The buyer cut 1% TDS on your NRI sale. That's the resident rate. Here's what happens now.
TL;DR
For a resident seller, property TDS is 1%. For an NRI it's around 12.5% on the full sale value. When a buyer gets this wrong, and plenty do, the buyer is the one on the hook, but you still have to get your own tax right. Here's how to sort it.
By Vipul Sharma, Founder
Reviewed by Preetesh Maloo, Chartered Accountant, NRI Tax Partner
The short answer
If you're an NRI, the buyer should deduct TDS under Section 195, roughly 12.5% plus surcharge and cess on the sale value, not the 1% that applies to resident sellers (Section 194-IA). Buyers get this wrong all the time, usually because nobody told them clearly that you're an NRI.
Two things are true at once:
So it's the buyer's compliance problem, but your tax problem. Both need sorting, and it's far cheaper to fix before registration than after.
Why 1% is the wrong rate for an NRI
The 1% everyone quotes is Section 194-IA, and it only applies when the seller is a resident. The moment the seller is an NRI, a different section takes over: Section 195. By default it deducts on the full sale value, at the long-term rate of 12.5% plus surcharge and cess, which works out to roughly 13% to 15% depending on the size of the sale. (A short-term sale, held two years or less, is taxed higher, at slab rates.)
The gap is huge, and that's exactly why it gets 'missed'. On a ₹2 crore flat, 1% is ₹2 lakh. Under Section 195 it's about ₹30 lakh. The cash the buyer has to hold back is fifteen times larger, so a buyer who would rather not deal with it sometimes treats you as a resident.
Two more things change with an NRI sale. For now, the buyer needs a TAN to deposit the tax, and files it on Form 27Q, not the Form 26QB used for resident sales. And there's no ₹50 lakh floor: Section 195 applies to an NRI sale of any size.
₹2 Cr sale: the 1% mistake
If buyer deducts 1% (wrong)
₹2 L
Section 194-IA, the resident rate.
Correct NRI deduction
about ₹30 L
Section 195 on the full value, 12.5% plus surcharge and cess.
The shortfall
about ₹28 L
The buyer can be chased for this, with interest and a penalty on top.
Illustrative. A Form 13 certificate can lower the correct deduction to your actual gain, so you don't lock up cash you'll only get back at refund time.
Whose problem is it? Mostly the buyer's
Under the law the buyer is the deductor. If they deduct too little, or nothing, the tax department can treat the buyer as being in default (Section 201). In practice that means:
This is why a switched-on buyer's lawyer won't let the deal close until the NRI TDS is handled correctly. And if yours did close on 1%, don't be surprised when the buyer comes back once they realise, sometimes asking you to make good the gap.
The buyer often circles back to you
When the buyer's shortfall surfaces (a notice, a mismatch, their own CA at filing time), they frequently come back to the seller to cover it, or hold up the last tranche of the payment. A clean deduction at the sale protects you as much as them.
Buyer used the wrong rate on your sale?
Send us the sale deed and the TDS challan. We'll tell you the correct number, what you owe, and how to close it cleanly, before it becomes a notice.
Senior CA who specialises in NRI tax · we deal with the tax officer, you don't
What you should do
If the sale hasn't closed yet, tell the buyer in writing that you're an NRI, and get them to deduct under Section 195, ideally at a lower rate using a Form 13 certificate (Form 128 from April 2026) so they don't over-withhold. That's the clean path, and it keeps ₹25-30 lakh from sitting idle with the department.
If the sale already closed on 1%, or on nothing, declare the full capital gain in your Indian return (usually ITR-2) and pay the balance tax with any interest. Don't sit on it. If you under-pay your own tax, the department can raise a demand on you separately, with interest for the shortfall (Section 234B). Getting a CA to compute the real gain and clear it cleanly is the safe move, especially once the buyer starts asking questions.
Fix it before registration
Sorting the correct Section 195 deduction, the buyer's TAN, and a Form 13 lower-rate certificate before the sale deed is registered is far cheaper than unwinding a wrong deduction later. Once it's registered on 1%, both sides are cleaning up after the fact.
Frequently asked questions
Q: The buyer deducted 1%. Is that my problem or theirs?
A: Both, in different ways. The buyer is the deductor, so the department can chase the buyer for the shortfall plus interest and a penalty. But you still owe the correct tax on your gain, so if too little was deducted you make up the difference in your return.
Q: Why is my TDS around 12.5% when residents pay 1%?
A: The 1% (Section 194-IA) only applies to a resident seller. An NRI falls under Section 195, deducted on the full sale value at 12.5% plus surcharge and cess. And Section 195 has no ₹50 lakh threshold; it applies to a sale of any size.
Q: The buyer deducted nothing at all. What now?
A: The buyer is exposed to the shortfall plus interest and penalty. You declare the gain and pay your tax through your ITR. Sort it before it becomes a notice on either side.
Q: Can I stop the buyer over-deducting the full 12.5%?
A: Yes. Apply for a lower-TDS certificate (Form 13, becoming Form 128) before the sale, so the buyer deducts on your actual gain rather than the full price.
Q: Does the buyer need a TAN?
A: Yes, for now. NRI-sale TDS is deposited against the buyer's TAN and filed on Form 27Q, not the Form 26QB used for resident sales.
Q: The deal closes next week and the buyer used the 1% route. Can we fix it?
A: Yes, but fast. Switch to Section 195, get the buyer a TAN, and deposit via Form 27Q. File Form 13 if there's time; otherwise the buyer deducts the full amount and you reclaim any excess through your return.
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