The Lower TDS Certificate: How NRIs Stop Buyers Withholding 15% of the Sale Price

Sell a ₹2 crore flat as an NRI without doing anything about tax, and your buyer is legally required to withhold roughly ₹30 lakh and deposit it with the government — even if your actual capital-gains liability, computed properly, is closer to ₹15 lakh. The extra ₹15 lakh isn't lost, but it is stranded: it sits with the tax department until you file a return, the return is processed, and a refund arrives — a year or more later, in rupees, in your NRO account, earning almost nothing and waiting to be repatriated all over again. One document prevents all of this: the lower- or nil-deduction certificate from the Assessing Officer, applied for under Section 197 before the sale deed is signed. On any NRI property sale of substance, it is almost always worth the effort. Here is why the default is so punishing, and exactly how to replace it.

Why the buyer withholds triple your actual tax

The problem starts with who the law makes responsible. When the seller is a non-resident, Section 195 turns your buyer into the tax collector — no threshold, no exemptions, and, critically, deduction computed on the entire sale consideration, not your gain. The buyer has no legal way to know your cost of acquisition, your improvements, or your exemption plans, so the machinery defaults to the safest number for the government: the long-term capital-gains rate of 12.5%, plus surcharge and cess, applied to the full price — an effective 13–15% depending on the slab the sale value falls in. On a short hold of 24 months or less, slab rates push the deduction past 30%.

Run the arithmetic on our ₹2 crore example. Say you bought for ₹1 crore, making the taxable long-term gain about ₹1 crore and the true tax bill — at 12.5% with surcharge and cess — roughly ₹15 lakh. The default withholding is ~15% of ₹2 crore: about ₹30 lakh, twice the real liability. Sellers with smaller gains fare worse — on a flat that has barely appreciated, the deduction can run three to five times the actual tax. And your buyer has no discretion to be reasonable: if they under-deduct, the shortfall, interest, and penalties land on them, which is why informed buyers deduct the full freight — a dynamic we cover from the buyer's chair in our guide to buying Indian property as an NRI.

The fix: a Section 197 certificate, obtained before the deed

Section 197 exists for exactly this mismatch. You apply to your jurisdictional Assessing Officer — the application everyone still calls Form 13, though the Income-tax Act, 2025 has renumbered the forms and the old names persist in every bank branch and CA's office — filed online through the TRACES/e-filing portal. You show the officer your actual expected gain, and the officer issues a certificate directing the buyer to deduct at a rate matching that gain — or at nil, where losses or reinvestment exemptions mean nothing is due. The buyer then deducts exactly the certified amount, and the rest of the price reaches your NRO account intact.

Three features of the certificate shape your planning. First, it is buyer-specific: it names the buyer and their TAN (tax-deduction account number), so it cannot be applied for in the abstract — you need an identified buyer, and that buyer must obtain a TAN before your application can name it. Second, it is issued for the financial year, so a deal that slips past 31 March needs a fresh certificate. Third, it must exist before the money moves — a certificate obtained after the buyer has already deducted at the default rate changes nothing; the excess is already with the government.

The application file, and the clock

The officer is being asked to certify, in advance, what you will actually owe — so the application is essentially your capital-gains computation with evidence attached. Assemble:

• The sale agreement or MOU showing the price and the buyer's details, plus the buyer's TAN
• The purchase deed and proof of cost — and for property acquired before 2001, a valuation supporting the fair market value as on 1 April 2001, which Section 55 lets you substitute for the original cost, often shrinking the gain several-fold
• A capital-gains computation — have a CA prepare it; this document is the application
• Your PAN, copies of recent Indian tax returns, and bank details
• Evidence for any exemption you're claiming — bonds you intend to buy, a property you intend to reinvest in

Then there is the clock. Officers realistically take three to six weeks to process the application — budget anywhere from a few weeks to a couple of months, and longer in March, when the year-end queue builds. That timeline is why the certificate belongs at the start of your sale, not the end: apply the moment a price is agreed and the buyer's TAN exists, well before registration. In our repatriation walkthrough of a ₹2 crore sale, this certificate is weeks one through six — the longest single stage of the entire journey from sale deed to money abroad, and the only one you can run in parallel with everything else.

When the right rate is zero

The certificate isn't only for lowering the rate — it can eliminate deduction entirely where the law says no tax will ultimately be due. If you plan to reinvest the gain in another residential property under Section 54, or park up to ₹50 lakh of it in specified bonds under Section 54EC, your final liability may genuinely be nil — and a well-documented application can persuade the officer to certify nil deduction, so the buyer withholds nothing at all. The same logic applies where brought-forward capital losses absorb the gain.

Be realistic about the hurdle: you're asking the officer to trust a stated intention, so expect scrutiny, a demand for concrete evidence of the reinvestment plan, and sometimes a low-but-not-nil rate as the officer's compromise. Practice varies by jurisdiction — take a CA's advice on your specific claim. Even a partial win is worth having: a certificate at 3% instead of the default 15% keeps ₹24 lakh of a ₹2 crore sale out of the refund queue.

Frequently asked questions

Can I just skip the certificate and claim a refund instead?

You can, and the route works — the buyer deducts ~13–15%, you file your Indian return after the year ends, and the excess comes back as a refund. But look at what "works" means: on our ₹2 crore example, ₹15 lakh of your money sits with the government for a year or more, earning only modest statutory interest, and the refund lands in rupees in your NRO account — where it must then clear the CA-certificate and USD 1 million repatriation process all over again. If you needed the full proceeds abroad promptly, the refund route quietly wrecks that timeline. The certificate costs a CA's fee and a few weeks of foresight; skipping it costs a year of liquidity.

My buyer doesn't have a TAN and doesn't want one. What now?

The TAN is non-negotiable — a buyer purchasing from an NRI must obtain one to deduct and deposit TDS under Section 195, certificate or no certificate, and your lower-deduction certificate cannot even be issued without naming it. A buyer who resists is either poorly advised or hoping to treat you as a resident and deduct 1%, which exposes them to the full shortfall with interest and penalties. Get both sides' CAs talking early: the TAN application takes days, costs little, and unblocks your certificate application. Most delays in NRI resales trace to exactly this step being started late.

I've moved back to India. Do I still need this?

It depends on your tax residency in the year of sale, not your address history. If you've returned recently, you may still be non-resident — or RNOR — for tax purposes this year, in which case Section 195 and everything above still applies; once you're fully resident, the buyer instead deducts a flat 1% under the resident rules and the certificate question largely disappears. The classification turns on day counts, not intentions, so establish it before the deal is structured — our guide to NRI, RNOR, and resident status walks through the tests. Misclassifying yourself as resident to dodge the higher TDS puts your buyer at risk and unwinds badly.

The flat is jointly owned with my spouse. One application or two?

Two. The certificate is issued per taxpayer, so each co-owner files their own application for their share of the consideration, with their own gain computation — and each certificate names the buyer and TAN. The upside: surcharge slabs are assessed per person, and each owner can plan exemptions independently. File both applications together so the officer sees the whole transaction at once, and make sure the sale deed records the ownership proportions the applications assume.