What are the rules for NRIs buying or selling property in India, and how does TDS under Section 195 apply?

Question

I am an NRI planning to sell a property I inherited in India. I want to know the TDS and compliance rules that apply to the buyer and me. I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

What are the rules for NRIs buying or selling property in India, and how does TDS under Section 195 apply? is governed in India primarily by Income Tax Act 1961, Section 195, Foreign Exchange Management Act 1999, Section 6 and Income Tax Act 1961, Section 197. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 195 requires any person buying immovable property from a non-resident seller to deduct tax at source on the entire sale consideration at rates applicable to capital gains, which is significantly higher than the flat 1 percent TDS applicable under Section 194-IA for resident sellers.

The buyer must obtain a Tax Deduction Account Number (TAN), deduct TDS before payment, and deposit it with the government, failing which the buyer can be treated as an assessee in default.

An NRI seller can apply for a lower or nil TDS deduction certificate under Section 197 from the jurisdictional Assessing Officer based on the actual computed capital gains, which is commonly used to avoid excess deduction on the full sale value.

Under FEMA Section 6 and related regulations, NRIs can freely acquire or transfer residential and commercial property in India, but generally cannot acquire agricultural land, plantation property or a farmhouse except by inheritance.

Sale proceeds can be repatriated abroad subject to RBI limits and documentation such as Form 15CA/15CB, and the transaction must be routed through an NRO account for property held in India.

What to do next: 1) Apply for a lower TDS certificate under Section 197 well before the sale to avoid excess deduction; 2) Ensure the buyer obtains a TAN and deducts TDS at the applicable capital gains rate under Section 195; 3) Retain Form 16A and file an income tax return in India to claim any TDS refund due; 4) Complete FEMA-compliant repatriation formalities including Form 15CA/15CB through an authorised bank.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Income Tax Act 1961, Section 195 carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.