The direct answer: 15% is the ceiling on capital-gains surcharge
Surcharge is an extra percentage added on top of your income tax. For most income it rises with your total income, in steps: 10% above ₹50 lakh, 15% above ₹1 crore, 25% above ₹2 crore, and 37% above ₹5 crore. That last set is what frightens buyers on a big sale.
But capital gains are treated differently. The law caps the surcharge on the tax on capital gains at 15%, whatever your total income. This started as a cap for listed shares and was widened by the Finance Act 2022 to cover all long-term capital gains under Section 112 (renumbered Section 197 from FY 2026-27), which includes the sale of a house, a plot, or commercial property.
So even if your gain is several crore and your total income crosses ₹5 crore, the surcharge on the property-gain tax stays at 15%. The 25% and 37% slabs simply do not reach it.
What the buyer should actually deduct
For a long-term sale by an NRI (property held over two years), the tax on the gain is 12.5% without indexation. On top of that sits surcharge, capped at 15% on the gain, and then 4% health and education cess on the whole figure.
Put together, the maximum the buyer should withhold on your gain is:
| Layer | Rate |
|---|---|
| Long-term capital gains tax | 12.5% |
| Surcharge (capped) | 15% of the tax |
| Cess | 4% of tax plus surcharge |
| Top effective rate on the gain | about 14.95% |
The catch is the base. Most buyers deduct on the full sale price, not on your gain, because they do not know your cost. That over-withholding is a separate and bigger problem than the surcharge tier, and the fix for both is the same certificate described below. Under the new default tax regime the top surcharge for other income is anyway 25%, not 37%, but for your capital gains the 15% cap is what governs.
Why buyers get this wrong, and how to fix it before the deed
The buyer is the one who must deduct and deposit the TDS, and a shortfall lands on them, so they err on the high side. Faced with a large sale, an advisor sees crores of consideration and reaches for the 37% or 25% slab, missing that the capital-gains cap overrides it.
The clean fix is a lower-deduction certificate. You apply, before the sale closes, under Section 197 (Form 13), which becomes Section 395 (Form 128) from FY 2026-27. The officer computes your real gain and the correct tax, surcharge and cess, and issues a certificate telling the buyer exactly what to deduct. With it in hand, the buyer deducts on your gain at the capped rate, and you receive almost all your money at closing instead of chasing a refund for a year or two.
If the sale has already happened and too much was cut, you recover the excess by filing your Indian return: your actual tax is set against the TDS deducted, and the difference is refunded with interest under Section 244A.