Direct answer: if you are a non-resident selling Indian property, settle the tax route before the buyer makes the first substantial payment. The ordinary 1% resident-seller property-TDS process is not the right starting point. The Income Tax Department says payment to a non-resident seller is subject to Section 195, while Section 194-IA is the resident-seller route.
This is not a tax calculation. It is the decision sequence that stops a sale from being structured around the wrong assumption.
Four questions to settle before you sign or accept an advance
| Question | Why it matters | Evidence to assemble |
|---|---|---|
| Is the seller non-resident for this transaction? | It determines whether the buyer must use the Section 195 route rather than the familiar resident-seller process. | PAN, current tax-residency advice, sale terms and seller details |
| Is the asset long-term or short-term? | The Income Tax Department’s current guidance uses a holding period of more than 24 months for immovable property. | Acquisition deed, allotment or prior-owner documents where relevant, sale date |
| What may be deductible or exempt? | The final tax position depends on facts, evidence and current law, not just a headline rate. | Cost and improvement records, transfer expenses, inheritance or gift documents, adviser’s computation |
| What will the authorised dealer bank need later? | Tax and FEMA documentation can affect how proceeds are handled and remitted. | Sale deed, TDS records, tax advice and bank’s current checklist |
If any answer is uncertain, do not ask the buyer to “sort it out later”. Put the issue into the agreement and payment timeline, then get Indian tax and legal advice suited to the transaction.
Section 195 is the practical fork in the road
For a resident seller, buyers often know the property-purchase process under Section 194-IA. The Income Tax Department’s property-TDS guidance expressly describes that route as applying where the transferor is a resident. Its non-resident FAQ directs a buyer paying a non-resident seller to Section 195 instead.
That difference has practical consequences. The buyer, seller, tax adviser and sometimes the bank should agree the compliance sequence before funds move. Do not tell a buyer to deduct a flat percentage based on a blog post. Surcharge, cess, the nature of the gain, the documents and a certificate under Section 197 can all change the correct handling.
A lower-deduction certificate is a process, not a promise
Section 197 permits an application for a certificate authorising deduction at a lower or nil rate. It is not a blanket NRI entitlement, a retrospective fix, or a reason for the buyer to omit TDS without the applicable certificate. Read our Form 13 and lower-TDS certificate guide with a tax professional, and check current Income Tax Department instructions before acting.
Work out the capital-gains facts before looking for a rate
The useful starting point is not an online calculator. It is a clean evidence pack:
- the acquisition deed and date;
- documents explaining inheritance, gift or partition, where relevant;
- the original owner’s documents where the acquisition history matters;
- invoices and records for capital improvements and transfer expenses; and
- the proposed sale consideration, tax advice and dates in the agreement.
For immovable property, the Income Tax Department’s current FAQ says a holding period of more than 24 months is long-term. It also says the long-term rate for transfers on or after 23 July 2024 is 12.5%, subject to the law and applicable additions. That is not the final number you should pay or ask a buyer to deduct. It is a reason to get a written computation before the payment schedule becomes irreversible.
Property received through inheritance needs particular care. Ownership history can affect the records needed for a computation and the sale itself. Start with the NRI inherited-property guide and have an adviser confirm the facts rather than substituting a current market estimate for the documentary history.
Exemptions and remittance are separate decisions
It is tempting to treat a potential reinvestment or bond investment as a shortcut to “no TDS”. It is not. Provisions such as Section 54, 54EC or 54F have asset, timing, ownership and investment conditions. Whether they apply, and how they interact with deduction, requires transaction-specific advice. Our Section 54 and 54EC explainer is useful background, but it is not a substitute for a computation or a certificate.
Likewise, tax compliance and sending money abroad are connected but not identical. RBI’s current Master Direction on acquisition and transfer of immovable property sets out the FEMA framework; your authorised dealer bank decides what documents it needs for the actual remittance. Keep the bank involved early and see our Form 15CA/15CB and repatriation guide for the separate reporting question.
A safe sale sequence
- Confirm seller status and property history with an Indian tax professional.
- Assemble the deeds, cost evidence, improvement and transaction-expense records.
- Obtain a written view on the Section 195 deduction and whether a Section 197 application is appropriate before the payment schedule is fixed.
- Put the agreed deduction and document sequence into the sale agreement and retain the evidence of each payment.
- Ask the authorised dealer bank for its current remittance checklist before committing to an overseas transfer date.
- File the relevant return and reconcile TDS with the final tax position using professional advice.
This sequence does not guarantee a tax outcome, registration, certificate or remittance. It makes the gaps visible early enough to address them.
If you want a structured list of FEMA, tax, document and monitoring questions before engaging advisers, try the NRI Compliance Check. It produces a practical checklist and action items. It does not calculate tax, retrieve government records, bypass login or portal controls, or replace legal, tax or bank advice.
Assetly helps property owners organise, verify and track their property documents digitally.
