Lower TDS guide
Lower TDS Certificate for NRI Property Sale: A Practical Guide
An educational guide for NRIs selling property in India, explaining why TDS can be high, when a lower TDS certificate may help, what documents are usually needed, and how timing affects cash flow.
Quick summary
Lower TDS planning should happen before buyer payment.
A lower or nil deduction certificate can reduce excessive withholding where an NRI seller’s estimated final tax liability is lower than the deduction that would otherwise apply. It does not reduce the final capital gains tax by itself.
From 1 April 2026, the current lower or nil withholding application is Form 128 under section 395(1) of the Income-tax Act, 2025. This replaces the older Section 197 and Form 13 terminology that many property-sale guides still use.
Use the NRI Property Sale TDS Calculator as an estimate, then prepare the actual Form 128 working from the transaction documents before relying on a requested rate.
Why can TDS be high when an NRI sells property?
The buyer’s withholding obligation and the seller’s final capital gains liability are related, but they are not the same calculation. In an NRI sale, the buyer has to follow the non-resident withholding framework. The seller’s actual tax, however, depends on the eventual capital gains computation and other relevant income-tax rules.
This difference can create a cash-flow problem. If the withholding is materially higher than the seller’s final tax, the excess may remain blocked until the seller files the return, the credit is available and the refund is processed.
Current law
Lower TDS certificate in 2026: Form 128 replaces Form 13
For tax year 2026-27 under the Income-tax Act, 2025, the lower or nil withholding provision is contained in section 395(1). The application is made in Form 128 under the Income-tax Rules, 2026. Form 128 is the successor to the older Form 13 used under Section 197 of the Income-tax Act, 1961.
The Income Tax Department states that a lower or nil certificate is issued where the payee’s estimated total income justifies deduction at a lower rate or nil rate. Form 128 is filed electronically and can be used by residents or non-residents seeking the certificate.
Existing certificates issued under the old Section 197 framework can continue for 2026-27 payments where they were issued for the projected receivable for that tax year, subject to their stated validity and coverage.
When should an NRI apply for a lower TDS certificate?
The review should begin once the buyer, expected consideration and payment schedule are reasonably known, but before the buyer makes the payment that will attract withholding. The Income Tax Department’s Form 128 guidance specifically notes that the certificate should be available to the payer before deduction, so the application should be filed as early as possible.
Do not wait only for the registration date. Token money, advances and instalments can matter if they are part of the transaction and trigger deduction obligations. If the buyer plans multiple payments, the seller should map the certificate timing to the actual payment schedule.
- Buyer identified: collect payer details early.
- Sale value known: prepare the estimated tax working.
- Documents available: purchase or inheritance chain should be ready.
- Payment schedule known: flag advances and instalments.
- Joint ownership: review each seller separately.
- Repatriation planned: align bank and tax records from the start.
How does the lower TDS application workflow work?
The application starts with an estimated tax computation and supporting transaction data. Under the current Form 128 process, the taxpayer provides applicant details, the lower or nil deduction request, estimated income and tax information, and payer details in the relevant annexure.
The current process is electronic. The application is submitted through the Income Tax/TRACES workflow, supporting documents are uploaded, and the application may be processed by the Assessing Officer or system. Additional information may be sought before a certificate is issued.
If approved, the certificate specifies the rate and validity or coverage. The buyer should use the certificate only for the payments and circumstances it actually covers.
Documents and information usually needed for a lower TDS review
- PAN, passport, visa or OCI records: Supports identity and residential-status information.
- Buyer details and payment schedule: Needed to map the proposed withholding and certificate coverage.
- Purchase deed or inheritance chain: Supports acquisition history and cost working.
- Sale agreement or draft deed: Supports the proposed consideration and transaction terms.
- Improvement and transfer-expense records: May support the estimated capital gains computation where legally allowable.
- Prior tax returns and tax records: May be relevant to the estimated total income and compliance history.
- Capital gains computation: Provides the numerical basis for the requested lower or nil rate.
- Exemption support, where relevant: Any assumed exemption should be supportable and still has to satisfy the final legal conditions.
What determines the rate requested in a lower TDS application?
The requested rate should be supported by an estimated tax position rather than chosen arbitrarily. The working may consider sale consideration, acquisition cost, holding period, improvement expenditure, transfer expenses, ownership share, other relevant income and any supportable exemption assumptions.
The seller should be conservative with unsupported costs. Missing invoices, unclear inheritance history or an exemption that has not yet been planned can weaken the working and create a mismatch later when the final return is filed.
Circle-rate or stamp-duty valuation issues should also be reviewed where relevant. If the sale value and the value adopted for stamp purposes differ, the tax computation may need additional analysis.
What does the buyer need to do after a certificate is issued?
The certificate does not transfer the buyer’s compliance responsibility to the seller. The buyer must check that the certificate applies to the relevant seller, payment, rate and period, then deduct and report tax using the permitted treatment.
The seller should preserve the certificate, payment records and resulting tax-credit documents. After the transaction, the final capital gains calculation is completed through the return process, and any difference between estimated and actual tax is dealt with there.
What if the property has two or more NRI sellers?
A lower deduction certificate should not be assumed to cover every co-owner. Each seller can have a different ownership share, acquisition cost, tax position, exemption plan and other income. The buyer may therefore need seller-wise instructions and tax credit mapping.
Where one co-owner is resident and another is non-resident, the withholding rules may differ within the same property transaction. Read Joint Ownership and NRI Property Sale Tax Rules before the payment schedule is finalised.
What if the buyer has already deducted the higher TDS?
A lower certificate is most useful prospectively. If tax has already been deducted and deposited, the seller may need to move to the return and refund route for that amount rather than expect a later certificate to undo a completed deduction.
The immediate priorities are to verify that the deduction is correctly mapped to the seller, obtain the relevant TDS records, reconcile the credit and complete the final capital gains computation. If excess tax remains after the return is filed, the eligible amount can be claimed as a refund.
See Claim TDS Refund After Selling Property in India as an NRI for the post-deduction workflow.
Avoid these
Common lower TDS mistakes NRIs should avoid
- Starting the application only after the buyer has already deducted tax.
- Using old Form 13 terminology without checking the current Form 128 process for a 2026-27 transaction.
- Requesting a rate without a complete estimated tax computation.
- Ignoring buyer details or payment instalments while preparing the application.
- Assuming one co-owner’s certificate automatically applies to another seller.
- Relying on unsupported improvement costs or exemption assumptions.
- Failing to check whether the certificate actually covers the payment being made.
- Assuming lower TDS changes the final capital gains liability.
Watch overview
Lower TDS certificate for NRI property sale
This video explains why lower TDS planning should be reviewed before the sale payment stage.
FAQs
Common questions
What is a lower TDS certificate for an NRI property sale?
It is a certificate that permits the payer to deduct tax at a lower or nil rate where the seller's estimated income and tax position justify it. It changes withholding at the payment stage, not the final capital gains liability.
Is Form 13 still used for lower TDS applications in 2026?
For tax year 2026-27 under the Income-tax Act, 2025, the current application is Form 128 under section 395(1). Form 128 replaces the older Form 13 and Section 197 framework.
When should an NRI apply for lower TDS on a property sale?
The application should be started before the buyer makes the payment that will attract withholding. Buyer details, sale consideration, payment timing and the estimated tax working should be organised early.
What documents are usually needed for Form 128 in a property sale case?
Common inputs include PAN and identity details, payer information, sale documents, purchase or inheritance records, estimated income and tax computation, prior tax records, improvement evidence and relevant exemption support where applicable.
Can the buyer deduct lower TDS without a certificate?
The buyer should not simply use a lower rate because the seller requests it. Where a lower or nil certificate is required, the approved certificate provides the basis for the permitted withholding treatment.
Does a lower TDS certificate reduce the final capital gains tax?
No. The final tax is determined from the actual capital gains computation and return filing. A lower certificate only affects how much tax is withheld before the seller receives the payment.
Can one lower TDS certificate cover all joint owners?
Do not assume so. Each seller's ownership share and tax position should be reviewed separately, and the certificate must be checked for the seller, payer, rate, period and payments it actually covers.
What if TDS has already been deducted at the higher rate?
The seller may need to reconcile the credit and claim the eligible excess through the income-tax return and refund process. A later certificate generally does not reverse tax already deducted and deposited.
Need help with a live property sale?
Use the service workflow for document review.
This article explains the concept. The service page is for submitting your sale stage, buyer timing and documents for review.
Disclaimer: This guide is for general informational purposes only and should not be treated as legal, tax, FEMA, accounting, investment or professional advice. The correct treatment depends on facts, documents, jurisdiction and applicable law.