NRI property sale TDS rules differ from resident sellers

Buyers in India deduct TDS at different rates depending on whether the seller is a resident or a non-resident Indian (NRI). Livemint reports that under the Income Tax Act, 2025, a buyer deducts 1% TDS on property purchases from residents when the consideration or stamp duty value is Rs 50 lakh or more, calculated on the higher of the two amounts.

For NRI sellers, the buyer must deduct TDS at rates applicable to the seller's capital gains, not the flat 1%. Long-term capital gains (property held over 24 months) are taxed at 12.5%, while short-term gains attract 30% for individuals or firms and 35% for foreign companies, plus a 4% cess and surcharges that can raise the effective rate. In practice, buyers often deduct on the gross sale value unless the seller obtains a lower or nil deduction certificate.

In a separate advisory, Livemint notes that an India resident selling an inherited overseas property is taxed on capital gains in India, with the acquisition cost and holding period traced to the previous owner. The gain is computed in foreign currency and converted using SBI's TT buying rate. Tax may be reduced by opting for reinvestment exemptions in qualifying Indian assets.

Separately, for inherited overseas property, the cost of acquisition is the previous owner's cost, and the holding period includes the previous owner's tenure. If the property was acquired before 1 April 2001, the seller can adopt the fair market value as on that date, subject to stamp duty value. The taxpayer can compare tax at 20% with indexation against 12.5% without indexation and choose the lower liability.