If you're an NRI selling property in India, the buyer is legally required to deduct tax on the entire sale price — not on your profit. Not 1%, either. Under Section 195, the deduction runs at the long-term capital gains rate of 12.5% plus surcharge and cess, which on a sale above ₹1 crore works out to roughly 14.95% of the full consideration. Most buyers don't know this. Most NRI sellers find out after the money's already gone.
Here's what that looked like for a client of ours in Dubai last year. He was selling a Gurgaon flat he'd bought in 2012 for ₹58L; the 2025 sale price was ₹1.45 crore. His actual long-term gain was ₹87L, and at 12.5% the real tax on it came to about ₹11L. But the buyer — correctly, under the law — withheld ₹21.7L, because the deduction applies to the full ₹1.45 crore, not the ₹87L gain. Nearly ₹11L of my client's own capital went to the tax department as an interest-free loan, refundable only after he filed his Indian return and the refund was processed. He waited eleven months for it.
Why buyers get this wrong in the other direction too
The resident-to-resident rule everyone half-knows — 1% TDS on property above ₹50L — comes from Section 194-IA, and it simply does not apply when the seller is an NRI. I've seen buyers deduct 1% on a purchase from an NRI because their broker told them that's “the TDS on property.” The income tax department then treats the buyer as an assessee-in-default for the shortfall, with interest. So this one rule burns both sides: sellers lose liquidity when it's applied correctly, buyers inherit a tax liability when it isn't. If either party to your deal is an NRI, residential status is the first question, not a footnote.
The fix: a lower-deduction certificate, filed before the deed
The escape hatch is Section 197. The NRI seller applies to the income tax department (Form 13, filed online) for a certificate directing the buyer to deduct tax on the actual computed gain instead of the gross price. In my client's case, that certificate would have brought the withholding from ₹21.7L down to roughly ₹11L — money in hand at the sale table instead of stuck for a year. It typically takes a few weeks to a couple of months to come through, which is exactly why it fails in practice: sellers hear about it during the final paperwork, when nobody wants to delay the deed, and they eat the excess deduction instead. If a sale is even three months away, the Form 13 application should already be in.
Getting the money out — the actual FEMA leg
Then comes moving the proceeds abroad, which is where FEMA proper takes over. Sale proceeds of a property bought with rupee funds land in an NRO account, and repatriation from NRO is capped at USD 1 million per financial year, with a chartered accountant's certification (Form 15CB) and the seller's Form 15CA filed before the bank remits. My client's ₹1.45 crore fit under the cap in one year; on larger sales, the remittance gets split across financial years — something to plan for, not discover at the bank counter. And one adjacent FEMA rule worth stating flatly because it comes up constantly: NRIs cannot purchase agricultural land, plantation property, or a farmhouse in India. Inheriting it is fine; buying it is not, whatever a local broker suggests.
The pattern across every NRI property case we handle is the same: none of these rules is obscure, but each one has a deadline that expires before most people learn it exists. The Form 13 only helps before the deed. The 15CB only matters when you already know the repatriation cap. Sequencing is the whole game, and it's the first thing we map in an NRI real estate engagement — before a buyer is even in the picture.
This is a general account of a real, anonymised case for educational purposes and isn't a substitute for professional advice. Tax rates, surcharge thresholds, and FEMA limits change — the figures here reflect rules at the time of writing, and any actual NRI sale should be run past a chartered accountant before the deed is signed.