Selling Your Indian Flat? The Buyer Just Became Your Tax Problem.

The short answer first: when an NRI sells Indian property, the buyer deducts TDS on the full sale price, not on your gain, at 12.5% for a long-term sale plus surcharge and cess. That is usually far more tax than you actually owe on the gain, so you either apply for a lower-TDS certificate (Form 13) before the sale or reclaim the excess by filing.

Now the scenario nobody prepares you for. You bought a flat for ₹50 lakh. You're selling it for ₹2 crore. Your capital gain is ₹1.5 crore. At 12.5% LTCG, your tax should be about ₹18.75 lakh.

But the buyer doesn't deduct TDS on your gain. They deduct on the full sale price. 12.5% of ₹2 crore = ₹25 lakh. That's ₹6.25 lakh more than your actual tax liability, held by the government until you file your ITR and get a refund. Which takes 3-6 months. Maybe longer.

For inherited properties where the original cost was ₹5 lakh forty years ago, the over-deduction is even worse.

The fix exists: Form 13. It's an application to the Income Tax Department for a lower TDS certificate. You show them: here's my purchase cost, here's the sale price, here's the actual gain, deduct TDS only on that. Takes 30-45 working days to process (~6-8 calendar weeks). But you must apply BEFORE the sale, you can't do it retroactively.

Take the real case that came into our inbox last month. NRI based in London. Bengaluru 2-BHK bought in 2005 for ₹10 lakh. Offer on the table today: ₹1.25 crore.

Under the old regime (before 23 July 2024): indexed cost climbs to roughly ₹35 lakh using the Cost Inflation Index. Taxable gain: ₹90 lakh. Tax at 20%: ₹18 lakh.

Under the new regime: indexation is gone. The cost stays at ₹10 lakh. Taxable gain: ₹1.15 crore. Tax at 12.5%: ₹14.38 lakh.

For this 19-year hold, the new rate is actually slightly better, the lower percentage offsets the lost indexation. But take a flat bought in 2010 for ₹60 lakh now selling at ₹1.5 crore. Old regime indexed cost ~₹97 lakh, gain ₹53 lakh, tax ₹10.6 lakh. New regime gain ₹90 lakh, tax ₹11.25 lakh. The new rule costs ₹65k more. Different holding periods, different winners.

The one partial shelter left: if you acquired before 1 April 2001, Section 55(2)(b) lets you substitute the FMV on that date as your cost. For anything acquired between 2001 and 2015 at low-ish prices, the indexation removal genuinely stings.

Run both numbers before you accept an offer. Our capital-gains calculator does it in 60 seconds.

When an NRI sells property, the buyer becomes the tax collector. They must: get a TAN, deduct TDS at 12.5% basic under Section 195 (effective 13-14.95% with 15% surcharge cap + 4% cess), deposit it using Challan ITNS-281 within 7 days of the month-end (then file the quarterly TDS statement Form 27Q by Q1 31 Jul / Q2 31 Oct / Q3 31 Jan / Q4 31 May) (Q4 statement filing deadline 31 May) (not Form 26QB. That's for resident-to-resident sales at 1%), and issue you Form 16A as the TDS certificate.

Most Indian buyers have never done this before. They don't know they need a TAN. They don't know 27Q from 26QB. Some refuse to comply because it's “too complicated.” Deals fall through because buyers simply don't want the hassle of buying from an NRI.

Worst case: some buyers try to show a lower sale price in documents to reduce TDS. That creates legal risk for both parties, undervaluation is a red flag the tax department actively hunts.

And then there's the GPA problem. NRIs who gave someone a General Power of Attorney to “manage” their property have lost it entirely, the GPA holder sold it without consent, mortgaged it, or transferred it to their own name. The Supreme Court's Suraj Lamp ruling (2012) says GPA-based sales aren't valid title transfers. Always use a Special Power of Attorney with specific, limited authority. Get it attested at the Indian Embassy.