TDS on a property sale
Why a purchase from an NRI withholds several times more than one from a resident, what a lower deduction certificate changes, and why the buyer needs a TAN nobody mentioned.
Your numbers
| Saved by a lower deduction certificateApply before listing — the process has a lead time measured in weeks. | — |
| TDS without the certificate | — |
| Does the buyer need a TAN?A step buyers routinely discover far too late. | — |
| What to tell the buyer | — |
The buyer, not the seller, is responsible for withholding tax on a property purchase and depositing it. Get it wrong and the exposure sits with the buyer, which is why their advisor raises it late and everything slows down.
For a resident seller above the threshold, the rate is a small percentage of the consideration. For a non-resident seller it is deducted at capital-gains rates plus surcharge and cess — materially higher — and the buyer also needs a TAN to deposit it.
Raise it at the first serious conversation. Buyers whose own advisors surface this after they have committed emotionally get nervous and slow.
Two completely different regimes
Resident seller. A small percentage of the consideration where it exceeds the statutory threshold, deducted against the buyer's PAN. Administratively simple.
Non-resident seller. Deduction at capital-gains rates plus surcharge and cess, on the consideration rather than on the gain — which is why the amount withheld can vastly exceed the seller's actual liability. The buyer needs a TAN, and the compliance burden is real.
Worked example
An ₹80 lakh sale by an NRI at a 20% base rate with 15% surcharge and 4% cess gives an effective rate of about 23.92% — roughly ₹19.1 lakh withheld, against a possible actual liability far below that. The seller waits until they file a return to recover the difference.
With a lower deduction certificate at, say, 5%, the withholding falls to ₹4 lakh and the seller keeps ₹15 lakh of their own money at closing rather than a year later.
Why it belongs before listing
The certificate application takes time. Starting it after a buyer appears is exactly how a three-month sale becomes a nine-month one — and by then the buyer has usually found something else.
Rates, thresholds, surcharge slabs and procedures change and depend on the seller's circumstances. This is a framing tool, not tax advice — the numbers must be confirmed by a chartered accountant before either party relies on them.
Questions
Why is the NRI rate so much higher?
Because it is deducted at capital-gains rates on the whole consideration rather than a nominal percentage, plus surcharge and cess. It is a collection mechanism, not a measure of the tax actually owed.
Can the higher deduction be reduced?
There is a process to apply to the income tax department for a lower or nil deduction certificate, setting the rate closer to the real liability. It has a lead time, which is why it belongs before the property is listed.
What happens if the buyer does not deduct?
The obligation and the consequences sit with the buyer. It is one of the few areas where an agent genuinely helps both sides by raising it early and pointing them to professionals.
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