TDS on Sale of Property by an NRI – Why Withholding Can Redefine the Transaction When an NRI sells property in India, the conversation usually begins with capital gains tax. Questions arise around the holding period, the applicable rate, and whether indexation is available. While these are essential components of the tax computation, they do not, by themselves, determine the financial outcome of the transaction. What often has a greater immediate impact is tax deduction at source under Section 195. Unlike sales involving resident sellers — where TDS is restricted to 1% of the consideration — transactions involving NRIs require the buyer to deduct tax at the applicable capital gains rate on the income portion of the sale. The buyer is statutorily obligated to ensure that tax is withheld before releasing funds. Failure to do so can expose the buyer to interest and disallowance consequences. Naturally, buyers err on the side of caution. The rate of tax depends on two primary fac...
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