Lower TDS Certificate: Form 13 for NRI Sellers

An NRI selling property in India without applying for a lower deduction certificate first is choosing, whether they realise it or not, to lend the Income Tax Department their own money interest-free for the better part of a year. TDS on an NRI's property sale is withheld on the full sale consideration, not on the actual capital gain, and the gap between those two figures is usually large enough that most NRI sellers end up filing for a refund the following year rather than receiving the correct amount at closing. The certificate that closes this gap has existed for years. What changed is its name.

A buyer purchasing property from an NRI seller is required to withhold tax before paying the seller, and without a certificate specifying otherwise, that withholding is calculated on the entire sale price, at rates that run well above what most sellers' actual tax liability on the gain would be. A lower deduction certificate, issued by the jurisdictional assessing officer, instructs the buyer to withhold at a lower rate, or in some cases none at all, aligned with the seller's real computed liability rather than the default rate applied to the full transaction value. The certificate does not reduce the seller's actual tax bill. It closes the gap between what gets withheld at the point of sale and what the seller genuinely owes, so the money is not locked up with the government for a year awaiting a refund claim.

Under the Income Tax Act, 1961, this certificate was applied for using Form 13, under the authority of Section 197. The Income Tax Act, 2025, effective 1 April 2026, retains the same underlying mechanism but renumbers both: the application is now Form No. 128, filed under Section 395(1), and the new Form 128 also absorbs what used to be several separate older rules governing related lower-deduction and nil-deduction scenarios into one consolidated form. The substance of what the certificate does has not changed. A seller, or an advisor, still working from a guide that mentions Form 13 or Section 197 is describing the same certificate under its retired name, which matters mainly for knowing what to actually type into the income tax portal rather than searching for a form that technically no longer exists under that name.

A certificate already issued under the old Section 197, covering projected receivables for the tax year running from 1 April 2026 to 31 March 2027, does not become invalid simply because the new Act has taken effect partway through that period. A seller who obtained a certificate before the transition, timed correctly, is not required to reapply under the new form purely because the numbering changed underneath them. This detail is easy to miss in a guide that only covers the renumbering itself rather than the transition rules around it.

Take a hypothetical NRI seller disposing of a property for 1.5 crore rupees, with an actual computed long-term capital gain of 40 lakh rupees after accounting for the original cost, numbers chosen only to make the comparison legible rather than a claim about any specific transaction. Without a certificate, TDS is withheld at the higher default rate applicable to a non-resident seller under Section 393(2), calculated on that full 1.5 crore sale price rather than the 40 lakh gain, which can easily withhold an amount well above the seller's actual liability on the gain itself, sometimes several times over. With a certificate correctly computed against the actual 40 lakh gain, the buyer withholds only what corresponds to the real liability, and the seller receives the balance of the sale price at closing rather than waiting a full assessment year to reclaim the difference as a refund. The gap between these two outcomes is not a rounding error; on a transaction of this size it is commonly the difference between receiving most of the sale proceeds immediately and having a meaningful share of them tied up with the department for months.

The application should be filed at the start of the relevant financial year, or well ahead of a specific planned sale, rather than treated as a step that happens alongside the sale agreement itself. Processing takes real time, and a seller who applies for the certificate only after signing a sale agreement is very likely to miss the window before the buyer is contractually obligated to make payment, at which point the buyer defaults to the standard withholding rate regardless of whatever certificate application is still pending. Capital Gains Tax on Selling Land in India: The Complete Guide covers the underlying tax calculation this certificate is meant to align the withholding against, and running that calculation before applying is the only way to know what lower rate to actually request.

The application requires the seller's computation of expected capital gains, supporting documents establishing the original acquisition cost and date, and details of the specific transaction or buyer the certificate is being sought against, since a certificate issued under this section is valid for a specific financial year and, depending on how it is issued, for a specific transaction or deductor rather than as a blanket authorisation covering any future sale. A seller planning more than one disposal in the same year needs to confirm whether a single certificate actually covers all of them or whether a fresh application is needed for each.

Treat the certificate application as a task to complete before a buyer is found, not after a sale agreement is signed, since processing time is the single most common reason sellers end up defaulting to full withholding despite having a legitimate case for a lower rate. Use the correct current names, Form 128 and Section 395(1), when searching the income tax portal or briefing an advisor for any transaction on or after 1 April 2026, while confirming whether an existing older certificate already covers the relevant period before assuming a fresh application is required. Selling Indian Property as an NRI: The End-to-End Process covers where this certificate fits inside the broader sale sequence.

Section 197 and Form 13 were renumbered to Section 395(1) and Form No. 128 respectively under the Income Tax Act, 2025, effective 1 April 2026. Certificates issued under the old Section 197 for projected receivables spanning the 2026-27 tax year remain valid despite the transition.

Funding Your Purchase: Legal Channels to Send Money Home is relevant for an NRI planning to repatriate sale proceeds once the certificate and the sale itself are settled, and Currency Risk When Buying and Holding Property Abroad covers the separate cost of converting those proceeds back to a foreign home currency. TDS on Property Purchase: When and How Much covers the equivalent obligation from a buyer's side of an ordinary, non-NRI transaction, worth reading for the contrast in how differently the two withholding regimes are structured. Due Diligence When Buying Property in Another Country and Residency and Visa Routes Tied to Property Ownership round out the picture for an NRI seller weighing where sale proceeds go next, and Can Foreigners Own Property Abroad? Freehold, Leasehold and Use Rights is worth reading for the same seller weighing a purchase elsewhere against the Indian ownership rules they are exiting.

Whatever the property being sold, Goa, Karjat and Mulshi are worth a look for an NRI seller considering where to redeploy proceeds from an Indian sale.

• Form 13 renumbered to Form 128, Section 197 renumbered to Section 395(1), under the Income Tax Act 2025, effective 1 April 2026
• Certificates issued under old Section 197 for projected 2026-27 receivables remain valid despite the Act's transition
• The lower deduction certificate mechanism and why NRI sellers overpay withholding without it