Lower TDS Certificate for NRI Property Sale: How Form 13 (Now Form 128) Stops the Over-Deduction

A lower TDS certificate under Section 197 tells your buyer to deduct tax on your actual capital gain instead of on the whole sale price. Without it, the buyer must withhold roughly 13% to 14.95% of the full consideration under Section 195, even when your real gain is a fraction of that. With it, you keep the difference at closing instead of chasing a refund for a year or more. The application is Form 13, filed on the TRACES portal. Under the Income-tax Act, 2025, in force from 1 April 2026, the same certificate is issued under Section 395 and the application is renumbered Form 128. This guide is about that certificate: what it does, who applies, and the exact steps.

What is a lower TDS certificate and why does an NRI need one?

When an NRI sells property in India, the buyer deducts TDS under Section 195, not the 1% under Section 194-IA that applies to resident sellers. Two things make Section 195 painful. The rate is the capital gains rate plus surcharge and cess, not 1%. And the base is the entire sale consideration, because the buyer has no legal basis to work out your gain.

The result: the buyer withholds tax on money that was never profit. Sell a flat for Rs 1.8 crore that you bought for Rs 1.5 crore, and your gain is Rs 30 lakh. Tax on that gain is around Rs 4.3 lakh. TDS without a certificate is close to 14.95% of Rs 1.8 crore, which is about Rs 26.9 lakh. Over Rs 22 lakh of your own money sits with the government until you file a return and wait out a refund.

Section 197 exists to close that gap. It lets you apply for a certificate that directs the buyer to deduct at a lower rate, or nil, matched to your real tax liability. The full rate mechanics and slab table sit in the TDS on sale of property by an NRI guide. This page is the how-to for the certificate itself.

How much does the certificate actually save you?

The certificate does not change your tax. It changes your cashflow. You pay the same final tax either way. The question is whether you pay it now, at closing, or lend it to the tax department interest-light for a year first.

The blocked cash is the real cost. It cannot be repatriated or reinvested until the refund lands. For a seller moving money out of an NRO account, the certificate also unblocks the repatriation of sale proceeds, which stalls while the excess TDS is still locked in the system.

How do I apply for a lower TDS certificate?

You apply online through the TRACES portal (tdscpc.gov.in). The buyer does not apply. You do, as the seller and the person whose income is being taxed. The steps:

1. Register on TRACES as a taxpayer using your PAN. This is separate from your income-tax e-filing login.
2. Open the "Statements/Forms" menu and start a request for Form 13 (Form 128 for certificates covering tax year 2026-27 onward).
3. Enter the buyer's details, including the buyer's PAN and TAN, the property, the sale consideration, and the section, which is 195.
4. Upload your capital gain computation and the supporting documents (below).
5. Verify and submit using a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC).
6. The application routes to the jurisdictional Assessing Officer for international taxation, who reviews it, raises queries, and issues the certificate.

The officer issues a certificate that names the buyer, states the rate the buyer must apply, and fixes the amount and period it covers. It is buyer-specific and transaction-specific. A separate buyer or a materially different price needs its own certificate.

What documents do I need for Form 13?

The officer is approving a tax computation, so the file has to prove both the gain and your history. Keep these ready before you start:

• PAN and passport (identity and NRI status).
• The purchase deed and cost proofs for the property, plus improvement receipts if you are claiming them.
• The agreement to sell, or a draft with the negotiated price, showing the buyer, the consideration, and the payment schedule.
• The buyer's PAN and TAN. The buyer must hold a TAN before you can name them as deductor.
• Your capital gain computation, including any exemption you plan to claim under the reinvestment provisions.
• Income-tax returns for the last two to three years, with acknowledgements.
• Bank statements and, for inherited property, the inheritance documents and the previous owner's cost.

Thin or inconsistent papers are the main reason applications stall. The officer questions the acquisition cost, the source of an exemption, or a mismatch between the deed and the computation. Answer fast. A pending query is what turns a three-week certificate into an eight-week one.

How long does Form 13 take?

Plan for three to eight weeks from a clean filing to a certificate in hand. The spread depends on the city, the officer's queue, and how quickly you clear queries. Some straightforward files close in two to three weeks. The governing rule expects the Assessing Officer to dispose of a complete application within thirty days from the end of the month in which it is received, but a query resets that clock in practice.

The timing lesson is simple. File as soon as a price is agreed in principle. Do not wait for the sale deed date, and do not wait for registration. A certificate issued after the buyer has already paid does nothing for the money already withheld.

What does the buyer have to do?

The buyer carries the legal duty to deduct, whether or not you hold a certificate. Even with a certificate, the buyer's compliance does not disappear. It shrinks. The buyer must:

1. Obtain a TAN. A PAN is not enough for a Section 195 deduction. This is the single biggest difference from buying from a resident.
2. Deduct at the certificate rate on each payment, including any advance. No certificate means the full Section 195 rate on every rupee.
3. Deposit the TDS by the 7th of the following month using the non-resident challan.
4. File the quarterly TDS statement in Form 27Q. From 1 April 2026, quote the new section-table codes in place of the old Section 195 reference.
5. Issue Form 16A so the credit appears in your Form 26AS and AIS.

Give the buyer the certificate before the first payment. Deductions made before the certificate's date of issue do not get its benefit. Sequence the advance and instalments to fall after the certificate arrives.

What happens if I skip the certificate?

Nothing is lost, but the money is slow. If the sale closes at the full Section 195 rate, the excess becomes a refund claim, not a write-off. You confirm the buyer deposited the TDS and filed the return, check your Form 26AS for the credit, then file your Indian return for the year of sale computing the real gain and any exemption. The excess comes back as a refund.

Refunds for NRI sellers tend to arrive six to eighteen months after filing, with interest at the statutory refund rate, which is below what the same money would earn deployed. And the proceeds cannot be freely repatriated while the excess is still locked. A certificate before the sale beats a refund after it, every time. If the sale has already closed, the refund route is the fallback, and the broad sale-side sequence is in the NRI selling property in India guide.

What is changing under the Income-tax Act, 2025?

The mechanism is not changing. The labels are. From 1 April 2026, the Income-tax Act, 2025 replaces the Income-tax Act, 1961. Section 197, the lower or nil deduction certificate, becomes Section 395. Section 195, the payment-to-non-residents provision, moves into Section 393. The application form, Form 13, is renumbered Form 128, prescribed under Rule 213 of the Income-tax Rules, 2026.

Two practical points. A certificate issued under the old Section 197 stays valid for payments made on or after 1 April 2026, provided it covers projected receipts for tax year 2026-27. And an application filed under Section 197 before 31 March 2026 that is still pending on 1 April 2026 can be treated as an application under the new Act, so a live application does not need to be filed again only because the law changed. The verification, the TRACES portal, the documents, and the officer review all carry over. If you are filing now for a sale that closes in 2026-27, you are filing Form 128.

Where this goes wrong

• The seller applies after registration is booked. The certificate arrives after the money is already withheld at the full rate.
• The buyer has no TAN when the advance is paid, so the advance itself was under-deducted.
• The buyer deducts 1% under Section 194-IA because the broker never disclosed the NRI status. The department later treats the buyer as in default for the shortfall, with interest.
• The computation claims a cost or exemption the file cannot prove, the officer raises a query, and the answer arrives after closing.

FAQ

Who applies for the lower TDS certificate, the buyer or the seller? The seller applies. It is your income being taxed, so you file Form 13 (now Form 128) on TRACES using your PAN. The buyer only supplies their PAN and TAN and, once the certificate is issued, deducts at the rate the officer specifies. The buyer cannot apply on your behalf.

Can I get a nil TDS certificate instead of a lower one? Yes, if your computation shows no tax is due, for example when a reinvestment exemption wipes out the gain, or a loss offsets it. The officer can issue a nil-deduction certificate. You still file the same Form 13 and prove the position. A nil certificate is issued at the officer's satisfaction, not on request.

How early should I apply before selling? As soon as the price is agreed in principle, and before any advance is paid. Certificates take three to eight weeks, and the buyer must hold a TAN first. Applying after the sale deed or after an advance changes hands means the money is withheld at the full rate before the certificate can help you.

Does the certificate reduce my actual tax? No. It reduces what the buyer withholds, not what you owe. Your final tax is computed in your return. The certificate matches the deduction to that liability so you are not over-withheld. Think of it as a cashflow fix, not a tax cut. The tax is the same either way.

Is the certificate valid for any buyer? No. It is buyer-specific and transaction-specific. It names the deductor and fixes the rate, amount, and period. A different buyer, or a materially different price, needs its own certificate. If your deal changes after the certificate is issued, you may have to apply again for the new terms.

What if my certificate application is still pending when the new Act starts on 1 April 2026? If it covers tax year 2026-27 onward, the pending Section 197 application can be treated as one under Section 395 of the Income-tax Act, 2025. You do not have to refile only because the law changed. Certificates already issued also stay valid for payments made on or after 1 April 2026.

Get the certificate before the buyer withholds

66 MG Road files the Form 13 (Form 128) lower or nil TDS certificate for NRI sellers end to end: gain computation, TRACES filing, officer queries, buyer TAN and Form 27Q compliance, and repatriation of the proceeds. Teams across Mumbai, Pune, Bangalore, Hyderabad, Chennai, and Gurgaon. Itemized billing, no surprises.

Saurabh Garg, founder, 66 MG Road

Sources

• Income Tax Department, Form 128 (application for lower/nil deduction certificate, earlier Form 13): https://www.incometaxindia.gov.in/documents/d/guest/fn-128
• Income Tax e-filing portal, Income Tax Forms: https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/income-tax-forms
• TRACES portal (TDS Reconciliation Analysis and Correction Enabling System): https://www.tdscpc.gov.in
• Income Tax Department, Capital Gains: https://www.incometaxindia.gov.in/w/capital-gain