Lower TDS Certificate for NRI Property Sale: Form 128 Guide
How a lower TDS certificate helps NRIs selling property in India: Form 128 (old Form 13), documents, timeline and how it cuts TDS on the full sale price.
Written by
Justin
6 November 2026 · 7 minutes read
How a Lower TDS Certificate Helps NRIs Selling Property in India (Form 128, Old Form 13)
Short version: When an NRI sells property in India, the buyer deducts TDS on the full sale price, not just the profit. For a long-term sale that’s about 13% to 15% of the price, which can be many times the tax you actually owe. A lower deduction certificate, applied for on the Income Tax portal (TRACES), tells the buyer to deduct less, based on your estimated real tax. It isn’t a tax exemption, but it can free up lakhs at closing. Apply early, because it can take weeks.
If you’re an NRI selling a flat or plot, this is one of the most useful steps you can take before registration. Here’s how it works under the rules that apply from 1 April 2026.
What is a lower deduction certificate?
It’s a certificate from your Assessing Officer that directs a named buyer to deduct tax at a lower rate, or nothing, on a payment to you. The Income-tax Act, 2025 replaced the 1961 Act on 1 April 2026, and the names changed:
Old (1961 Act) | From 1 April 2026 | |
|---|---|---|
Power to issue the certificate | Section 197 | Section 395(1) |
Application form | Form 13 | Form 128 |
TDS on payments to non-residents | Section 195 | Section 393(2) |
Where you apply | TRACES | TRACES |
Many guides online still say Form 13 and Section 197. They mean the same thing.
Why is TDS so heavy on an NRI’s property sale?
Under the NRI provision, the buyer must deduct tax on the whole amount paid, not on your gain, unless the Assessing Officer says otherwise. There’s no minimum threshold.
Holding period | Base rate | With 4% cess | With surcharge as well |
|---|---|---|---|
Long-term (over 24 months) | 12.5% | About 13% | About 14.3% to 14.95%, depending on the surcharge slab |
Short-term (24 months or less) | 30% | About 31.2% | Higher, depending on the surcharge slab |
Older articles say 20% for long-term sales. That was the rate before 23 July 2024, and it’s no longer correct.
How does a certificate help? A worked example
This is illustrative. It ignores surcharge, which can make the numbers higher.
Item | Without a certificate | With a certificate |
|---|---|---|
Sale price | Rs 1.5 crore | Rs 1.5 crore |
Your long-term capital gain (after cost and expenses) | Rs 60 lakh | Rs 60 lakh |
Rate applied | 13% on the full price | About 13% on the gain only |
TDS deducted | Rs 19.5 lakh | About Rs 7.8 lakh |
Money you’d otherwise wait to recover | About Rs 11.7 lakh | Close to nil |
Without a certificate, the extra TDS stays with the government until you file your Indian tax return and the refund is processed, which can take months.
What doesn’t it do?
It isn’t a tax exemption. It only changes how much is deducted at source. Your final tax is worked out in your return.
Tax treaties usually don’t cut it. Guides say a tax residency certificate generally doesn’t reduce TDS on a property sale, and the certificate is the route. Confirm with your CA.
It’s specific. A certificate names the buyer and the transaction. A new buyer needs a new certificate.
When should I apply?
As soon as you have a buyer and a draft agreement. The Income Tax Department’s guidance says the certificate should reach the buyer before they deduct tax. Guides put the usual processing time at about 4 to 8 weeks, and longer near the end of the financial year or if the officer raises queries.
When | What to do |
|---|---|
Buyer identified, draft agreement ready | Collect documents and have your CA compute the gain |
At least 8 weeks before the sale payment | File Form 128 on TRACES |
While the officer reviews it | Reply quickly to queries |
Before registration | Get the certificate, and check its validity dates |
At closing | Give the buyer a copy |
Put a line in the agreement about how TDS will be deducted and what happens if the certificate is delayed.
How do I apply?
Compute your capital gain with your CA: sale price, cost of acquisition, improvement costs and transfer expenses. Indexation is generally not available to NRIs.
Log in to TRACES (the TDS portal) and open the lower deduction request.
Fill in Form 128: your details and residential status, the buyer’s PAN or TAN, the transaction, your income estimate and tax computation, and details of tax already paid.
Upload the documents (below).
Respond to queries from the Assessing Officer.
Receive the certificate and read the rate, the buyer’s details and the validity dates.
Give it to the buyer before the buyer pays.
What documents do I need?
Draft or signed agreement for sale, with the price and property schedule
Purchase deed, allotment letter, or proof of inheritance
Computation of capital gains with cost and improvement records
PAN of both you and the buyer
Passport and proof of NRI status
Previous tax returns and details of tax already paid
NRO bank account details
Reinvestment plans, if you expect to claim an exemption (confirm with your CA how the officer treats it)
What does the buyer do?
Deduct at the certified rate, not the standard rate, and quote the certificate when reporting the TDS.
If it’s a company or firm, a TAN is needed.
If it’s an individual or HUF, from 1 October 2026 the buyer can deposit with a PAN instead of a TAN, according to practitioner guides citing a CBDT notification. Form names changed under the new rules, so check the portal for the current ones.
Give you a TDS certificate, which you need for your return.
If the buyer deducts at the full rate despite your certificate, the certificate has probably expired or doesn’t match the buyer or property. Check the details before registration.
What mistakes should I avoid?
Mistake | Why it hurts |
|---|---|
Applying after the sale agreement is nearly closed | The certificate may arrive after the buyer has deducted |
Wrong capital gains computation | The officer may issue a higher rate or ask for clarifications |
Missing documents | Causes queries and delays |
Not filing Indian returns | The officer may question your tax position |
Changing the buyer after getting the certificate | It names the buyer, so you’d need a new one |
Not checking the certificate’s dates | An expired certificate takes you back to the full rate |
Treating it as a tax exemption | You still have to file and pay the final tax |
What if the certificate doesn’t arrive in time?
Talk to your CA and advocate before closing. Options may include delaying registration, or agreeing in the sale agreement how the buyer’s deduction and your refund will be handled. If the buyer deducts the full rate, you claim the excess when you file your Indian return, so keep the TDS certificate and your records.
What happens after the sale?
Tax return. File your Indian return and claim credit for the TDS.
Sending money abroad. Sale proceeds first go to your NRO account. You can remit up to USD 1 million a year with a CA certificate (Form 15CB, renumbered under the new rules) and Form 15CA.
See our NRI selling and buying guides for the full process.
Quick answers (FAQ)
What is a lower TDS certificate for an NRI selling property?
A certificate from the Assessing Officer directing the buyer to deduct tax at a lower or nil rate, based on your estimated actual tax. It’s Form 128 under the Income-tax Act, 2025 (old Form 13).
How much TDS applies to an NRI’s property sale?
12.5% for long-term holdings (over 24 months) plus surcharge and 4% cess, and 30% for short-term. It’s on the full sale price unless you have a certificate.
Is the TDS rate 20% or 12.5%?
12.5% for long-term sales since 23 July 2024. The 20% figure in older articles is outdated.
How long does it take?
Typically about 4 to 8 weeks, sometimes longer.
Where do I apply?
On the TRACES portal.
Does the certificate reduce my actual tax?
No. It reduces the TDS deducted at source. Your final tax is calculated in your return.
Can the buyer ignore my certificate?
No. The buyer should deduct at the certified rate, provided the certificate is valid and matches the buyer and the transaction.
Do I need a chartered accountant?
It’s strongly advised, since the computation affects the rate you get.
This article is general information, not tax advice. Rates, forms and procedures change, so confirm with a chartered accountant before you apply or sell.