Selling your Indian property from the US, cutting the TDS and not paying tax twice

The trap is that TDS on an NRI sale is worked out on the sale price, not on your profit. The buyer is required to deduct it under Section 195 and deposit it with the Indian tax department before paying you the balance.

For a long-term sale, property held more than 24 months and sold on or after 23 July 2024. The rate is a flat 12.5% plus surcharge and cess (Section 112), with no indexation for NRIs. You may have seen an older figure of 20%; that was the long-term rate before 23 July 2024. If you owned the property for under two years, it is short-term and taxed at your slab rate, which is higher again. Either way the deduction lands on the entire consideration.

So on a one-crore sale where your real gain is, say, twenty lakh, the buyer may still withhold 12.5%-plus on the full crore, far more than the tax you actually owe on the gain. The over-deducted amount is not lost, but you would otherwise have to wait until you file your Indian return the following year to get it back as a refund. That is the cash-flow problem Form 13 is designed to solve up front.

Section 395, formerly Section 197 lets you ask the Assessing Officer, before the deal completes, to certify a lower rate of TDS. The application is Form 13, filed online on the TRACES portal, and it sets out what you actually paid for the property (or its 1 April 2001 value for an older one), what you are selling it for, and therefore the real capital gain and the real tax.

If the officer agrees, they issue a certificate telling the buyer to deduct tax only on that gain. In practice this often takes the effective withholding from 12.5%-plus of the whole price down to low single digits of it, sometimes one to three percent, because the tax is now measured against your profit, not your sale value. Where there are two or more co-owners, each files their own Form 13 for their share. The certificate has to be in hand before the buyer makes payment, so timing matters, and this is the part NRIs most often need a CA to drive.

Because you are a US tax resident, the same capital gain is reportable on your US federal return. The India, US tax treaty exists precisely so the gain is not taxed in full in both countries: the tax you pay in India on the sale can be claimed as a foreign tax credit against the US tax on that same income, so you are not paying the whole bill twice.

To be clear about the boundary. We are your Indian CA. We do the India side: the gain computation, the Form 13, the Indian return that finalises the tax, and the documents that prove how much India tax was paid and when. Your US return and the foreign tax credit on it are filed by your US preparer. What we give them is a clean, defensible record. The computation, the challans showing tax paid, and the filed Indian return, so the credit is straightforward to claim and stands up if it is ever questioned.

Once the sale is done and the tax position is settled, the proceeds sit in your NRO account in India, and the bank will not release them abroad without a chartered accountant's certificate. A CA files Form 15CB, certifying that the remittance is tax-paid, and you file the accompanying Form 15CA declaration; the bank then processes the transfer on its Form A2.

An NRI can repatriate up to USD 1 million per financial year from NRO funds without needing RBI approval, which comfortably covers most single property sales. We line up the 15CA/15CB so the money moves to your US account cleanly, rather than getting stuck behind paperwork after all the hard work on the tax is done.