Lower TDS Certificate for NRI Property Sale 2026: Form 128, Online Process & Documents 

The Indian Income Tax Department is moving towards making Lower and Nil TDS Certificates fully online, a move that could be particularly beneficial for NRIs selling property in India in 2026. Selling a house or flat in India while you’re living abroad sounds simple on paper — find a buyer, sign the papers, get your money. Then comes the term TDS (Tax deducted at Source) that disappears a big chunk of the sale amount from your deal before it even reaches you. 

A Lower TDS Certificate can help bring the deduction closer to the estimated tax liability, allowing the NRI to retain more of the sale proceeds instead of waiting for a refund after filing the tax return.

There is also an important 2026 change to understand. Under the Income Tax Act, 2025, Form 128 replaces the earlier Form 13 framework for applications seeking lower or nil deduction of tax.

In this guide, we’ll explain the Lower TDS Certificate for NRI Property Sale in 2026, how Form 128 works, the new online process, eligibility requirements, documents needed, and what NRIs should know before selling property in India.

What Is a Lower TDS Certificate for an NRI Property Sale?

A Lower TDS Certificate allows an eligible NRI selling property in India to have tax deducted at a lower rate than the otherwise applicable rate. In certain cases, a Nil TDS Certificate may also allow no TDS to be deducted on the specified payment.

The certificate is useful when the NRI’s actual estimated tax liability is lower than the amount that could otherwise be deducted as TDS. It can help reduce the amount of sale proceeds blocked as TDS and improve cash flow during the property sale.

For 2026, applications for lower or nil deduction are made through Form 128 under the Income Tax Act, 2025.

Why Do NRIs Need a Lower TDS Certificate When Selling Property in India?

When a Resident Indian sells property, the buyer deducts just 1% TDS on the sale amount. But when an NRI sells property, tax rules require the buyer to deduct heavy TDS (up to 20% + surcharge) on the total sale price—not just on the profit made.

This causes two major issues for NRIs:

• Massive Cash Flow Blockage: A huge portion of your total sale money gets blocked with the Income Tax Department for months.
• Overpaying Tax Upfront: Even if your actual profit is small (or zero), you are forced to pay tax on the full property value.

How does Lower TDS Certificates provide Relief to NRIs here:

This is where a Lower TDS Certificate (Form 128) becomes especially beneficial for NRIs, as it enables the Assessing Officer (AO) to determine the tax on your actual capital gains (profit) at 12.5%, rather than on the entire sale consideration.

In short: It prevents lakhs of rupees from being needlessly trapped with the government and gives you full access to your funds right at the time of property registration.

Let our experts help you understand your Lower TDS Certificate options.

Lower TDS Certificate for NRI Property Sale: What Changed in 2026?

Here are the 3 Major Changes in 2026 for NRI Property Sales:

1. Form 13 Replaced by Form 128:
   • Applications for Lower/Nil TDS Certificates under Section 395 now use Form 128 on the TRACES portal (replacing the old Form 13).
   • Submission strictly requires a Digital Signature Certificate (DSC) or Net Banking.
2. PAN instead of TAN:
   • Until Sept 30, 2026: Resident buyers still need a TAN (Tax Deduction and Collection Account Number) to deduct and deposit TDS.
   • From Oct 1, 2026 Onward: The TAN requirement is completely eliminated; buyers can deduct TDS using a simple PAN-based system.
3. Tax Rates & Capital Gains Impact:
   • Without Certificate: The buyer must deduct TDS at 20% (+ surcharge/cess) on the total sale price.
   • With Form 128 Certificate: Tax is calculated only on your actual profit at the revised Long-Term Capital Gains (LTCG) rate of 12.5%.

Form 128 for NRIs: What Is It and Who Can Apply?

Many people are confused about what exactly is Form 128, can NRIs apply for it, and if yes then when should you request for the form. Let’s one by one get the answer to each question related to newly introduced Form 128. 

What is Form 128? 

It’s the application you file to request a certificate authorizing your buyer (or any payer) to deduct TDS at a lower rate — or not deduct it at all — under Section 395(1)/395(3) of the Income-tax Act, 2025.

Can non-residents apply? 

Absolutely Yes, NRIs are permitted to apply for this application form seeking a lower or nil deductions certificate on the sale of property in India. There’s no separate NRI-only version. 

Who is eligible? 

Anyone — individual, HUF, company, or otherwise — whose actual expected tax liability for the year is lower than the TDS that would normally be deducted. For property sales, that usually means your real capital gains tax is lower than what a flat-rate TDS deduction on the full sale price would come to.

When can an NRI apply for Form 128?

An NRI must apply for Form 128 after executing the Agreement to Sell (MOU), but before the buyer actually pays the money or completes the property registration.

Why? Once tax is deducted and deposited by the buyer, Form 128 cannot be applied retroactively to previous payments.

Who approves it? 

The Assessing Officer (AO) is the one who reviews & approves your Form 128 application and the supporting documents required. The officer either issues the certificate at a specific TDS rate, issues a nil-deduction certificate, or may also reject your request if not satisfied with your computation. 

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How Does TDS Work When an NRI Sells Property in India?

Here’s a simple understanding of how the TDS works when any NRI sells their property in India.

4 Step Process of how this works:

• Rule: When an NRI sells property in India, the buyer is responsible for deducting TDS from the payment made to the NRI 
• Default Rate: If you do not obtain a specific certificate (i.e., Form 128), the buyer will deduct TDS @20% (Plus surcharges/cess) on the entire sale amount and deposit it to the govt. 
• Form 128 (Lower TDS): Once NRIs apply for the Form 128 after the sale agreement is signed, the TDS is deducted @12.5% that too only on your actual profit (gains) rather than the entire sale amount. This helps you avoid heavy tax burdens. 
• Payment & Certificate: The buyer deducts the TDS, pays you the balance amount, deposits the TDS with the government, and provides you with the TDS certificate.

Also Read: NRIs Home Loan In India: Complete Guide

Lower TDS Certificate vs Normal TDS: What Is the Difference?

Before moving to the section learning how to apply for Form 128, here’s a quick differentiation between Lower TDS Certificate and Normal TDS. 

How to Apply for Form 128 for NRI Property Sale in 2026

NRIs can apply for a Lower or Nil TDS Certificate through Form 128 under the Income Tax Act, 2025. The application should be made before the property transaction/payment on which TDS is applicable is completed.

Step-by-Step Process

1. Log in to TRACES using your taxpayer credentials.
2. Go to e-File → File Forms → Form No. 128.
3. Enter your income, tax liability and payer details.
4. Provide details of the property sale and the expected TDS.
5. Upload the required supporting documents and tax computation.
6. E-verify and submit the application electronically.
7. The Income Tax Department/Assessing Officer will review the application.
8. If approved, the Lower or Nil TDS Certificate can be downloaded and provided to the buyer/payer.

Documents Required for Lower TDS Certificate for NRI Property Sale

Here’s a list of the documents every NRIs should gather before applying for the Form 128 and lower TDS certificates for the sale of property. 

Property documents

• Sale agreement
• Purchase deed
• Previous sale deed (if applicable)
• Details of the original property cost
• Records of any improvement/renovation expenses

Tax documents

• PAN
• Income tax returns (previous years)
• Capital gains computation
• Details of any existing tax demands or liabilities
• TDS details already deducted, if applicable

NRI / KYC documents

• Passport
• Current address and contact details
• Documents confirming your NRI/residential status

Connect with our experts for help with Form 128, documents, and the application process.

How Is the Lower TDS Rate Calculated for an NRI?

Here’s something worth understanding clearly, because a lot of people assume the math is as When you apply for Form 128, the Assessing Officer (AO) calculates the lower TDS rate based on your estimated actual tax liability divided by the total sale consideration.

Here is the exact step-by-step formula and a real-world numerical example.

1. The Calculation Formula

Approved TDS Rate %  =Estimated Tax Payable on Actual Profit / Total Sale Price x 100

2. Real-World Practical Example

Scenario:

• Original Purchase Price (2018): ₹1.20 Crore
• Agreed Sale Price (2026): ₹2.00 Crore
• Property Held: > 24 months (Long-Term Capital Asset)

Step-by-Step Calculation:

1. Calculate Gross Sale Price: ₹2,00,00,000

2. Calculate Purchase Cost: ₹1,20,00,000

3. Calculate Net Profit (Capital Gain):
₹2,00,00,000 – ₹1,20,00,000 = ₹80,00,000

4. Calculate Actual LTCG Tax Payable (at 12.5% rate):
12.5% of ₹80,00,000 =₹10,00,00,00

Adding 4% Health & Education Cess:
₹10,00,000 + ₹40,000 = ₹10,40,000 Total Tax Liability

5. Determine Lower TDS Rate for Form 128 Certificate:
₹10,40,000 / ₹2,00,00,000 x 100 = 5.2%

What difference it makes to NRIs

The Result: The NRI saves ₹35.36 Lakhs from being unnecessarily blocked with the Tax Department, receiving the full money upfront upon registration.

When Should an NRI Apply for Form 128?

• Ideally, well before the buyer makes any payment or credits any amount to you. The certificate has to be in the buyer’s hands before deduction happens — not after.
• Before signing final payment schedules, especially if the deal involves part-payments at different stages.
• Applying at the last minute is risky — processing takes time, and if the sale closes before your certificate comes through, the buyer has no choice but to deduct at the standard rate.
• If TDS has already been deducted at the standard rate, a fresh certificate won’t undo that specific deduction — you’d be looking at a refund route instead (more on that below).

What Happens If TDS Has Already Been Deducted?

• Can the certificate apply retrospectively? No — a lower TDS certificate only affects deductions made after it’s issued and handed to the buyer. It can’t reverse tax already deducted.
• What about the TDS already taken out? It still counts as tax credit in your name, reflected against your PAN.
• Claiming it back: You claim the excess TDS as a refund when you file your Income Tax Return (ITR) for that year.
• Why planning ahead matters more: A refund gets your money back eventually, but a lower TDS certificate gets you more of your money at closing — which usually matters a lot more for NRIs juggling repatriation timelines and currency conversion.

Common Mistakes NRIs Make While Applying for Lower TDS

• Applying too late — after the buyer has already made the payment
• Using outdated “Form 13” or “Section 197” terminology without realizing the framework moved to Form 128 / Section 395(1) from FY 2026-27 onward
• Getting the capital gain calculation wrong — missing eligible cost additions or picking the wrong indexation option
• Missing property documents, which delays or stalls the AO’s review
• Forgetting to account for other taxable income, which can throw off the AO’s overall computation
• Assuming a certificate automatically means zero TDS — nil deduction is only granted in specific situations, not by default
• Mixing up Section 195/393(2) (NRI property TDS) with resident-property provisions like Section 194-IA/Form 26QB, which simply don’t apply to non-resident sellers
• Waiting until the sale registration date to start the paperwork, instead of starting the moment a sale is being seriously negotiated

Conclusion

For NRIs selling property in India, a Lower or Nil TDS Certificate can be a useful way to avoid unnecessary TDS deductions and retain more of the sale proceeds for their financial needs. With the introduction of Form 128 in 2026 and the move toward a more streamlined online application process, it has become increasingly important for NRIs to understand the new requirements and procedures properly. 

If you are planning to sell an Indian property, it is worth checking your estimated tax liability, required documents, and Form 128 eligibility before the sale is completed. Applying at the right time can help you avoid excess TDS and the hassle of waiting for a refund later.

The key is simple: plan the TDS before the property sale, rather than trying to recover excess TDS afterward.