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Meta Description: A step-by-step 2026 guide for NRIs applying for a Lower TDS Certificate (Form 128) on property sales, covering documents, timeline, and mistakes.
An NRI sells a property for ₹2 crore, with an actual capital gain of just ₹10 lakh, sometimes even fully exempt through reinvestment. Without planning ahead, the buyer still ends up deducting TDS on the full ₹2 crore, not the ₹10 lakh gain. That's not a bank error or a mistake by the buyer, it's exactly what the law requires unless the NRI takes one specific step beforehand.
Under Section 195, buyers purchasing property from an NRI seller must deduct TDS on the entire sale consideration, at rates that can run to roughly 12.5–14.95% for long-term gains or 30%+ for short-term ones. This is structurally different from a resident seller, where TDS applies at just 1% on the sale price. The reasoning is administrative: the tax department has no easy way to verify the seller's actual profit at the point of sale, so it defaults to withholding against the full amount and lets the seller reclaim any excess later. This is exactly the "genuine hardship" that a Lower TDS Certificate exists to resolve, letting the AO authorize deduction only on the real gain instead.
If you've researched this before, you may know it as Form 13 under Section 197 of the Income-tax Act, 1961. As of 1 April 2026, this has been replaced by Form 128 under Section 395(1) of the Income-tax Act, 2025. It's the same mechanism with a new form number and section reference — older content referencing Form 13 applies to transactions processed before this date.
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