When an NRI sells Indian property, the buyer must deduct TDS under Section 195 at rates far higher than the actual tax due — often locking up lakhs unnecessarily. A Section 197 lower-deduction certificate cuts the TDS to the true tax liability. Here is the application process, the timeline and the documents you need.
CA Rahul Dang
Founder & Practice Lead
If you are an NRI selling Indian property, the buyer is required to deduct TDS under Section 195 at rates much higher than the tax you actually owe. For a transfer on or after 23 July 2024 the long-term rate for a non-resident under section 112(1)(c) is 12.5% plus applicable surcharge and cess — but it is applied, in practice, not to the gain but to the whole sale consideration unless you have a lower-deduction certificate in hand. That is where the cash-flow damage comes from. Selling a Pune flat for ₹2 crore can mean ₹40+ lakh stuck with the department for a year, refunded only when you file your return and the assessment closes.
A Section 197 lower-deduction certificate — also called a "Form 13 certificate" after the application — eliminates this problem. The buyer deducts TDS at a much lower, certificate-approved rate, and you keep your cash. This is among the most valuable single steps an NRI seller can take, and the most under-used.
Section 197 allows the Assessing Officer to issue a certificate authorising a lower or nil rate of TDS when the recipient's actual tax liability is lower than the headline TDS rate. For an NRI selling property, this lets the buyer deduct only the TDS that matches your real capital-gains tax — not the much higher Section 195 default.
The certificate is issued for a specific transaction, a specific buyer, and a specific PAN. It does not replace your obligation to file an Indian return; it only fixes the withholding at source.
Take a Pune flat bought for ₹60 lakh in 2010 and sold for ₹1.8 crore in 2026. The transfer takes place on or after 23 July 2024, so an NRI seller is taxed at 12.5% under section 112(1)(c)(ii)(B), computed without indexation. The gain is ₹1.2 crore and the tax on it is ₹15 lakh, plus applicable surcharge and cess. Without a 197 certificate, the buyer withholds under Section 195 on the gross consideration rather than on the gain — 12.5% of ₹1.8 crore, or ₹22.5 lakh, again plus surcharge and cess. You eventually get the difference back as a refund, but the cash is gone for a year. With a 197 certificate at ~5% of consideration (matching the real tax), the buyer deducts about ₹9 lakh and your ₹30 lakh-plus stays with you.
Apply before the sale completes, ideally at the agreement-to-sell stage. The processing time is typically 2–4 weeks at the jurisdictional Assessing Officer (overseas-NRI matters are routed through the International Taxation cell), so building this into the deal timeline matters.
The buyer in turn quotes the certificate in their TDS challan, deducts at the certificate rate, and issues the resulting Form 16A.
A clean application includes:
This is the point most often got wrong in an NRI sale, and it turns on which clause of section 112 you fall under. Section 112(1)(a) applies to “an individual or a Hindu undivided family, being a resident”. Its second proviso is the relief everyone talks about: for land or building or both acquired before 23 July 2024, where tax computed at 12.5% exceeds what the law produced immediately before the Finance (No. 2) Act, 2024 — that is, 20% with indexation — “such excess shall be ignored”. In effect a resident pays the lower of the two. Section 112(1)(c), which applies to “a non-resident (not being a company) or a foreign company”, sets 20% for a transfer before 23 July 2024 and 12.5% on or after — and carries no equivalent proviso for land or building. So an NRI selling Indian property today is taxed at 12.5% on the gain, without indexation, and does not get the comparison with 20%-with-indexation at all, whenever the property was acquired. Build the certificate application on that basis. The resident position is different and is set out in our capital gains on property guide.
If you intend to reinvest the gain into another residential house (Section 54) or specified bonds (Section 54EC), the resulting taxable gain reduces — sometimes to zero. The 197 application should reflect this intent with proof or a clear commitment, and a nil-deduction certificate may then be possible. Get the reinvestment plan documented before applying, not after.
The buyer is the one who must implement the certificate. Practically:
A buyer unfamiliar with Section 195/27Q can derail an otherwise clean transaction; coaching them through the right TDS challan (Form 27Q, not the 1% Form 26QB used for resident sellers) is part of the CA's value.
Even with a certificate, file your ITR for the year of sale. The certificate locks the withholding, not the final liability. The return is where any small surplus is refunded — and where loss carry-forward and Schedule FA disclosure happen too. NRIs file ITR-2 (or ITR-3 with Indian business income).
For repatriation of the net sale proceeds abroad, Form 15CA / 15CB is required — the certification chain is the CA-deliverable that turns a closed sale into received-abroad funds. The mechanics are in our 15CA/15CB guide.
At RDA Tax Advisory Services, Baner, we manage the Section 197 application alongside the sale itself. For Pune-property sellers based in the Gulf, US, UK, Singapore and Australia, we compute the real capital-gains liability under the right method, file Form 13 with the jurisdictional Assessing Officer, coordinate the buyer's Form 27Q TDS, prepare the 15CA/15CB for repatriation, and file the year's ITR-2 with Schedule FA. Most of our NRI sellers receive at least 5×–6× more net cash at closing than they would have without the certificate — the fee for the certificate work is a fraction of one month's saved interest. Office No. 102, Snehraj Apartment, Baner, Pune 411045 · call +91 77570 45059.
Selling a Pune flat as an NRI? We obtain the Section 197 lower-deduction certificate, coach the buyer through Form 27Q, certify the repatriation via 15CA/15CB, and file your Indian return. Book an NRI property-sale consult at rdatax.in or call +91 77570 45059 — RDA Tax Advisory Services, Baner, Pune.
Part of the NRI Taxation knowledge hub.
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