Selling a plot in Kerala as an NRI: what tax applies?
Draft: not yet reviewed by a CA.
An NRI selling Indian property pays capital gains tax on the profit, but the buyer usually deducts TDS on the whole sale price. That can be far more than the tax you owe. Applying for a lower-deduction certificate before the sale, or claiming a refund after it, avoids locking up that money.
Why is TDS so high for NRIs?
When a resident sells, the buyer deducts 1% of the price, if it is ₹50 lakh or more. When an NRI sells, the buyer generally deducts at the capital gains rate, plus surcharge and cess, on the whole price unless the tax department says otherwise.
Example
On a plot held for years and sold for ₹40,00,000, TDS at 12.5% plus cess comes to ₹5,20,000. If your real gain is ₹5,00,000, the tax is far smaller. The rest comes back only as a refund, after you file.
See your figure with the TDS on property calculator.
What can you do about it?
Apply to the tax department for a lower-deduction certificate before the sale. This takes time, so start early. Otherwise, file a return after the sale and claim the refund.
How is the actual gain worked out?
Sale price less what you paid and your sale costs. Held for over 24 months, it is long term, at 12.5%. Some reinvestment exemptions may reduce it. The capital gains calculator gives a first estimate.
What should the buyer know?
They need a TAN to deposit the TDS, and they must file a TDS return. Agree this with them early, because it often delays the sale.
Estimate for planning, not tax advice.