If you’re an NRI selling property in India, one thing can instantly ruin your cash flow – TDS.

Many NRIs are shocked to see 20–30% of the sale amount deducted upfront, even when their actual tax liability is much lower. This happens not because the tax is unavoidable, but because the process is misunderstood or handled late.

So the real question is: How to avoid TDS on sale of property by NRI?
Not illegally. Not by shortcuts. But legally and smartly.

This guide explains exactly how NRIs reduce or avoid excess TDS – step by step.

First, Understand Why TDS Is So High for NRIs

When a buyer purchases property from an NRI:

• TDS is mandatory
• It is not 1% (like resident Indians)
• It is deducted under Section 195

Key point:
👉 TDS is deducted on capital gains, not blindly on sale value – but only if you plan in advance.

Most NRIs don’t – and that’s where money gets stuck.

What Is the Actual TDS Rate for NRIs?

There is no flat number, but typically:

• Long-term capital gains → ~20% + surcharge + cess
• Short-term capital gains → As per income slab

In practice, buyers often deduct 30% on the entire sale value to stay “safe” – which is terrible for the seller.

Understanding How to Avoid TDS on Sale of Property by NRI? starts with correcting this mistake.

Step 1: Calculate Capital Gains Correctly (Before You Sell)

You cannot reduce TDS unless you know:

• Purchase price
• Year of purchase
• Cost inflation index
• Sale price

Important for NRIs:

• Holding period determines tax rate
• Indexation significantly reduces taxable gains

Selling first and calculating later is the biggest financial error NRIs make.

Step 2: Apply for Lower or Nil TDS Certificate (Most Important Step)

This is the single most effective legal way to reduce or avoid excess TDS.

You can apply under:

• Section 197 of the Income Tax Act

What this does:

• Income Tax Department calculates your actual tax liability
• Issues a certificate specifying lower or NIL TDS
• Buyer deducts TDS only as per this certificate

This directly answers the question:
How to avoid TDS on sale of property by NRI without breaking any law?
👉 By applying for a lower TDS certificate before registration.

Step 3: When Should You Apply for Lower TDS?

Timing matters.

Ideal time:

• After signing agreement to sell
• Before sale deed registration

If you apply too late:

• Buyer will deduct full TDS
• Refund can take 12–24 months

Planning early saves both time and money.

Step 4: Documents Required for Lower TDS Application

You’ll generally need:

• Sale agreement
• Purchase deed
• Computation of capital gains
• PAN card
• Passport & visa
• Past income details (if any)

A CA usually handles this process to avoid rejection or delays.

Step 5: Use Capital Gains Exemptions to Reduce TDS Further

Even if some TDS applies, you can reduce it significantly by planning exemptions.

Common exemptions for NRIs:

• Section 54 – Reinvest in residential property
• Section 54EC – Invest in capital gain bonds (within 6 months)

If exemptions are planned and documented:

• Lower TDS certificate reflects reduced tax
• Buyer deducts less upfront

This is a key part of How to Avoid TDS on Sale of Property by NRI? that many sellers ignore.

Step 6: Educate the Buyer (Yes, This Matters)

Many buyers:

• Don’t understand NRI TDS rules
• Deduct higher TDS out of fear
• Delay payment due to confusion

You (or your CA) must clearly explain:

• Applicable TDS rate
• Lower TDS certificate
• Form 27Q filing responsibility

An informed buyer = smoother transaction.

Step 7: What If TDS Is Already Deducted?

If the buyer has already deducted high TDS:

• Don’t panic
• File income tax return in India
• Claim refund of excess TDS

Reality check:

• Refunds take time
• Cash flow remains blocked

That’s why prevention beats correction every time.

Step 8: Power of Attorney Does NOT Change TDS Rules

Many NRIs believe using Power of Attorney reduces TDS.

It doesn’t.

TDS depends on:

• Seller’s residential status
• Not on who signs the sale deed

So even if a PoA holder sells on your behalf, NRI TDS rules still apply.

Common Mistakes NRIs Make with TDS

• Not applying for lower TDS certificate
• Assuming buyer knows the rules
• Ignoring surcharge and cess
• Waiting for refund instead of planning
• Mixing resident and NRI tax logic

Each mistake costs real money.

Final Checklist to Avoid Excess TDS

Before selling, ensure:

• Capital gains calculated correctly
• Lower TDS certificate applied for
• Exemptions planned in advance
• Buyer educated on correct deduction
• CA involved from the start

This is how experienced NRIs legally manage TDS.

Conclusion: You Can’t Skip TDS – But You Can Control It

So, how to avoid TDS on sale of property by NRI? The honest answer is this: you don’t try to avoid it blindly – you reduce it legally through proper planning, correct timing, and the right documentation.

NRIs who plan early are in control. They apply for lower TDS certificates on time, structure their capital gains smartly, and walk away with more money in hand, minimal cash blockage, and a smoother, faster transaction.

On the other hand, NRIs who ignore planning often pay the price later. They face excess TDS deductions, struggle with blocked funds, wait months – sometimes over a year – for refunds, and regret not acting sooner.

The difference isn’t luck. It’s awareness, preparation, and execution.

Want to know How can NRI sell property in India: Step-by-Step Guide?

This is where reliable guidance matters. Platforms like India For NRI help overseas Indians understand complex tax and compliance rules clearly, so property sales don’t turn into financial headaches. When you know the process and plan ahead, TDS becomes manageable – not a shock.