In this article
Legal period: Indian tax year 2026-27 onwards under the Income-tax Act, 2025, with earlier-law and transition references identified separately.
Research basis checked: 23 October 2026.
If you are non-resident for Indian income-tax purposes in the relevant tax year and are selling property in India, the tax deducted by the buyer may exceed the Indian tax you eventually owe on the sale. You can seek a certificate for lower or nil tax deduction, but your own capital-gains calculation does not authorise the buyer to deduct less.
For the tax year beginning 1 April 2026, the ordinary seller-application procedure is Form 128 under Section 395(1) of the Income-tax Act, 2025, read with Rule 213 of the Income-tax Rules, 2026. Under that procedure, the Assessing Officer considers your estimated total income, tax position and supporting information. If the certificate is issued, the buyer applies it only to the payments and period it covers.
The practical distinction is between your eventual income-tax liability, what the buyer must deduct when paying you, and what a valid certificate permits.
Why can the TDS exceed your eventual capital-gains tax?
A property buyer generally knows the price agreed with you. That price is not necessarily your taxable capital gain. The computation may involve your acquisition date, legally recognised cost, eligible improvement and transfer expenditure, the holding period, applicable stamp-duty valuation provisions and any statutory relief for which you qualify.
Withholding operates separately. Section 393(2), Table serial number 17, addresses sums chargeable under the Income-tax Act, 2025 paid or credited to a non-resident, at the applicable rates in force. The provision uses a chargeability test; it does not say that tax must invariably be deducted on the entire gross sale consideration in every property transaction.
At the same time, the buyer cannot simply substitute the capital gain privately estimated by the seller for the statutory withholding basis. Where the whole payment is not chargeable, a separate payer-side determination procedure exists under Section 395(2). A seller seeking lower or nil deduction based on estimated total income uses Section 395(1).
| Amount | What it means |
|---|---|
| Sale consideration | Amount agreed to be paid for the property |
| Taxable capital gain | Gain computed under the applicable capital-gains provisions |
| Tax deducted at source (TDS) | Deduction required under the withholding law and any valid certificate or determination |
These figures need not be equal. The difficulty for a seller is that withholding may be higher than the eventual tax liability, creating a cash-flow difference until the final return and credit or refund process.
Who can apply for a lower or nil TDS certificate?
A seller whose payment is subject to Indian tax withholding may apply under Section 395(1) if the estimated total-income position supports lower or nil deduction under the law. The certificate is not an automatic concession for being an NRI, having an inherited property, or proposing to reinvest the sale proceeds.
The relevant residential status is your status under Indian income-tax law for the tax year. Indian citizenship, OCI registration, an NRE account or a bank’s FEMA classification does not by itself decide that status. FEMA residence and banking classifications must be tested separately for their own purposes.
The application should be built on a defensible estimate of total income and tax, not merely the difference between an asking price and an old purchase price. Where exemption or reinvestment relief is claimed, the exact statutory conditions and supporting facts matter.
Form 13 or Form 128: which applies?
The applicable form depends on the legal period.
| Issue | Through 31 March 2026 | From 1 April 2026 |
|---|---|---|
| Law | Income-tax Act, 1961 | Income-tax Act, 2025 |
| Seller’s lower/nil deduction provision | Section 197 | Section 395(1) |
| Ordinary seller application | Form 13 | Form 128 |
| Principal application rule | Rules 28 and 28AA, as applicable | Rule 213 |
| General withholding on relevant non-resident payments | Section 195 | Section 393(2), Table serial number 17 |
For an ordinary new application for tax year 2026-27, the form is Form 128, not the earlier Form 13.
Does an old Form 13 certificate stop working automatically?
Not necessarily. The Income Tax Department’s published transition guidance recognises continued validity for certain Section 197 certificates issued under the 1961 Act for projected receivables relating to tax year 2026-27, even where payment or credit occurs from 1 April 2026. The actual certificate’s payer, payment scope, amount, period and terms must be checked; not every old certificate continues automatically.
How do you apply for Form 128?
The Income Tax Department’s published Form 128 FAQs specify an electronic application through the TRACES portal at www.tdscpc.gov.in. They give the route TRACES login → Dashboard → e-file and view → File Forms → Form No. 128. The interface and availability should be checked when filing, as portal procedures can change.
The ordinary steps are:
- Identify the proposed payment. Establish the seller, buyer, property, relevant tax year, agreed consideration and expected payment or credit dates. Multiple buyers, owners or instalments may require additional identification and separate treatment.
- Compute estimated total income and tax. Include the proposed gain, relevant statutory costs and reliefs, other income affecting the estimate, existing liability and available advance-tax or withholding credits, as applicable.
- Complete Form 128 and Annexure I. The form requests the applicant’s identity, PAN, residential status, estimate and prior-year particulars. Annexure I asks for the withholding section and table entry, payer’s TAN/PAN, estimated payment and the requested rate. A nil-rate request is entered as prescribed by the form.
- Upload the relevant supporting material. The department identifies the estimated income-and-tax computation, computations for earlier years in which returns were not filed and a note for claimed exempt income, where applicable. Property-specific records may be needed to establish the computation.
- Electronically verify and submit. Retain the acknowledgement and respond to any lawful requests made while the application is examined.
- Obtain and examine the certificate if approved. The department’s guidance identifies a TRACES download route. Give the issued certificate to the relevant buyer and check that it actually covers the payment.
Filing the application is not receiving the certificate. The buyer cannot rely on the requested rate merely because you have an acknowledgement.
When should you apply?
The department advises applying sufficiently before the transaction. It does not offer a universal guaranteed period for processing Form 128.
Under Section 393(2), the timing of the relevant payment or credit is important. The sale deed’s registration date may not be the first relevant withholding event. Advances and instalments therefore require attention before they are paid or credited. A certificate obtained after tax has already been deducted should not be assumed to reverse that completed deduction; any remaining payment must be tested against the actual certificate.
Can you withdraw or make another application?
The official FAQs state that an application can be withdrawn before it is processed, and that there is no statutory numerical cap on applications within a tax year. A later application must still be factually justified and is not guaranteed approval.
What documents support the application?
The form and the property’s tax evidence answer different questions. The prescribed form asks for income, tax, prior-year and payer information. A property’s purchase, inheritance, ownership or expenditure records support the factual computation behind those entries.
| Evidence category | Illustrative records or information |
|---|---|
| Identity and residential status | PAN, address and facts relevant to Indian income-tax residence |
| Property and transaction | Acquisition or inheritance documents, ownership share, proposed agreement, buyer and payment details |
| Gain computation | Acquisition cost, eligible improvement and transfer expenditure, acquisition/transfer dates, relevant valuation evidence |
| Relief claimed | Facts and evidence necessary for the specific applicable statutory relief |
| Current tax estimate | Estimated total income and tax, existing demands and available credits |
| Earlier years | Prior-year return particulars and, where no return was filed, the relevant income computation |
| Certificate particulars | Payer TAN/PAN, relevant section, payment estimate and requested rate |
This is a practical evidence guide, not a universal list of files required for uploading in every transaction.
Rule 213(3) requires consideration of the preceding four tax years. The prescribed Form 128 also contains a declaration relating to previous returns, while its accompanying instructions and the department’s FAQs address computations for a year in which no return was filed. The taxpayer must report the actual filing history truthfully and complete the applicable declarations correctly. The mere absence of a prior return should not be hidden or replaced by an inaccurate declaration.
Where property was inherited or is jointly owned, the legal ownership, acquisition history and seller’s individual share may change the computation. Being named in a deed does not dispense with the need to establish the relevant facts.
How is the certificate decided, and what does it cover?
Under the ordinary Rule 213 procedure, the Assessing Officer considers the estimated tax on the current year’s income, tax on returned, assessed or estimated income for the preceding four tax years, existing liabilities under the 2025 and earlier Acts, and relevant prepaid taxes and withholding credits.
The requested rate is not automatically accepted. The certificate, if granted, applies to the specified deductor, payment amount and period. Rule 213 also contains a special regime for applicants with more than 100 deductors whose details are unavailable, but that is not the normal single-buyer property situation.
Before relying on the certificate, check the correct seller and payer identity, the covered income or payment, the approved rate or nil deduction, the amount limit and validity. Section 395 permits cancellation after the statutory opportunity requirement. A certificate for one buyer, transaction or period should not be assumed to apply to another.
What must the buyer do with the certificate?
The buyer remains responsible for deduction, deposit, reporting and the relevant TDS certificate. Where a valid Section 395(1) certificate covers a payment, the buyer uses the approved treatment within its limits. The seller’s computation or application acknowledgement alone does not authorise a reduced deduction.
What changed for resident individual and HUF buyers on 1 October 2026?
For qualifying purchases of immovable property from a non-resident seller, resident individual and Hindu Undivided Family (HUF) buyers may use Form 141, Schedule E, with PAN-based compliance instead of obtaining a TAN solely for that transaction. Other categories of buyers do not automatically qualify for this facility.
Under Rules 218(3) and 219(5) of the Income-tax Rules, 2026, the deducted tax must be paid, and Form 141 furnished with it, within 30 days from the end of the month in which the deduction is made. The portal FAQ also describes the filing as due within one month from that month-end. For a deduction made in October, both readings give 30 November.
The relevant portal instructions should be followed for making payment and furnishing the challan-cum-statement. Where there are multiple buyers, each buyer may have an independent reporting obligation. The Form 141 Schedule E interface also provides for the number of an applicable Section 395(1) or Section 395(2) certificate.
Form 141 is a buyer’s TDS payment/reporting form. It is not an application for the seller’s lower deduction certificate.
Is Form 129 another route?
Yes, but it serves a different applicant and question. Where a buyer considers that the whole sum payable to a non-resident is not chargeable to Indian tax, Section 395(2), read with Rule 214 and Form 129, provides a payer-side procedure for determining the appropriate chargeable proportion.
| Procedure | Applicant | Question it answers |
|---|---|---|
| Form 128, Section 395(1) | Seller or payee | Is lower or nil deduction justified by the recipient’s estimated income and tax position? |
| Form 129, Section 395(2) | Buyer or payer | What proportion of the payment is chargeable to Indian tax? |
| Form 141, Schedule E | Qualifying resident individual/HUF buyer | How is tax actually deducted, paid and reported? |
These forms are not interchangeable. The existence of a separate payer-side procedure is another reason not to claim that the entire gross sale consideration must invariably be the withholding base whenever the seller lacks Form 128.
What happens if no certificate is issued before payment?
An application does not suspend the buyer’s statutory withholding duty. If no valid lower deduction certificate or other legally applicable determination covers the payment, the buyer must apply the relevant non-resident withholding provisions to the facts.
The familiar 1% property TDS rule for the specified resident-seller category is not the general rule for a non-resident seller. Equally, the rate cannot be described as a universal 12.5% for every NRI property sale. Income character, holding period, the rates in force, surcharge, cess, applicable relief and other statutory requirements may matter.
Where tax has been properly deducted and deposited, the seller can consider the eligible TDS credit in the relevant Indian income-tax return and claim any refund legally due. This is a separate process from obtaining lower withholding before payment. A subsequent certificate does not automatically undo a completed deduction.
Does a lower TDS certificate permit repatriation of sale proceeds?
No. A lower deduction certificate addresses Indian income-tax withholding. It is not permission to remit the sale proceeds abroad.
FEMA and RBI rules examine different facts, including the seller’s status under FEMA, how the property was acquired and funded, the property category, the banking route and any applicable conditions or permissions. Those requirements must be assessed independently from the income-tax deduction certificate.
A conclusion reached under one regulatory procedure does not perform the function of another.
The seller’s country of residence must also be considered separately. A sale may carry tax or reporting consequences in the USA, UK, UAE or another country under that country’s law. A Double Taxation Avoidance Agreement may modify a qualifying person’s position under its actual provisions, but an Indian lower TDS certificate does not itself establish treaty entitlement or a foreign tax exemption. Foreign-law conclusions should be reviewed by an appropriately qualified professional in that country.
What should you establish before relying on lower TDS?
Three records serve different purposes. Your capital-gains and total-income estimate supports the application. The issued certificate determines whether a different withholding treatment has been authorised. The buyer’s withholding and reporting record establishes how the deduction was actually handled.
The practical distinction is this: you calculate the tax position you expect; the competent income-tax authority determines whether lower or nil deduction is authorised; and the buyer follows the law and any valid certificate.
Official sources
- Income-tax Act, 2025, Section 395.
- Income-tax Act, 2025, Section 393.
- Income-tax Rules, 2026, Rule 213.
- Official notified Income-tax Rules, 2026, including Form 128.
- Income Tax Department: Form 128 FAQs.
- Income Tax Department: Form 129 FAQs.
- Income Tax Department: Form 141 FAQs and deadlines.
- Income Tax Department: Form 141 Schedule E user manual.
- Income Tax Department: Transition guidance on older Section 197 certificates.
- RBI: Acquisition or transfer of immovable property regulations.
This article is general education concerning the stated Indian law and period. It is not an individual tax determination or authority for a buyer to apply a lower rate or deduction base without the lawfully applicable certificate or determination. Its research was reviewed on 23 October 2026, and its legal and procedural position should be reconfirmed when used for a transaction.
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