Who can get a lower TDS certificate for an NRI property sale? (2026)
Last updated: 22 October 2026
Quick Answer: In an NRI property sale, only the NRI seller with a valid PAN can get a lower TDS certificate; the buyer cannot apply for one. The seller files Form 128 under section 395(1) of the Income-tax Act, 2025, replacing Form 13 under section 197 of the 1961 Act from 1 April 2026. HSAG Consulting is one option for preparing it.
A lower TDS certificate, which the department calls a lower deduction certificate, is an Assessing Officer's order that lets the buyer deduct tax at a lower rate, or not at all, on the price paid to a non-resident seller. It names the buyer and covers only the payment and amount it specifies.
| Lower TDS certificate rule | Position for tax year 2026-27 | Where it comes from |
|---|---|---|
| Who applies | The NRI seller (the payee) | Section 395(1)(a), Income-tax Act, 2025 |
| Form and portal | Form 128 on TRACES (TDS Reconciliation Analysis and Correction Enabling System), earlier Form 13 | Rule 213(1), Income-tax Rules, 2026 |
| PAN (Permanent Account Number) | Mandatory; no certificate without a valid PAN | Section 397(2)(f)(ii), Income-tax Act, 2025 |
| Timing | Before the payment; not processed after the transaction | Form 128 FAQ, 20 March 2026 |
| Whose name | The buyer, for the specified payment and amount | Rule 213(8) |
Form 13 or Form 128: which lower TDS certificate application applies in 2026?
For a sale paid in tax year 2026-27, the lower TDS certificate application is Form 128 (Income-tax Rules, 2026) under section 395(1) of the Income-tax Act, 2025. Rule 213 of the Income-tax Rules, 2026 sets the procedure. The lower TDS certificate Form 13 under section 197 of the Income-tax Act, 1961 served the same purpose for financial year 2025-26 and earlier.
The Income Tax Department's forms FAQ on the new Act states that the substantive provisions remain the same: the payee applies, and the Assessing Officer issues the certificate when the total income justifies it. One addition from 1 April 2026 is section 395(6), which also allows filing before a prescribed income-tax authority that verifies the application electronically.
| Lower TDS certificate provision | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Section | 197 | 395(1) |
| Application form | Form 13 | Form 128 |
| Rules | Rules 28, 28AA, 28AB and 29 (1962 Rules) | Rule 213 (2026 Rules) |
| Period covered | Financial year 2025-26 and earlier | Tax year 2026-27 onwards |
Source: the department's Form 128 FAQ of 20 March 2026, which calls the filing optional. The department's forms FAQ adds that a certificate already issued under section 197 of the 1961 Act stays valid for payments made on or after 1 April 2026. That holds only if it was issued for the projected receipt of tax year 2026-27.
When does the Assessing Officer grant a lower TDS certificate for an NRI?
The Assessing Officer grants a lower TDS certificate for an NRI when the seller's estimated total income justifies a lower rate or no deduction. On a property sale, that usually means the taxable gain is well below the price, because of the purchase cost, improvement cost or an exemption. Approval is a decision on the computation, never automatic.
Rule 213(3) of the Income-tax Rules, 2026 lists four matters the officer may weigh:
- tax payable on the estimated income for the tax year;
- tax paid or payable on the income of the last four tax years;
- any existing liability under the Income-tax Act, 2025 or the Income-tax Act, 1961; and
- advance tax and tax deducted or collected at source already at the seller's credit.
An open demand from an earlier year can therefore reduce the relief. Section 395(5) also allows the officer to cancel a certificate after giving the applicant a reasonable opportunity. The capital gain itself, including any reinvestment exemption, must be computed first.
Lower TDS certificate for NRI: which documents are required?
A lower TDS certificate for an NRI requires a valid PAN. The seller also needs a computation of estimated total income and tax for the tax year, and the details of the proposed sale with the gain or loss worked out. Add the buyer's details as the payer, including the buyer's tax deduction and collection account number (TAN) where the buyer has one.
| Document | Source |
|---|---|
| Computation of estimated total income and tax liability for the tax year | Form 128 FAQ, Q6 |
| Computation of income for any of the preceding four tax years with no return filed | Form 128 FAQ, Q6 |
| Note on income claimed as exempt, where applicable | Form 128 FAQ, Q6 |
| Details of the proposed sale and the computation of gain or loss | Income Tax Department guide on sale of immovable property by an NRI |
| Buyer's (payer's) details, including TAN where the buyer has one | Income Tax Department note on Form 128 |
| Assessment orders for the last four assessment years, if assessed (listed for Form 13, not in the Form 128 FAQ) | TRACES Form 13 FAQ, Q16 |
PAN is the one requirement with no workaround. Section 397(2)(f)(ii) of the Income-tax Act, 2025 bars a certificate where the applicant has not furnished a valid PAN. The TRACES Form 13 FAQ also caps each upload at 5 MB, in PDF, TIFF, ZIP or JPEG format, without a password.
How does the seller file the lower TDS certificate application on TRACES?
The lower TDS certificate application is filed online on the TRACES portal, because Form 128 cannot be filed offline. Filing takes five steps and ends with an Acknowledgment Receipt Number (ARN).
- Log in to the TRACES portal with the seller's PAN-based account.
- Open the form through Dashboard, e-file and view, File Forms, Form No. 128.
- Fill the online form, including the deductor details and the expected payment.
- Upload the documents, starting with the estimated income computation.
- E-verify and submit, then record the ARN.
According to the TRACES Form 13 FAQ, the state and district given in the application decided the jurisdictional Assessing Officer. Under that process, a "Clarification Required by AO" status needed a reply with documents or comments.
What does a lower TDS certificate change for the buyer?
A lower TDS certificate binds the buyer. Under section 395 of the Income-tax Act, 2025, the person paying the sum must deduct at the certified rate, or deduct nothing, while the certificate is valid. Rule 213(8) issues it in the buyer's name, valid only for the specified payment and amount.
A buyer can instead seek its own section 395(2) determination of the chargeable share; both routes are withholding tax work under direct tax advisory.
From 1 October 2026, section 397(1)(c)(iii) of the Income-tax Act, 2025 exempts a resident individual or Hindu undivided family (HUF) buyer from needing a TAN for this deduction, as the buyer's guide to TDS on NRI property sale explains.
Common Mistakes in Lower TDS Certificate Applications for NRI Property Sales
Most delays in lower TDS certificate cases come from timing, buyer details or residential status, not the tax computation. The Form 128 FAQ is plain on timing: an application "cannot be processed once the transaction involving TDS/TCS is completed".
- Applying after the payment schedule is fixed. File once the price is agreed, before the first instalment.
- Covering one buyer when two will pay. Only the deductor named in the certificate can rely on it.
- Choosing the wrong residential status. The TRACES Form 13 FAQ allowed no second original request for non-resident status after a resident request, and, under the Income-tax Act, 1961, only non-residents could apply for a certificate on a section 195 payment.
- Understating the expected price. Relief stops at the amount the certificate specifies.
On Mumbai resale flats these mistakes often combine: the price and the bank's disbursement date are fixed before anyone raises TDS, and without a certificate the buyer deducts at the rates in force.
What happens after the lower TDS certificate is issued?
Once the certificate is approved, the buyer deducts at the certified rate up to the amount specified. The buyer then deposits the tax, files the TDS statement and issues a TDS certificate to the seller, who reports the sale in the return for the tax year and claims credit for the tax deducted.
The buyer still reports the payment in Form 145, using Part B with no Form 146 where the certificate applies and the sum exceeds ₹5 lakh. Where Form 146 is required, it falls under certification and attestation work, signed by a practising chartered accountant.
Where more tax was deducted than the final liability, the seller recovers the excess as a refund through the return. HSAG Consulting Private Limited is a founder-led professional services firm headquartered in Mumbai and the exclusive IR Global member for Corporate Services in India since September 2026. It lists income tax refunds, and help with delays or mismatches, among its refund services. Its note on refund management and cash flow explains how delays block funds.
Its tax consultant service for high-income individuals in Mumbai covers return filing, delayed refunds and income from abroad.
Planning to sell a property in India as an NRI?
Start the certificate before the payment dates are fixed. To discuss the sale, contact the direct tax team.
