For a payment to a non-resident seller, identify the amount chargeable to tax and the applicable deduction before completion. Section 395 provides a lower or nil deduction certificate and a separate route for the payer to obtain a determination of the chargeable proportion. A pending application is not an issued certificate. Applying early can reduce uncertainty about the amount the buyer must deduct.
Two different applications, and they are not interchangeable
Section 395 of the Income-tax Act, 2025 provides these distinct routes. The Income Tax Department identifies Form 128 for the payee's lower or nil deduction application under the new rules.
- The payee's application. Where tax is required to be deducted on any income or sum, the payee may apply to the Assessing Officer for deduction at a lower rate or for no deduction. If the officer is satisfied that the payee's total income justifies it, he issues a certificate, and the person paying must then deduct at the rate specified in the certificate, or deduct nothing, for as long as the certificate is valid. That is the route the seller takes.
- The payer's application. Separately, the person responsible for paying a non-resident a sum falling within the non-resident deduction entry may apply, where he considers that the whole of the sum would not be chargeable in the recipient's hands, for a determination of the appropriate proportion of the sum that is chargeable. Tax is then deducted only on that proportion. That is the route the buyer takes, and it is useful where the buyer wants his own protection rather than relying on your certificate.
The Act says that if a person does not furnish a valid permanent account number in an application for a certificate, no certificate shall be granted. It also requires the deductee to furnish a valid number to the deductor, with a higher rate of deduction if he does not. So the first step is not the application. It is confirming that you hold a valid number, that it is active, and that the name and details on it match the sale deed exactly.
What the officer is being asked to accept
He is being asked to accept a computation. That means you have to produce one, and support it. In practice the file needs the sale agreement showing the consideration, proof of your cost of acquisition and of any improvements, the chain of title, evidence of the expenditure incurred in connection with the transfer, your residential status, your past returns if any, and, where a treaty rate is claimed, a residence certificate from the government of the country you live in together with the prescribed documents.
Inherited property is where this stalls most often, because the relevant cost is the cost to the previous owner and the family no longer has the paperwork. Start assembling that early. Our guide on viewing the encumbrance certificate online in Karnataka shows how to recover part of the chain from the registry when the documents at home have gone missing.
Timing, and the mistake that cannot be undone
- Apply before you sign, not after. The certificate directs the buyer how to deduct going forward. It does not reach back to a deduction already made. Once the buyer has deducted and deposited, your only remedy is to claim it in a return and wait.
- Allow real time. There is no statutory period within which the officer must decide, and the file will go back and forth for documents. Build the application into the transaction timetable at the outset rather than treating it as a formality at the end.
- Match the certificate to the actual buyer. A certificate is issued for a payment by a named payer. Where there are two buyers, or the buyer's name on the agreement differs from the name on the payment, the certificate has to reflect that or the bank will not act on it.
- Watch the validity. The obligation to deduct at the certificate rate lasts only while the certificate is valid. A delayed completion can outlive it.
- Tell the buyer in the agreement. Record that a certificate is being applied for, what happens if it is not issued by the completion date, and who bears the cost of the delay. This is the clause that prevents the transaction collapsing at the last minute.
If you did not get one
Tax deducted is taken into account when assessing what remains payable or refundable. Section 431 provides for refund of tax paid in excess of the amount properly chargeable, and Section 433 requires the refund claim through a return under Section 263. Eligibility and processing depend on the actual return and records. See the wider guide on tax deduction when an NRI sells Indian property.
The step after
A certificate solves the deduction. It does not move the money. Taking the net proceeds out of India is a separate exercise under exchange control with its own limits and bank documentation, and our guide on repatriating money from India as an NRI sets out how that works. Plan both together, because a sale that clears the tax gate and stalls at the remittance gate has not finished.
The computation that goes into the application is the whole case, and it should be prepared and confirmed by a chartered accountant on your actual numbers for the relevant tax year rather than adapted from a general note.