Parag Keshav Bopardikar lives in the United States. In 2015, he sold a property in Pune for ₹2 crore. The buyer - a resident Indian - dutifully deducted 20% TDS before paying him, and deposited the money with the Income Tax Department.
Everything appeared to be in order. Bopardikar filed his income tax return, reported the capital gains, and claimed credit for the TDS deducted.
Then the notice arrived. The Income Tax Department was demanding ₹46.81 lakh, plus a penalty under Section 270A.
The buyer had used the wrong form.
What the Buyer Did Wrong
Under Indian tax law, TDS on property sales works differently depending on whether the seller is a resident or a non-resident.
When a resident Indian sells property, the buyer uses Form 26QB under Section 194IA to deposit TDS. The rate is 1% of the sale price.
When an NRI sells property, the buyer must use Form 27Q under Section 195. The rate is substantially higher: for transfers on or after 23 July 2024, 12.5% on long-term capital gains (without indexation); for transfers before that date, 20% with indexation. Short-term gains are taxed at 30%. Surcharge and cess apply on top. Bopardikar’s 2015 sale fell under the earlier 20% rate.
Bopardikar’s buyer deducted TDS at the correct rate - 20% - and deposited it with the IT Department. But he filed under Form 26QB, not Form 27Q.
This single form selection broke the entire credit trail.
Form 26QB entries are linked to the seller’s PAN as a resident transaction. Bopardikar, as an NRI, had a different tax status in the IT Department’s records. The TDS his buyer deposited - ₹18,68,177 - never appeared in his Form 26AS or his Annual Information Statement (AIS).
As far as the IT Department’s system could see, no TDS had been deducted at all.
The Demand Notice
The Assessing Officer reopened the assessment under Section 148 in 2023 and ultimately issued a demand of ₹46.81 lakh. The computation treated the TDS as unclaimed and the capital gains as fully untaxed - despite the fact that the money was already sitting with the government, deposited by the buyer years earlier.
The notice also carried a penalty under Section 270A, which applies when income is under-reported or misreported. The department’s position: Bopardikar had under-reported his tax liability.
He had also paid ₹1.91 lakh as advance tax on his capital gains before the sale. That payment was not in dispute. What the department refused to acknowledge was the ₹18.68 lakh in TDS that his buyer had already deposited.
Bopardikar had done nothing wrong. He went to the Delhi High Court.
What the Court Ruled
The Delhi HC heard the petition in Parag Keshav Bopardikar v. ITO & Ors. [TS-727-HC-2025-DEL] and ruled in his favour on 27 May 2025.
The court’s reasoning was direct: a procedural lapse by the buyer cannot be used to penalise an NRI seller who complied with his own tax obligations.
The TDS had been deducted. It had been deposited. The government had the money. The only failure was the form used to report it - a form selected by the buyer, not the seller.
The court directed the Revenue to:
- Correct the record and reflect the TDS deposited by the buyer to Bopardikar’s credit under his PAN, effective from the date it was originally deposited.
- Compute the refund, if any, due to Bopardikar in accordance with law.
All orders and communications inconsistent with this direction were set aside.
Why This Keeps Happening
Most buyers who purchase property from NRIs are resident Indians who have bought and sold properties before - all from resident sellers, all using Form 26QB. When they encounter an NRI seller for the first time, many do not know that the form and rate are different. Their bank, their lawyer, or their CA may not flag it either.
The buyer deducts TDS and assumes the job is done. The NRI seller receives the sale proceeds and assumes the TDS credit will appear in their AIS within weeks.
Neither of them is watching for the mismatch. It surfaces months later, when the NRI files their ITR and the TDS credit is missing - or when the demand notice arrives first.
This gap cannot be corrected by the NRI seller alone. The correction has to be filed by the buyer at the TRACES portal, using their login credentials. Asking a buyer to revisit a completed transaction and file a correction is not always straightforward, particularly if the relationship was purely transactional and they have moved on.
The Delhi HC ruling establishes that this form mismatch cannot result in a penalty or a demand against the seller. But it does not prevent the notice from being issued. Getting the notice set aside required a court petition.
What NRI Sellers Must Do Differently
Before the sale - confirm the form:
Raise this explicitly with the buyer’s CA before any TDS is deposited. Confirm in writing that Form 27Q will be used under Section 195. If the buyer’s side is unfamiliar with the distinction, provide the relevant provision. This one conversation prevents the entire downstream problem.
Apply for a lower TDS certificate (Form 13):
An NRI seller can apply to their Jurisdictional Assessing Officer for a Form 13 certificate before the sale. This certificate specifies the actual tax liability based on your actual capital gains and instructs the buyer on the correct rate to deduct. It also compels the correct form to be used, since the certificate is explicitly issued under Section 195. The TDS refund process for NRIs becomes significantly simpler when TDS is deducted at a rate close to actual liability rather than the default Section 195 rate (12.5% on long-term gains for sales on or after 23 July 2024, 30% on short-term gains, plus surcharge and cess).
After the sale - monitor your AIS:
Check your AIS and Form 26AS within 60–90 days of the sale. If the TDS amount is not reflected, contact your buyer immediately. Do not wait until you file your ITR to discover the gap.
If a demand notice arrives:
Respond in writing. Do not ignore it. Cite [TS-727-HC-2025-DEL] and attach:
- The TDS challan from the buyer confirming the amount deposited
- Your ITR acknowledgement showing the credit was claimed
- Your advance tax payment receipts
If the Assessing Officer does not resolve it at their level, a High Court petition is the appropriate next step - and the Delhi HC has already established the legal position clearly.
Documents to keep from every property sale:
- Buyer’s TDS certificate (Form 16B or 16C)
- TDS deposit challan (available from buyer or TRACES)
- Advance tax payment receipts
- ITR acknowledgement
- All IT Department correspondence, with dates
The Larger Point
NRI sellers already face a higher TDS rate, a more complex refund process, and longer timelines than resident sellers. When a buyer’s procedural error adds a demand notice and a court proceeding on top of that, the sale that should have been complete nine months ago is still being resolved.
The Bopardikar case gives NRI sellers a clear legal position when this happens. But the better outcome is preventing it from happening - by confirming the correct form before the TDS is deposited, not after.
Assetly helps NRI property owners store and organise all property-related documents - sale deeds, TDS certificates, tax filings, and correspondence - accessible from anywhere. Learn more at assetlyhq.com.
