The default TDS rate an NRI faces when selling property in India often has little to do with their actual tax liability, and that gap is where several legitimate, underused provisions come in.

When an NRI sells immovable property in India, the buyer is required to deduct TDS, and this deduction is typically applied on the full sale value at rates that assume the highest capital gains scenario, rather than on the actual gain after indexation and cost adjustments. This frequently results in tax being withheld well in excess of what’s actually owed, with the difference recoverable only by filing a return and waiting for a refund.

Section 197 of the Income Tax Act offers a more efficient route: an NRI can apply to the jurisdictional Assessing Officer for a certificate for lower or nil TDS deduction, based on the actual computed capital gains rather than the full sale value. Getting this certificate before the property transaction closes means the buyer deducts TDS at the correct, lower rate from the outset, rather than the NRI seller having to fund excess TDS and recover it later through a refund that can take months.

Beyond TDS management, Sections 54, 54EC, and 54F provide capital gains exemptions on the sale of long-term capital assets, if the proceeds are reinvested in a residential property or in specified capital gains bonds within prescribed timelines. These aren’t automatic; they require timely reinvestment and correct filing to claim.

None of these provisions are secret, but they require action before or at the time of the transaction, not after the fact once TDS has already been deducted at the higher default rate.

Ashutosh Financial Services has worked with NRIs to plan property sales around these provisions well before the transaction date, when the options are still available. Ashutosh Financial Services continues to run sessions on tax-efficient structuring of asset sales for the NRI community.