AskNRIGuru

Lower TDS certificate for NRI property sellers: how to apply on Form 128 (old Form 13)

By Updated

In short

  • Without a certificate, the buyer deducts up to 14.95% of the full sale price on a long-term sale, even if your gain is small.
  • Form 128 replaced Form 13 from 1 April 2026 and is filed online on TRACES under Section 395(1) of the Income-tax Act, 2025 (old Section 197).
  • There is no statutory processing deadline; practitioners report 2 to 8 weeks, so apply 30 to 60 days before the sale.
  • A certificate cannot be issued once the payment has been made, so it must be in hand before the buyer pays.

A lower TDS certificate lets your buyer deduct tax based on your real capital gain, not the full sale price. NRIs apply on Form 128, which replaced the old Form 13 from 1 April 2026. You file it online on the TRACES portal, and the certificate must be issued before the buyer makes the payment.

Why the certificate matters

When you sell as an NRI, the buyer deducts TDS under Section 393(2) of the Income-tax Act, 2025 (Section 195 of the 1961 Act). The deduction applies to the entire amount paid, with no threshold.

On a long-term sale above Rs 1 crore, that is 14.95% of the price, including surcharge and cess. Your actual tax is 12.5% of the gain plus surcharge and cess. When the gain is a small slice of the price, the gap can run into lakhs.

Without a certificate, you get the excess back only as a refund. That happens only after you file your return. For a sale in late 2026, the return is due by 31 July 2027. A certificate keeps that money with you from the day of sale.

Lower or nil TDS certificates are now issued under Section 395(1) of the 2025 Act (Section 197 of the 1961 Act). The supporting rule is Rule 213 of the Income-tax Rules, 2026.

The application form is Form 128. Its title covers lower or nil deduction and lower collection of tax. Form 13 applies only to applications under the old law.

Under Rule 213, the Assessing Officer looks at your estimated income and your tax record for the previous four years. Outstanding demands and tax already paid also count.

Who applies

The seller applies, not the buyer. Form 128 is open to both residents and non-residents, so an NRI seller is fully eligible.

You need a PAN. The form cannot be submitted without one. If you are one of several co-owners, each seller applies for their own share.

The buyer cannot apply on your behalf. However, the buyer’s details go into your application, so agree on who will pay, and in what instalments, before you file. If a second buyer joins later, the certificate may not cover their payment.

What to prepare

The official FAQs ask for a computation of your estimated total income and tax for the year. You must also give a computation for any of the previous four years in which you did not file a return.

For a property sale, practitioners typically assemble:

  • PAN, passport and visa or OCI details
  • Purchase deed, with proof of the price you paid
  • Bills for improvements, if you are claiming them
  • Sale agreement or draft, with the agreed price and payment schedule
  • Stamp duty value of the property
  • Buyer’s name, PAN and, where applicable, TAN
  • Proof of any exemption you plan to claim, such as a booking for a new house or bond investment
  • Past Indian returns, and your annual tax statement (Form 168, old Form 26AS)
  • A capital gains computation, ideally prepared by a chartered accountant

How to file on TRACES

  1. Register or log in as a taxpayer on TRACES (tdscpc.gov.in) using your PAN.
  2. Go to the e-file menu and choose Form 128.
  3. Fill in the online form: your details, the type of request, your income and tax position, and the deductor annexure.
  4. Upload the supporting documents and computation.
  5. E-verify and submit. You will get an Acknowledgment Receipt Number (ARN).
  6. Answer any queries from the Assessing Officer, who may ask for revised figures or more proof.
  7. Download the certificate from the TRACES dashboard once it is issued, and send it to the buyer.

Offline filing is not allowed. You can withdraw an application until it is processed. You can also file again in the same year if your estimates change.

Timelines

There is no fixed statutory period for processing a Form 128 application. Practitioners report 2 to 8 weeks, depending on the jurisdiction, the quality of documents and any queries.

The safest plan is to file 30 to 60 days before the expected payment date. The official FAQs are clear that an application cannot be processed once the transaction is complete. If you sign and receive payment first, you lose the chance.

If the buyer pays in instalments, the certificate covers only the payments, period and amount it specifies. Instalments outside those limits get full TDS.

How the buyer uses the certificate

The certificate states a rate, a validity period, the payments it covers and an upper amount. The buyer applies that rate instead of the normal rate, but only within those limits. The buyer can verify the certificate on TRACES.

The buyer then quotes the certificate details in the TDS filing:

  • Resident individual or HUF buyers from 1 October 2026 use Form 141 with Schedule E. CBDT Notification 121/2026 added a field there for lower or nil deduction certificate details.
  • Other buyers, such as companies, use their TAN and report in the quarterly statement Form 144 (old Form 27Q).

Make sure the buyer named on the certificate is the one who actually pays. A certificate issued for one deductor does not cover another.

Worked example: with and without a certificate

Rahul lives in Dubai. He bought a flat in Bengaluru in 2012 for Rs 1,10,00,000. He sells it in December 2026 for Rs 1,80,00,000 and pays Rs 1,80,000 in brokerage. He has no other Indian income.

His actual tax

  • Capital gain: Rs 1,80,00,000 − Rs 1,10,00,000 − Rs 1,80,000 = Rs 68,20,000
  • Tax at 12.5%: Rs 8,52,500
  • Surcharge at 10%: Rs 85,250
  • Cess at 4% on Rs 9,37,750: Rs 37,510
  • Total tax: Rs 9,75,260

Without a certificate

  • TDS: Rs 1,80,00,000 × 14.95% = Rs 26,91,000
  • Excess over actual tax: Rs 26,91,000 − Rs 9,75,260 = Rs 17,15,740, recovered only through a refund

With a certificate

Suppose the Assessing Officer accepts his computation and certifies a rate of 5.42% on payments up to Rs 1,80,00,000. That rate is his tax divided by the price.

  • TDS: Rs 1,80,00,000 × 5.42% = Rs 9,75,600
  • Excess over actual tax: Rs 340
Without certificate With certificate
TDS deducted Rs 26,91,000 Rs 9,75,600
Actual tax Rs 9,75,260 Rs 9,75,260
Money locked until refund Rs 17,15,740 Rs 340

The rate in a real certificate is the officer’s decision and may differ from your own working. If Rahul planned to reinvest in a new house or bonds, he could ask for that to be reflected too, with supporting proof.

Common mistakes

  • Applying after the agreement is executed and payment has started. A certificate cannot cover payments already made.
  • Giving the buyer an unverified PDF. The buyer should check the certificate on TRACES and apply only the rate stated.
  • Mismatch in buyer details. A certificate tied to one deductor does not help if a different person pays.
  • Ignoring instalments. Payments outside the certificate’s period or amount attract full TDS.
  • Overstating the cost. Unsupported improvement claims invite queries and delay.
  • Skipping the return. A certificate reduces TDS; it does not replace filing. You still file for the tax year and pay any shortfall.

For a sale with multiple owners, inherited property or planned exemptions, a chartered accountant’s computation usually speeds up the officer’s review.

What to do next

Sources

This guide explains the rules as they stood on 25 October 2026. It is general information, not tax, legal or financial advice. Rules change, and individual cases have exceptions, so confirm your position with a chartered accountant before acting. Spotted an error? Tell us and we will correct it.