Section 195 vs Section 194-IA
The default Indian withholding obligation on a property sale by a resident is Section 194-IA at 1% — mechanical, low-friction, paid by the buyer with Form 26QB. When the seller is an NRI, that section does not apply. Instead Section 195 kicks in, and the buyer must withhold at the seller’s LTCG / STCG rate, plus surcharge and cess. The buyer also needs a TAN, must deposit the TDS by the 7th of the following month, and must file Form 27Q quarterly. Without planning, this often means 20%+ of the sale price is parked with the tax department, leaving the seller cash-short at the closing table.
Who needs this advisory
Both the buyer and the NRI seller benefit from getting this right. Buyers face joint and several liability for short-deduction. NRI sellers face inflated TDS without a lower-deduction certificate. Banks won’t process the registration without seeing the TDS challan. Both sides typically retain us together so the closing happens cleanly.
Governing rules
The governing rules:
- Section 195 — TDS on payments to non-residents.
- Section 197 — lower deduction certificate (Form 13).
- Form 27Q — quarterly TDS return for non-resident payments (renamed Form 144 under ITA 2025 from 1 April 2026).
- Section 206AB — higher TDS for non-filers (does not typically apply to one-off NRI sellers but is worth a check).
- Surcharge slabs — 10% / 15% / 25% / 37% on the income tax depending on transaction value.
- Health & education cess — 4%.
How we deliver this engagement
- Buyer TAN — if buyer doesn’t have one, we apply (Form 49B) — allotment in 5–7 working days.
- Seller cost-basis pack — we compile original purchase documents, indexed cost, exemption eligibility.
- Form 13 application — filed with the seller’s jurisdictional AO so the certificate authorises the actual LTCG / STCG rate.
- Closing-table pack — sale-deed coordination, TDS challan ready for buyer’s deposit on registration day.
- Form 27Q filing — quarterly return by the buyer; we file on their behalf.
- Seller’s ITR — reconciliation of capital gains and TDS, refund claim where applicable.
Documents we’ll ask for
- Sale agreement / draft sale deed with consideration value.
- Buyer’s PAN, address, TAN (or we will help obtain TAN).
- NRI seller’s PAN, passport, visa, foreign address.
- Original purchase documents, payment trail, capital expenditure proofs.
- Property registration documents and encumbrance certificate.
- For Section 54 / 54F claim — reinvestment plan or CGAS deposit details.
How long it takes and what it costs
Lower deduction certificate processing typically takes 30–45 working days. We start 8–10 weeks before the expected sale date so the certificate is in hand at closing. Form 27Q quarterly filing is due 31 July, 31 October, 31 January, 31 May. Our fee covers TAN application (if needed), Form 13 application, Form 27Q for the quarter of sale, and the seller’s ITR.
Frequently asked questions
Can the buyer avoid the TDS by claiming the seller is resident?
No — residency for the purposes of Section 195 follows the seller’s status under Section 6, not the buyer’s convenience. Mis-classification is the buyer’s liability.
What if the property is jointly held with a resident?
TDS applies proportionately to the NRI’s share. The buyer deducts under Section 195 on the NRI portion and Section 194-IA on the resident portion.
Can the certificate be issued for nil deduction?
In rare cases — for example, where Section 54 reinvestment is fully planned and documented at the application stage. Most certificates land at the actual LTCG rate, not nil.
Is the seller exempt from filing an Indian ITR if TDS was deducted?
No. Filing an Indian return is mandatory for the year of capital gain — the ITR reconciles the TDS, claims exemptions, and either claims a refund or pays the shortfall.
Talk to a partner.
A 30-minute call with a partner — no deck, no follow-up email blasts. Just a read on whether we’re the right team to handle the Section 195 TDS for your NRI property sale.