NRI Property Sale in India: TDS under Section 195, Form 13 Lower Certificate & Repatriation Guide

Selling immovable property in India as a Non-Resident Indian (NRI) involves a regulatory ecosystem far distinct from resident transactions. Whether you are an NRI based in the US, UK, UAE, Canada, Singapore, or Australia disposing of an ancestral residential plot in Raipur’s Shankar Nagar, a commercial unit in the Urla/Bhanpuri industrial belt, or agricultural/commercial land in Kalahandi and Sambalpur, the tax implications can catch both buyer and seller off guard.

The single biggest operational shock during an NRI property sale is Tax Deducted at Source (TDS). While a resident seller faces a straightforward 1% TDS under Section 194-IA, an NRI seller is subject to Section 195—where tax is deducted at full capital gains rates (20% plus applicable surcharge and cess, effectively reaching up to 23.92%) on the gross sale consideration, rather than the actual capital gains earned, unless a formal Lower TDS Certificate is obtained.

In our practice at Rabi Agrawal & Associates, advising NRIs across Chhattisgarh and Odisha, we regularly encounter transactions stalled at the sub-registrar's office because parties misjudged Section 195 compliance, failed to obtain a buyer TAN, or ended up with millions of rupees unnecessarily locked in tax refunds for 18 months.

This guide provides a comprehensive practitioner's roadmap covering Section 195 mechanics, the Form 13 application process for a Lower TDS Certificate on TRACES, Form 15CA/15CB repatriation procedures under RBI guidelines, and DTAA tax credit mechanisms.

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1. Understanding Section 195: Why NRI Property Sales Face Heavy TDS

Section 195 of the Income Tax Act, 1961 governs payments made to non-residents. Unlike Section 194-IA (which applies to resident sellers and mandates 1% TDS on sales above ₹50 Lakhs), Section 195 is designed to ensure tax compliance before capital leaves Indian shores.

Key Rules under Section 195:

1. Deduction on Gross Sale Value (Without Form 13): In the absence of a Lower TDS Certificate issued by the Income Tax Department, the buyer is statutorily bound to deduct TDS on the total agreement value, not the net taxable profit.
2. Applicable Tax Rates:
   • Long-Term Capital Gains (LTCG): Property held for more than 24 months attracts a base tax rate of 20%. Adding applicable surcharges (10% for gains/income exceeding ₹50 Lakhs, 15% exceeding ₹1 Crore) and 4% Health & Education Cess, the effective TDS rate ranges between 20.80% and 23.92%.
   • Short-Term Capital Gains (STCG): Property held for 24 months or less is taxed at the individual NRI's applicable income tax slab rate, which can translate into an effective TDS rate of 30% plus surcharge and cess (up to 35.88% or 39%).
3. Mandatory TAN for the Buyer: Unlike resident property purchases where the buyer uses their PAN via Form 26QB, buying property from an NRI requires the buyer to obtain a Tax Deduction and Collection Account Number (TAN) under Section 203A. The buyer must file quarterly TDS returns in Form 27Q and issue a Form 16A TDS certificate to the NRI seller.

The Capital Blockage Reality

Consider an NRI selling a commercial plot in Urla, Raipur for ₹1.50 Crore, which was purchased years ago for ₹1.10 Crore. The actual taxable long-term capital gain might be minimal after indexation/cost adjustments or reinvestment. However, without a Lower TDS Certificate, the buyer must deduct approximately ₹31.20 Lakhs to ₹35.88 Lakhs as TDS from the total payout. This causes extreme liquidity blockage until the NRI files an Indian Income Tax Return (ITR) in the subsequent assessment year to claim a refund.

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2. Comparison Table: Resident vs. NRI Property Sale TDS

To understand why custom structuring is vital, compare the statutory requirements between resident and non-resident property dispositions:

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3. Lower / Nil TDS Certificate u/s 197 (Form 13 on TRACES)

To prevent severe capital lockup, Section 197 of the Income Tax Act permits an NRI seller to apply for a Certificate for Lower or Nil Deduction of Tax. Upon processing, the Assessing Officer (AO) calculates tax based on actual estimated capital gains (incorporating cost of acquisition, improvement, and eligible reinvestment exemptions under Sections 54, 54EC, or 54F) and issues a certificate specifying the reduced TDS percentage (e.g., 1.5%, 3%, or 0%).

+-----------------------------------------------------------------------------------+
|                  NRI PROPERTY SALE & REPATRIATION WORKFLOW                        |
+-----------------------------------------------------------------------------------+
                                          |
                                          v
                  [ Draft Agreement to Sell & Finalize Buyer TAN ]
                                          |
                                          v
                  [ Apply for Form 13 Lower TDS Cert on TRACES ]
                                          |
                                          v
                  [ AO Verifies Capital Gains & Issues Cert u/s 197 ]
                                          |
                                          v
                  [ Execute Registered Sale Deed & Collect Payment ]
                                          |
                        +-----------------+-----------------+
                        |                                   |
                        v                                   v
             [ Buyer Deducts Lower TDS ]        [ Buyer Deposits TDS via ]
             [ (e.g., 2% instead of 20%) ]       [ Form 27Q & Issues 16A ]
                        |                                   |
                        +-----------------+-----------------+
                                          |
                                          v
                  [ Sale Proceeds Deposited into NRI's NRO Account ]
                                          |
                                          v
                  [ Obtain Form 15CB from Chartered Accountant ]
                                          |
                                          v
                  [ File Form 15CA Online on Income Tax Portal ]
                                          |
                                          v
                  [ Submit 15CA/15CB + Form A2 to AD Category-I Bank ]
                                          |
                                          v
                  [ Funds Remitted to Overseas Bank Account (LRS) ]

Steps to Apply for Form 13 on TRACES Portal

1. Prerequisites & TAN Finalization: The buyer must apply for and obtain a valid TAN. The seller must have an active PAN linked with Aadhaar/passport details and registered on the TRACES portal.
2. Online Form 13 Submission: The NRI logs into TRACES under "Request for Income Tax Department Certificate u/s 197/195(3)/195(2)" and selects Form 13.
3. Documentation Upload:
   • Title Documents & Acquisition Proof: Original registered purchase deed, construction bills, or probate/mutation records if inherited.
   • Agreement to Sell: Signed agreement indicating total consideration, advance paid, property description, and buyer details (PAN & TAN).
   • Computation of Capital Gains: Detailed statement prepared by a Chartered Accountant showing indexed cost of acquisition/improvement or statutory cost calculations, alongside proposed exemptions.
   • Exemption Evidence: If claiming exemption under Section 54EC, submit an undertaking or draft allocation application for REC/PFC/NHAI bonds. If claiming exemption under Section 54 or 54F, submit purchase/construction agreements or proof of deposit in the Capital Gains Account Scheme (CGAS).
   • Residency Status Verification: Copy of passport, VISA, entry/exit stamps, and Tax Residency Certificate (TRC) issued by the foreign tax authority.
   • Financials & Past Filings: Income tax returns filed in India for the preceding 3 financial years, along with Indian bank statements (NRO/NRE) reflecting transaction movement.
4. AO Review & Queries: The jurisdictional International Taxation Ward AO examines the computation, verifies collector valuation rates (e.g., CG RERA guidelines or local municipal rates in Raipur/Kalahandi), and may issue online queries.
5. Certificate Issuance: Upon satisfaction, the AO issues an electronic certificate specifying the exact buyer TAN, seller PAN, property details, valid financial year, and maximum amount on which the reduced TDS rate applies.

Practitioner Tip: Apply for Form 13 at least 45 to 60 days before the scheduled date of final deed registration. Executing a sale deed prior to receiving the certificate forces the buyer to deduct the full statutory 20%+ surcharge/cess, defeating the purpose of filing Form 13.

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4. Repatriation of Sale Proceeds Abroad: Form 15CA & 15CB Framework

Once the sale deed is registered and net proceeds are credited into the seller's NRO (Non-Resident Ordinary) bank account, the next step is transferring these funds to an overseas bank account or an NRE account.

Under Reserve Bank of India (RBI) Foreign Exchange Management Act (FEMA) regulations, NRIs are permitted to repatriate up to USD 1 Million per financial year from their NRO account balances, subject to tax compliance verification.

Form 15CB (Chartered Accountant Certificate)

Form 15CB is an independent tax determination certificate issued by a practicing Chartered Accountant. The CA verifies:

• The exact nature of remittance (capital gains from property disposition).
• Compliance with Section 195 TDS requirements (proof of tax paid via Form 16A / Challan 281 / Form 13 order).
• Application of Double Taxation Avoidance Agreements (DTAA) under Section 90.
• Legitimate origin of funds deposited into the NRO account.

The CA signs Form 15CB digitally on the e-Filing portal and generates a unique UDIN (Unique Document Identification Number).

Form 15CA (Online Declaration by Remitter)

Form 15CA is an online declaration submitted by the NRI remitter on the Income Tax e-Filing portal. It comprises four parts depending on transaction value and taxability:

• Part A: For remittances where taxable amount does not exceed ₹5 Lakhs in a financial year.
• Part B: For remittances exceeding ₹5 Lakhs where an order u/s 195(2), 195(3), or 197 has been obtained from the AO.
• Part C: For taxable remittances exceeding ₹5 Lakhs where a Form 15CB certificate from a CA has been uploaded. (This is the standard part used for property sale repatriation).
• Part D: For payments not chargeable to tax under specified RBI remittance codes.

Final Bank Submission Package for Authorized Dealer (AD Bank)

To execute the foreign outward remittance, the NRI must submit the following package to their AD Category-I Bank (e.g., State Bank of India, HDFC Bank, ICICI Bank, or Axis Bank branch handling forex):

1. Copy of generated Form 15CA acknowledgment.
2. Signed Form 15CB certificate with UDIN.
3. Form A2 (FEMA Application-cum-Declaration for remittance under LRS / NRO remittance scheme).
4. Copy of Registered Sale Deed & Purchase Deed.
5. Bank Statement of NRO Account reflecting incoming buyer funds.
6. Form 26AS / AIS showing TDS credit or tax payment challan details.
7. Source of acquisition details (in case of inherited property: Will, partition deed, or revenue mutation records).

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5. DTAA Benefit under Section 90 & Foreign Tax Credit (FTC)

A frequent concern for NRIs residing in foreign countries (such as the US, UK, Canada, Australia, or UAE) is double taxation—paying tax in India on property sales and being taxed again in their country of residence.

How DTAA Works for Capital Gains (Article 13)

Under most bilateral Double Taxation Avoidance Agreements (DTAAs) entered into by India (e.g., India-US DTAA, India-UK DTAA, India-Canada DTAA):

• Primary Taxing Right: Article 13 (Capital Gains) gives the state where the immovable property is situated (India) the primary right to tax capital gains arising from the sale of such property.
• Foreign Tax Credit (FTC): The NRI’s country of residence will usually grant a credit for tax paid in India against the home country’s tax liability on the same income.

Steps to Claim DTAA Credit:

1. File Income Tax Return (ITR-2) in India: File the Indian tax return for the relevant assessment year, reporting the property transaction, capital gains, and claiming final tax settlement or refund against TDS.
2. Obtain Tax Residency Certificate (TRC): Secure a TRC from the revenue authority of your resident country (e.g., Form 6166 from the US IRS or HMRC Residency Certificate in the UK).
3. Submit Form 10F Electronically: File Form 10F on the Indian e-Filing portal if the TRC does not contain all details prescribed under Rule 21AB.
4. Claim Credit in Home Country Return: Declare Indian capital gains on your foreign tax return (e.g., Schedule D on US Form 1040) and report foreign taxes paid in India (e.g., US Form 1116 for Foreign Tax Credit) using Form 16A / Indian ITR verification.

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6. Ground Realities & Regional Context: Practical Scenarios in Chhattisgarh & Odisha

Ground realities in Tier-2 commercial hubs and agricultural regions differ significantly from metro cities. Here are real-world operational challenges we handle across Chhattisgarh and Odisha:

Scenario A: Commercial Land Sale in Urla / Bhanpuri Industrial Belt (Raipur)

Industrial plots or warehouse land in Raipur’s industrial corridors frequently involve high transaction values with substantial capital gains. Buyers—often local businessmen—are accustomed to simple 1% TDS under Section 194-IA and resist obtaining a TAN or deducting 20%+ TDS under Section 195.

Practitioner Solution: We advise setting up the TAN registration for the buyer immediately after signing the Agreement to Sell. We structure the timeline to file Form 13 on TRACES, securing a lowered rate (often 1.5% to 3% based on indexed cost calculations) prior to executing the sale deed. This protects the buyer from penalty u/s 201 for non-deduction while protecting the NRI seller from an illiquid block of ₹30+ Lakhs.

Scenario B: Ancestral Rice Mills or Agricultural Plots in Kalahandi & Sambalpur

NRIs who inherited rice processing mills, godowns, or agricultural land in Kalahandi (Bhawanipatna, Jayapatna) or Sambalpur often assume agricultural land is completely exempt from capital gains tax.

Ground Reality: Under Section 2(14)(iii) of the Income Tax Act, agricultural land is exempt only if it is situated outside specified municipal limits (e.g., beyond 2 km to 8 km of defined population thresholds). If the land falls within municipal limits or has been converted to commercial/industrial use, it qualifies as a taxable capital asset. Filing Form 13 with revenue record proofs (Khasra/Khatoni extract and municipal distance certificate from the Tahsildar) clarifies taxability before the transaction closes.

Common Pitfalls to Avoid:

• Executing the Deed Before Form 13 Approval: Sub-registrars in Chhattisgarh and Odisha do not verify TDS deduction during registration. However, post-registration, income tax processing units flag non-resident transfers. If a deed is executed without Form 13, the buyer remains legally liable to deposit full 20%+ TDS out of pocket if they deducted only 1%.
• Neglecting Surcharge and Cess Calculations: Buyers who deduct flat 20% under Section 195 without adding 4% Cess and applicable Surcharge face short-deduction notices from the CPC-TDS processing cell.
• PAN-Aadhaar Inoperative Status: NRI sellers whose Indian PAN has become inoperative due to non-linking or incorrect residential status updates will face double standard TDS rates (under Section 206AA) and cannot file Form 13 on TRACES until PAN status is rectified.

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Complete Action Plan for NRI Property Sellers

To ensure a seamless, legally compliant transaction with zero tax friction, follow this structured checklist:

1. Audit Property Title & Tax Records: Verify registration deed, ancestral inheritance proof, and municipal tax receipts. Update PAN details to non-resident status on the e-Filing portal.
2. Draft Airtight Agreement to Sell: Include clear covenants stipulating that the buyer must cooperate in obtaining a TAN and that sale deed execution is contingent upon Form 13 issuance.
3. Compute Actual Capital Gains: Engage a qualified Chartered Accountant to prepare detailed LTCG/STCG computations, indexed cost schedules, and evaluate Section 54/54EC exemption options.
4. File Form 13 on TRACES: Submit the online application with complete documentation to the jurisdictional International Taxation AO well in advance.
5. Execute Deed & Deposit TDS: Ensure the buyer deducts TDS strictly per the Form 13 certificate, deposits tax via Challan 281, files Form 27Q, and provides Form 16A to the seller.
6. Obtain 15CA / 15CB & Repatriate: Credit net proceeds into the NRO account, complete CA certification via Form 15CB, file Form 15CA, and submit the foreign remittance package to your AD Bank.
7. File Indian Tax Return & Claim DTAA Credit: Submit ITR-2 in India to reconcile 26AS tax credits and claim Foreign Tax Credit in your country of residence using TRC and Form 10F.

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Professional Advisory & Execution Support

Handling an NRI property sale in India requires precise synchronization between property laws, income tax mandates, FEMA regulations, and banking channels. Missteps can lead to massive tax lockups, demand notices u/s 201, or delayed funds transfer abroad.

At Rabi Agrawal & Associates, our senior practice team provides end-to-end advisory and execution services for NRIs disposing of real estate assets across Chhattisgarh (Raipur, Durg, Bhilai, Bilaspur) and Odisha (Kalahandi, Sambalpur, Bhubaneswar):

• Capital gains optimization & Section 54/54EC tax planning.
• Buyer TAN application & Form 13 Lower TDS Certificate processing on TRACES portal.
• Form 15CA & Form 15CB certification with digital UDIN generation.
• FEMA compliance & AD Bank repatriation facilitation under the USD 1 Million LRS framework.
• DTAA advisory, TRC filing, and international income tax return filing.

Contact Our Practice Team:
📍 Raipur Office: Office No. 304, Commercial Complex, Urla / Shankar Nagar, Raipur, Chhattisgarh – 492001
📍 Kalahandi Office: Main Road, Bhawanipatna, Kalahandi, Odisha – 766001
📧 Email: contact@carabiagrawal.com | 🌐 Website: carabiagrawal.com