If you sold property in India in the last few years and didn’t file an Indian income tax return, there is a reasonable chance the government is holding money that belongs to you.
Not a small amount. On a typical Rs 1 crore property sale by an NRI, the buyer is required to withhold roughly Rs 15 lakh as TDS before paying you. Your actual capital gains tax on that sale might be Rs 5 lakh, or Rs 3 lakh, or nil if you reinvested under Section 54. The Rs 10 to 15 lakh sitting in between - that is a refund you are entitled to claim.
Most NRIs don’t. Some don’t know an Indian return is required when TDS has already been deducted. Others assume it’s too complicated to file from abroad. Some haven’t maintained a PAN. The refund sits unclaimed, earning the government a modest interest-free loan at your expense.
Here is how the overpayment happens, how to calculate what you’re owed, and exactly how to get it back.
Why TDS Is Almost Always More Than Your Actual Tax
Think of TDS as an advance collection, not the seller’s final assessment. The buyer usually does not have the full acquisition-cost, improvement and exemption evidence needed to compute the seller’s eventual liability. That is why the statutory withholding calculation can produce more tax credit than the final return requires.
The buyer’s withholding amount and the seller’s final capital-gains liability are different calculations. Under Section 393, the buyer must use the current statutory entry and the transaction facts; a capital-gains headline rate should not simply be applied to the entire sale price.
The seller’s final liability is assessed on the taxable capital gain after the acquisition cost, eligible improvement costs, transfer expenses and any available reliefs are considered.
The possible refund is the tax credit validly deposited in your name minus the final liability determined in the return. Reinvestment relief under Section 54 or Section 54EC can widen that gap, but only if every condition is met and the claim is accepted. Have a chartered accountant compute both figures from the actual transaction instead of relying on an illustration from a different sale.
The First Check: Did the Buyer Actually File Their TDS Return?
Before you file your return and claim the credit, verify that the TDS is actually visible in your account. This is where many NRIs discover a problem.
Depositing TDS is only step one. The buyer must also complete the applicable reporting. From 1 October 2026, an eligible resident individual or HUF buyer uses Form 141 Schedule E for a property purchase from a non-resident. Other buyer categories should confirm the TAN-based Form 144 return, the successor to Form 27Q.
If the applicable statement has not been filed or matched correctly, Form 26AS may show no TDS credit. Filing a return with an unreconciled claim can delay the refund or produce an adjustment, so resolve the mismatch first.
How to check: log into the income tax e-filing portal, open AIS/Form 26AS and look for the property-sale TDS entry. If it is missing, ask the buyer for the Form 141 Schedule E acknowledgement or the relevant Form 144 filing details, depending on their category and the deduction date.
Once the credit is visible in Form 26AS, you can safely file your return and claim it.
The Two Routes: Before the Sale and After
You have two ways to address the TDS gap, and they’re not mutually exclusive.
Route 1 - before the sale: Lower Deduction Certificate
If you have not sold yet, assess a Lower Deduction Certificate under Section 395(1) using Form 128. Apply well before the expected payment date. Our dedicated guide to the lower TDS certificate explains the current application and evidence.
If your actual tax liability is nil (because you’re reinvesting fully under Section 54), the Assessing Officer can authorise nil TDS. The buyer deducts nothing, and you never enter the refund cycle. This is the cleaner path - you get the full sale proceeds immediately rather than waiting 6 to 18 months for a refund. The complete TDS guide walks through the LDC application in detail, and our Section 54 exemptions guide explains when your liability can be reduced to nil.
Route 2 - after the sale: ITR refund claim
If TDS has already been deducted, file an Indian income tax return (ITR-2) for the financial year of the sale. Declare the capital gain, claim any applicable exemptions (Section 54, 54EC, 54F), and the refund is computed automatically.
Filing the Refund Claim: Step by Step
What you need before you start:
- PAN (mandatory - no PAN means no filing)
- Form 16A or the current TDS certificate generated after the buyer completes the applicable statement
- Your purchase deed or inheritance documents (to establish cost of acquisition)
- Sale deed
- A capital gains computation - ideally prepared with a CA, though for straightforward sales you can do it yourself
- NRO bank account pre-validated on the e-filing portal
How to pre-validate your NRO account: Log into incometax.gov.in, go to Profile, then Bank Account, add your NRO account with IFSC code, and mark it as a refund account. The bank validates it digitally within a few days.
Filing the return:
File ITR-2, which is the correct form for individuals with capital gains income. Log into the e-filing portal, select ITR-2, fill in Schedule CG (capital gains), enter the TDS credit from Form 26AS, and the refund figure populates automatically.
After filing, you must e-verify within 30 days. Options for NRIs:
- Digital Signature Certificate (DSC) - works without an Indian mobile number
- EVC via your net banking
- Aadhaar OTP - if your email is registered with the e-filing portal, you may receive the OTP there even without an Indian number
The filing deadline is 31 July of the assessment year. If you sold property in FY 2026-27, the deadline is 31 July 2027 (a sale in the previous year, FY 2025-26, had to be filed by 31 July 2026).
Missed the deadline?
File a belated return under Section 139(4) by 31 December of the assessment year. For even older sales, Section 139(8A) allows an updated return within 48 months - roughly four years back - though updated returns for refund claims are subject to certain conditions.
For years beyond that, a formal application under Section 119(2)(b) to the CBDT for condonation of delay is the only option. These are considered case by case.
Section 244A: The Government Pays You Interest
While you wait for the refund, Section 244A works in your favour. The Income Tax Act mandates interest on delayed refunds at 0.5% per month (or part of a month) from 1 April of the assessment year to the date the refund is credited.
On a Rs 9 lakh refund held for 12 months, that is Rs 54,000 in interest. On Rs 15 lakh held for 15 months, it is Rs 1,12,500. The interest accrues automatically and should appear in the refund amount credited to your account. If it doesn’t, file a rectification under Section 154 on the portal.
One caveat: no interest applies if the refund amount is less than 10% of the total tax determined.
When the Buyer Got the TDS Wrong
Buyers sometimes use the resident-seller entry instead of the non-resident entry under Section 393, either out of ignorance or because the seller’s residential status was not established before payment.
This creates two problems. First, the buyer can become an assessee in default. Under Section 398(3) of the Income-tax Act, 2025, interest remains 1% per month or part-month for failure to deduct and 1.5% after deduction for failure to deposit. The ITAT Bangalore’s 2022 decision in Nitesh Estates Ltd. v. ADIT concerned former Section 195 and remains useful historical context for why knowing the seller’s status matters.
Second, for the NRI seller: if the buyer deducted less than the amount required for the transaction, Form 26AS shows only the amount actually deposited. You cannot claim credit for tax that was never deposited, and any final shortfall remains to be reconciled in the return.
If you suspect the buyer used the wrong route or rate, check Form 26AS and ask for the Form 141 Schedule E acknowledgement or the applicable TAN-based Form 144 details.
Getting the Refund Out of India
Refunds are credited to the NRO account you specify on the e-filing portal. The NRO account is an Indian rupee account, and the money stays in India until you repatriate it.
To move it abroad, you follow the same process as property sale proceeds: obtain a CA certificate (Form 15CA/15CB) confirming taxes have been paid, submit it to your bank, and initiate the remittance. The annual cap under FEMA is USD 1 million from the NRO account per calendar year, which for most NRIs is more than sufficient to cover a TDS refund. Our Form 15CA/15CB guide walks through the full repatriation process.
Keep the ITR acknowledgement, the refund credit confirmation, and your Form 26AS together. The bank will ask for them, and the tax authorities in your country of residence may need the Indian tax credit documentation for your DTAA claim.
A Practical Timeline
If you sold property in FY 2026-27 (April 2026 to March 2027):
| Deadline | Action |
|---|---|
| Before sale | Apply for an LDC using Form 128 where appropriate |
| After deduction | Confirm the buyer completed Form 141 Schedule E or the applicable Form 144 statement; check Form 26AS |
| 31 July 2026 | File ITR-2, claim refund |
| September-October 2026 | Receive 143(1) intimation; refund credited (typical) |
| 31 December 2026 | Last date for belated return if you missed July deadline |
| April 2030 | Last date for updated return (Section 139(8A)) |
Keeping your sale documents, capital gains computation, and Form 16A organised before the ITR deadline is the step that most NRIs skip. A platform like Assetly lets you store and access all of these from abroad, so the annual filing doesn’t require hunting through email threads and WhatsApp forwards.
Assetly helps NRIs organise, verify, and track their property documents digitally - from sale deed to ITR acknowledgement - so nothing gets lost between a sale in India and a filing deadline abroad. Learn more.
