This is the single most expensive misunderstanding in NRI property sales, and it usually surfaces a week before completion when the buyer's bank refuses to release funds.
The Act itself has changed
The Income-tax Act, 2025 came into force on 1 April 2026. Earlier tax years and proceedings remain subject to the repeal and savings provisions. Match the transaction and tax year to the applicable Act. An older section number may still be relevant to an earlier period, but a current transaction needs the operative provision.
Why the deduction buyers expect does not apply to you
The new Act carries two separate tables of deduction obligations. The first deals with payments to a resident, and its opening words say exactly that. That table contains the low fixed percentage on transfers of immovable property, above a threshold, that every buyer in Bengaluru has heard of. It has no application where the seller is a non-resident.
Payments to a non-resident sit in a different table, which catches any other sum chargeable under the Act paid to a non-resident and sets the rate as the rates in force. The Act defines that expression here as the rate in the Finance Act of the relevant year, or the rate in an agreement entered into by the Central Government for relief from double taxation, whichever applies. There is no threshold and no exemption for a small transaction.
Unless a certificate has been obtained in advance, the buyer deducts on the amount he pays you, not on the gain you make. On a flat bought years ago and sold at a modest real profit, that difference is the whole problem in one line. The Act also pulls in charges people treat as separate: consideration for transfer of immovable property here includes club membership fees, car parking fees, electricity and water facility fees, maintenance fees, advance fees and similar incidental charges.
What the buyer has to do, and why he will resist
As at 12 September 2026, the TAN exemption for a resident-property payment does not generally cover a payment to a non-resident seller. An enacted change takes effect on 1 October 2026: amended Section 397(1)(c)(iii) exempts a resident individual or Hindu undivided family from applying for TAN for the specified purchase of immovable property from a non-resident. This does not remove TDS itself. Check the transaction date, buyer status and reporting process before payment.
The consequences of getting it wrong fall on him. A person who fails to deduct or to pay is deemed an assessee in default, with interest and penalty attached, subject to a relief where the payee has filed a return and paid the tax. He will therefore be cautious, and reasonably so. Settle the deduction question in the agreement, in writing, before anyone signs.
How the gain is actually computed
Capital gains are computed by deducting from the full value of the consideration the expenditure incurred wholly and exclusively in connection with the transfer, and the cost of acquisition and of any improvement. An asset held for more than twenty-four months is long term, and long-term gains are charged under a single rate provision.
Here is the point most NRIs are not told. That provision carries a grandfathering formula for land or buildings acquired before a specified date in 2024, allowing the older method with an indexed cost where that produces a lower tax. It is confined in terms to an individual or Hindu undivided family being a resident, and the computation section ties indexation to that same formula. A non-resident therefore gets no indexation, and a computation that assumes one will be wrong by a large margin.
Four ways the number can legitimately come down
- A certificate from the Assessing Officer. The payee may apply for deduction at a lower rate or no deduction, and once a certificate is issued the buyer must deduct at that rate, or not at all, while it is valid. This is the main remedy, and the mechanics are set out in our guide on tax deduction when an NRI sells Indian property.
- An application by the buyer. The person paying a non-resident may separately apply for a determination of the appropriate proportion of the sum that is actually chargeable, and tax is then deducted only on that proportion.
- Reinvestment reliefs. The Act continues to exempt gains reinvested in a residential house in India within the stated periods, and gains from land or buildings invested within six months in specified long-term bonds up to a statutory ceiling. Both need planning before completion, not after.
- A treaty rate. Where a double taxation agreement gives a lower rate, the definition of rates in force lets it apply at the deduction stage, but only where you hold a residence certificate from the other country's government and furnish the prescribed documents.
Then getting the money out
Deduction is a tax question. Taking the net proceeds abroad is a separate exchange control question with its own limits, forms and bank undertakings. Our guide on repatriating money from India as an NRI sets out that channel, and our guide on viewing the encumbrance certificate online in Karnataka shows how to pull the title position so the cost documents are in hand first.
None of the above is a computation for your sale. The rate in force, the treaty position and the reliefs available all turn on your figures and your tax year, and should be confirmed with a chartered accountant for the specific transaction before you sign.