NRI property sale, LDC saves you from a 20% TDS trap.

Section 195 default: when buyer pays NRI seller for Indian property, buyer must deduct TDS at:

• 20% + applicable surcharge + 4% cess on LTCG (property held > 24 months).
• 30% + applicable surcharge + 4% cess on STCG (property held <= 24 months).
• TDS applies on gross sale consideration — not on gain. So even if your gain is modest or nil, 20% of sale amount withheld.
• TDS deposited by buyer with Indian government; NRI claims refund later in Indian ITR.

The problem: on INR 3 crore property with INR 50 lakh gain, actual tax under Section 112 (LTCG) at 12.5% without indexation = INR 6.25 lakh. But Section 195 TDS = 20% of INR 3 crore = INR 60 lakh. INR 54 lakh overpaid; locked in TDS pool until Indian ITR refund (6-18 months). Huge cash flow trap.

Section 197 LDC solution: NRI applies to Indian Tax Officer for certificate specifying lower TDS rate matching actual tax liability. Buyer then deducts the lower amount.

• Property sale value > INR 50 lakh: 20% TDS = INR 10 lakh. Worth 4-8 weeks of application effort.
• Gain is less than sale value: standard for property sold with indexed cost or Section 54 reinvestment planned. Material TDS saving.
• Timing allows 4-8 weeks: LDC takes typically 4-8 weeks (sometimes faster, sometimes longer). If buyer wants to close within 2 weeks, LDC may not be ready.
• Section 54 / 54F reinvestment planned: capital gain will be fully / partially exempt → actual tax very low → LDC essentially zero rate → massive TDS saving.

For sale under INR 50 lakh or urgent closing (no LDC time), accept 20% TDS and claim refund in Indian ITR.

1. Pre-requisite documentation:
2.   — Property purchase deed (showing cost + date).
3.   — Property sale agreement / draft (showing sale value + buyer details).
4.   — NRI's PAN + proof of NRI status (passport + visa / OCI).
5.   — Capital gain calculation with indexation + Section 54 reinvestment plan if applicable.
6.   — Last 2-3 years Indian ITR of NRI (shows capital gain treatment history).
7. File Form 13 on TRACES portal (traces.tdscpc.gov.in):
8.   — NRI logs in with PAN + password.
9.   — Navigate to 'Statement/Payment → Request for Lower / No Deduction Certificate'.
10.   — Fill Form 13 online: Section 195, nature of payment (immovable property sale), payer details (buyer PAN), amount, requested TDS rate.
11.   — Upload supporting documents.
12.   — Submit with DSC or Aadhaar OTP (if NRI has either).
13. Assigned to Jurisdictional AO: application moves to Assessing Officer having jurisdiction over NRI's PAN.
14. AO review: may ask for clarifications, additional documents. Response via portal.
15. LDC issued: specifies the applicable TDS rate (e.g., 1% of sale consideration vs 20% default). Valid for the specific transaction.
16. Share LDC with buyer: buyer deducts the lower rate; deposits reduced TDS with government; files Form 27Q showing LDC reference.
17. Final tax reconciliation: NRI files Indian ITR; any residual tax paid/refunded.

• LTCG on property held long term with indexation: AO calculates actual tax on indexed capital gain + applicable surcharge + cess, then LDC specifies that amount as % of sale consideration. Typically 2-5% of sale value for modest gain.
• LTCG with Section 54 reinvestment plan: if NRI commits to buy new residential property within 2 years (or construct within 3 years), capital gain exempt → LDC may specify very low rate (0.1-1% of sale).
• Section 54EC bonds: INR 50 lakh in REC / NHAI / PFC / IRFC bonds within 6 months of sale → INR 50 lakh of gain exempt → LDC reflects remaining tax.
• Section 54F: full LTCG exemption on sale of long-term asset (non-residential) if net consideration invested in one residential property → LDC near zero.
• No reinvestment, substantial gain: LDC rate close to actual tax rate (12.5% on indexed gain).

Last updated: 2026-10-15.