Real estate investors.
- People selling property in Dwarka, Janakpuri, Vikas Puri, Tagore Garden, Uttam Nagar, Delhi, Panipat, or Delhi NCR.
- Buyers who are confused about TDS rate, challan filing, TAN, Form 26QB, Form 141, or TRACES compliance.
TDS on Immovable Property and Lower Deduction Certificate: Key Points You Should Know
| Particulars | Resident Seller | NRI Seller |
|---|---|---|
| Main TDS section | Section 194-IA | Section 195 |
| Common TDS rate approach | Generally 1%, subject to threshold and latest law. | Depends on capital gain, applicable rate, surcharge, cess and facts. |
| TAN requirement | Generally not required for Section 194-IA. | Buyer may need TAN and TDS return compliance. |
| Lower TDS certificate | May be relevant in suitable cases. | Very important where tax liability is lower than expected TDS. |
1. TDS on Property Sale by Resident Seller
When a resident seller sells immovable property, the buyer has to check Section 194-IA.
Under Section 194-IA:
- Buyer deducts TDS.
- Seller is the deductee.
- TDS generally applies when sale consideration or stamp duty value is ₹50 lakh or more.
- TDS rate is 1%.
- It applies to immovable property other than rural agricultural land.
- TAN is not required for deduction under Section 194-IA.
For example, if a resident person sells a flat in Dwarka for ₹80 lakh, the buyer is normally required to deduct 1% TDS, subject to latest law and facts.
2. TDS on Property Sale by NRI Seller
If the seller is an NRI, the buyer should not apply Section 194-IA.
For NRI sellers, TDS is deducted under Section 195. The Income Tax Department’s guidance clearly states that if the seller is non-resident, tax is deducted under Section 195 and not under Section 194-IA.
This is where many mistakes happen.
In NRI property sale cases:
- Buyer may need TAN.
- TDS return filing may be required.
- TDS rate depends on the nature of income and applicable rate.
- Surcharge and cess may also apply.
- Lower or nil TDS certificate may be needed to avoid excess deduction.
3. NRI Property Sale TDS Rate
The NRI property sale TDS rate depends on whether the gain is short-term or long-term, the nature of asset, date of purchase, date of sale, capital gain computation, and applicable law.
As per the Income Tax Department’s TDS rate table, Section 195 covers payments to non-residents, including long-term capital gains covered under Section 112 and other specified categories. The table shows 12.5% for certain long-term capital gains categories, but surcharge and cess and facts of the case must be checked separately.
In simple words, do not blindly apply one rate in every NRI property case.
Capital Gain Working
Check sale value, stamp duty value, cost, holding period and improvement cost.
Exemption Review
Check Section 54, Section 54F or Section 54EC eligibility before deciding TDS position.
Residential Status
Confirm whether the seller is resident or non-resident under income tax law.
First calculate sale consideration, stamp duty value, cost of acquisition, holding period, indexed cost wherever applicable, cost of improvement, transfer expenses, capital gains exemption, residential status and DTAA position if relevant.
4. Lower or Nil TDS Certificate
A lower or nil TDS certificate allows tax to be deducted at a lower rate or not deducted, depending on the approval granted.
Under the old Income-tax Act, 1961, many people searched this as Section 197 income tax act property sale or Form 13 TRACES lower deduction.
Under the Income-tax Act, 2025 framework, Form No. 128 is described as the earlier Form No. 13. It is used for applying for a certificate authorising lower or nil deduction under Section 395(1) / 395(3).
So, people may search for Form 13 lower TDS certificate, Form 128 lower TDS certificate, nil TDS certificate for property sale, lower deduction certificate for NRI property sale, Section 197 certificate for property sale, or Form 13 TRACES lower deduction.
The practical purpose is the same: to avoid excess TDS where actual tax liability is lower.
NRI property sale or high TDS deduction?
Before sale deed execution, check whether lower or nil TDS certificate can reduce unnecessary deduction.
5. Why NRIs Commonly Need a Lower TDS Certificate
An NRI seller may need a lower deduction certificate in cases such as:
- Property was purchased long back and capital gain is low.
- Seller is claiming Section 54 exemption by purchasing another residential house.
- Seller is investing in specified bonds under Section 54EC.
- Property was inherited and cost needs proper calculation.
- Seller has incurred improvement cost.
- Sale is at a loss.
- Only one co-owner is NRI.
- Buyer is deducting TDS on full sale value instead of taxable capital gain.
- Seller wants to avoid refund blockage.
For example, suppose an NRI sells a flat in Janakpuri for ₹1.50 crore. After considering cost, improvement expenses, and eligible exemption, actual tax liability may be much lower than TDS calculated on the full sale value. In such a case, applying for a lower deduction certificate before sale may save cash flow.
6. Capital Gains Exemption Section 54 and TDS
Many sellers believe that if they are planning to buy another house, no TDS should be deducted.
This is not always correct.
Section 54 exemption may reduce actual capital gains tax liability, but the buyer needs a proper basis to deduct lower TDS. In NRI cases, a lower deduction certificate is usually the safer route if the seller wants the buyer to deduct tax at a lower rate.
Section 54 exemption is available in respect of capital gains arising from transfer of long-term residential house property, subject to conditions. It is available to an individual or HUF and generally requires investment in another residential house within the prescribed time.
Documents Required
For applying for a lower or nil TDS certificate in a property sale case, keep the following documents ready.
Property Documents
- Sale deed of property being sold.
- Purchase deed or allotment letter.
- Builder agreement, possession letter, payment receipts.
- Indexation and cost working, wherever applicable.
- Improvement bills and renovation proof.
- Brokerage or transfer expense proof.
- Draft sale agreement with buyer.
- Buyer PAN and address details.
- Property valuation details, if required.
- Stamp duty value / circle rate details.
Seller Documents
- PAN card.
- Aadhaar, if applicable.
- Passport and OCI details, if seller is NRI.
- Residential status details.
- Foreign address and Indian address.
- Bank details.
- Last filed income tax returns.
- Capital gain computation.
- Advance tax / TDS details, if any.
Exemption Documents
- New house purchase agreement.
- Builder payment receipts.
- Home loan details, if any.
- Capital Gains Account Scheme deposit proof.
- Section 54EC bond investment proof.
- Computation showing exemption claim.
NRI-Specific Documents
- Passport copy.
- Visa / overseas residency proof.
- NRE/NRO bank details.
- Tax residency details, if required.
- Power of Attorney, if transaction is handled through an authorised person.
- Form 15CA / 15CB details if sale proceeds are to be remitted outside India.
Form 15CB is a certificate furnished by a Chartered Accountant in specified cases of remittance to a non-resident or foreign company where the payment is chargeable to income tax and an AO certificate is not obtained.
Documents ready for lower TDS certificate?
Share sale deed, purchase deed, buyer details, exemption documents and capital gain working for review.
Step-by-Step Process
First confirm whether the seller is resident or non-resident under income tax law. If the seller is resident, Section 194-IA may apply. If the seller is NRI, Section 195 applies.
Check date of purchase, date of sale, property type, sale consideration, stamp duty value, cost, improvement cost, transfer expenses, indexation position and exemptions.
For resident sellers, TDS may be 1%, but final tax depends on actual capital gain. For NRI sellers, TDS can be higher and the buyer may need a certificate to deduct lower tax.
It may be useful if actual tax is lower, capital gain is exempt, property is sold at loss, cost is high, or buyer wants formal approval.
For older references, this is commonly searched as Form 13 TRACES lower deduction. Under the newer Income-tax Act, 2025 format, Form No. 128 is mentioned as earlier Form No. 13.
Queries may relate to purchase cost, source of acquisition, exemption claim, capital gains working, buyer details, past ITRs and residential status.
Once issued, the buyer should verify the certificate electronically through TRACES and deduct TDS at the approved rate during the validity period.
Buyer deducts and deposits TDS, files the correct challan / statement, and the seller checks Form 26AS / AIS / TDS credit before ITR filing.
Common Mistakes to Avoid
| Mistake | Why It Creates Risk |
|---|---|
| Applying resident TDS rule to NRI seller | If the seller is NRI, Section 195 applies, not Section 194-IA. |
| Deducting TDS only on capital gain without certificate | In NRI cases, buyer should be careful before deducting TDS only on capital gain without proper support or certificate. |
| Applying for lower TDS certificate too late | Do not wait until sale deed date. Processing may take time and queries may be raised. |
| Ignoring stamp duty value | For resident property TDS, stamp duty value is relevant along with sale consideration. |
| Not checking co-ownership | If there are multiple buyers or sellers, TDS treatment should be checked carefully. |
| Not taking buyer details before application | Buyer / payer details may be required for lower TDS certificate application. |
| Ignoring Section 54 conditions | Planning to buy another house is not enough. Timing, investment amount and reporting should be checked. |
| Not matching TDS in AIS and Form 26AS | Mismatch can delay refund or create notice risk. |
| Not planning repatriation for NRI seller | Form 15CA / 15CB and bank documentation may be required depending on facts. |
| Treating every property case the same | A flat in Dwarka, inherited property in Panipat and commercial shop in Tagore Garden may all have different treatment. |
TDS mismatch, refund issue or buyer confusion?
Do not complete property TDS compliance casually. Get the facts checked before filing challan, return or ITR.
How a CA Can Help
A Chartered Accountant can help in a practical way before the sale is finalised.
Check whether seller is resident or NRI.
Review sale value, cost, improvement and exemption.
Prepare and file Form 13 / Form 128, as applicable.
Check AIS, Form 26AS, ITR reporting and refund position.
A CA can also advise buyer on correct TDS section, reply to department queries, coordinate certificate-based TDS deduction, assist with Form 15CA / 15CB for NRI remittance where applicable, and file income tax return with proper capital gains disclosure.
This is especially useful in NRI property cases, because the buyer, seller, bank, and tax portal all need proper coordination.
If you are searching for an income tax consultant for NRI property Delhi, choose someone who understands both capital gains and TDS compliance.
Local Relevance
Property transactions are common in areas like Dwarka, Janakpuri, Vikas Puri, Tagore Garden, Uttam Nagar, Delhi, Panipat, and Delhi NCR.
Many families in these areas sell old residential houses, builder floors, flats, commercial shops, inherited properties, and plots. In many cases, one co-owner may be living outside India.
- A family may sell an old house in Uttam Nagar.
- An NRI may sell a flat in Dwarka.
- A retired person may sell property in Janakpuri and buy another house.
- A business owner may sell a shop in Tagore Garden.
- A family may sell inherited property in Panipat and distribute proceeds among co-owners.
In all these cases, TDS should be planned before the sale deed is signed.
Rakesh Rathore and Associates assists clients with income tax return filing, capital gains computation, TDS compliance, lower deduction certificate support, accounting, GST compliance, and advisory services in Delhi NCR.
Frequently Asked Questions
What is TDS on immovable property?
TDS on immovable property means tax deducted by the buyer while making payment to the seller for purchase of property. The applicable section depends on whether the seller is resident or NRI.
What is the TDS rate on property sale by a resident seller?
For a resident seller, TDS under Section 194-IA is generally 1% if the sale consideration or stamp duty value is ₹50 lakh or more, subject to latest law and facts.
Is TAN required for TDS on property purchase from a resident seller?
For Section 194-IA, TAN is not required. The buyer can use PAN for the transaction.
What is the NRI property sale TDS rate?
The NRI property sale TDS rate depends on capital gain type, holding period, applicable section, surcharge, cess, and other facts. It should be checked case by case.
Can an NRI apply for a lower TDS certificate?
Yes. An NRI can apply for a lower or nil TDS certificate if the actual tax liability is lower than the TDS that may otherwise be deducted.
What is Form 128 lower TDS certificate?
Form No. 128 is described under the Income-tax Act, 2025 framework as the earlier Form No. 13. It is used for applying for a lower or nil deduction certificate.
Is Form 13 still relevant?
Many people still search for Form 13 because it was the known form under the earlier system. Under the newer framework, Form No. 128 is linked with the same purpose. Always check the portal for the applicable form.
Can Section 54 exemption reduce TDS?
Section 54 exemption can reduce actual tax liability if conditions are satisfied. In NRI cases, a lower TDS certificate is usually advisable if the seller wants the buyer to deduct lower TDS.
What happens if excess TDS is deducted?
The seller may claim refund by filing the income tax return. However, refund may take time. That is why applying for a lower deduction certificate before sale can help.
When should I contact a CA for property TDS?
Contact a CA before finalising the sale agreement, especially if the seller is NRI, property value is high, exemption is planned, or buyer is unsure about TDS compliance.
Conclusion
TDS on property sale should not be handled casually.
For resident sellers, Section 194-IA usually applies when the property value crosses the prescribed threshold. For NRI sellers, Section 195 applies and the TDS impact can be much higher.
If the actual tax liability is lower, applying for a lower or nil deduction certificate can save cash flow and avoid unnecessary refund blockage.
The key is to plan early.
If you are selling property in Dwarka, Janakpuri, Vikas Puri, Tagore Garden, Uttam Nagar, Delhi, Panipat, or Delhi NCR, get the capital gain and TDS position checked before signing the sale deed.
Need help with TDS on immovable property?
Rakesh Rathore and Associates can assist with capital gains calculation, NRI property sale TDS advisory, lower / nil TDS certificate application, Section 54 planning, ITR filing, AIS/Form 26AS reconciliation and TDS compliance support.
About the Author
CA Rakesh Rathore
CA Rakesh Rathore is a Chartered Accountant qualified in 2014, with practical experience in GST, Income Tax, GST notices, Income Tax notices, GST registration, company formation, and LLP formation. He advises manufacturers, traders, educational institutions, IT businesses, and construction industry clients on taxation, registration, compliance, and business advisory matters.