By CA Surekha S Ahuja
Introduction: The 2026 NRI Property Landscape
As 2026 unfolds, NRIs face a transformed taxation and investment environment for Indian property sales:
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Finance Act 2025: LTCG at 12.5% without indexation, or 20% with indexation for pre-July 2014 properties.
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Section 195 TDS remains a key liquidity issue: buyers must deduct TDS on gross sale proceeds, potentially locking up significant funds.
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US-resident NRIs must consider PFIC taxation, impacting Indian mutual fund investments.
Critical questions for NRIs:
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Should I obtain a Lower TDS Certificate (Form 13)?
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How do PAN, Aadhaar, and residential status affect TDS and refunds?
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Should I reinvest in India or repatriate to the USA?
This guidance note provides a 360-degree roadmap for NRI sellers.
Lower TDS Certificate (Form 13) – Strategic Cash Flow Management
Why Form 13 Matters
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Buyers deduct TDS on total sale value without a certificate.
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With Form 13, TDS is restricted to actual capital gains, often much lower than gross sale value.
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Protects liquidity and blocked capital, especially for high-value sales.
Decision Matrix – When to Apply Form 13
| Scenario | Standard TDS (No Certificate) | Form 13 – Lower TDS Certificate | Recommendation |
|---|---|---|---|
| High-cost property, small gain | TDS ~20–24% of total sale | TDS only on gains (0–12.5%) | No-brainer – Apply Form 13 |
| Reinvestment under Sec 54/54EC | Funds blocked 12–18 months | TDS can be reduced to 0% | Apply Form 13 |
| Pre-2014 property | Buyer deducts 20% on gross | AO applies lower of 12.5%/20% with indexation | Apply Form 13 |
| Urgent sale / time-critical | Delays certificate issuance | 2–4 weeks wait | Consider skip and claim refund later |
| Small-ticket sales (<₹25L) | TDS impact low | Certificate cost may exceed blocked interest | Skip if minimal financial impact |
New TDS Rates for NRI Property Sales (2026)
| Gain Type | Sale Value | Base Rate | Surcharge | Cess | Effective TDS |
|---|---|---|---|---|---|
| LTCG | ≤₹50L | 20% | Nil | 4% | 20.8% |
| LTCG | ₹50L–₹1Cr | 20% | 10% | 4% | 22.88% |
| LTCG | >₹1Cr | 20% | 15% | 4% | 23.92% |
| STCG | Any | 30% | 10–15% | 4% | 31.2–35.88% |
Key insight: Form 13 reduces TDS from gross sale value to actual gains, releasing trapped capital immediately.
PAN, Aadhaar & Residential Status – Compliance Imperatives
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PAN: Mandatory; absence triggers Section 206AA, higher TDS
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Aadhaar: Optional but speeds up Form 13 issuance and refunds
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Residential Status: NRIs and RNORs fall under Section 195, not 194-IA
Implications: Proper documentation ensures minimal blocked funds, faster refunds, and smoother repatriation.
Buyer-Facing Compliance Advisory
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Verify seller PAN and documentation
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Request Form 13 for high-value/complex sales
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Collect proof for Sec 54/54EC reinvestments
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Ensure AO applies pre-2014 indexation benefits
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Monitor TDS compliance and timelines
Consequences of non-compliance: penalties, delays, or buyer liability issues.
Repatriation & US-NRI PFIC Advisory
FEMA-Compliant Repatriation
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Limit: USD 1 million per financial year from NRO account
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Requires Forms 15CA & 15CB
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Excess TDS cannot be repatriated until refund is processed
US-NRI Considerations
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Indian Mutual Funds = PFICs, subject to punitive US taxation
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Prefer Direct Equities, PMS, or AIFs
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Plan globally: minimize PFIC exposure, optimize liquidity, and align with US tax rules
India vs. USA – Investment Verdict
| Factor | India (Growth) | USA (Safety) |
|---|---|---|
| Economy | Fastest-growing large economy | Stable S&P 500, predictable returns |
| Currency | INR resilient | USD strong (₹90+), hedge volatility |
| Tax | Complex TDS + ITR | Simpler US tax compliance |
| Investment | Direct equity, PMS, AIF, commercial real estate | US ETFs, retirement funds |
Strategic Recommendation:
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Aggressive (<50, Indian tax resident): Retain proceeds in India; invest in direct equity or commercial property
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Conservative / US-tax resident: Use Form 13, repatriate under FEMA, invest in US-based instruments, avoid PFICs
Common Myths – Debunked
| Myth | Reality |
|---|---|
| TDS = 1% | Only for residents (194-IA). NRIs under 195 = 20–24% |
| TDS is final tax | Must file ITR to claim refund / pay balance |
| Repatriation is immediate | Excess TDS waits for refund cycle; USD 1M/year cap |
| Indian Mutual Funds safe | PFIC rules apply; punitive US tax |
Actionable NRI Seller Plan (2026)
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Confirm residential status, PAN, Aadhaar
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Compute capital gains (LTCG/STCG)
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Decide reinvestment vs. exit
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Apply Form 13 if blocked funds > 15–20% of gains
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Ensure buyer TDS compliance
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Plan FEMA-compliant repatriation (USD 1M limit)
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For US-residents, avoid PFIC exposure; prefer direct equity/US ETFs
Principle: Cash flow, liquidity, and compliance are as critical as tax optimization. Form 13 is a strategic liquidity tool, not just a compliance form.
Final Takeaway
In 2026, NRI property sales require:
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Strategic use of Form 13 to release blocked capital
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PAN/Aadhaar and residential compliance
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Informed decisions on reinvestment vs repatriation
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Awareness of US-PFIC implications for cross-border investors
Proper planning ensures your wealth works for you, not the tax authorities.
