Selling property in India as an NRI can be a stressful process due to the high TDS (Tax Deducted at Source) rates, which can go up to 14.95% or even 30%. However, in 2026, there are several legal ways to reduce this burden. By understanding Section 197 for lower TDS and Section 54F for tax-free reinvestment, you can protect your hard-earned money. This guide explains how you can save your tax and why reinvesting in growth hubs like Dholera SIR is the most profitable exit strategy for NRIs today.
NRI Investment in India: Understanding the TDS on Sale of Property
When a resident Indian sells a property, the TDS is a simple 1%. But for an NRI, the rules are different and much stricter. The Income Tax Department requires the buyer to deduct TDS on the total sale consideration, not just the profit.
- Long-Term Capital Gains (LTCG): If you sell your property after holding it for more than 24 months, the effective TDS rate is 12.5% (as per the latest 2026 rules).
- Short-Term Capital Gains (STCG): If you sell within 24 months, the TDS is deducted according to your income tax slab, which can be as high as 30% plus surcharge.
This high deduction often creates a liquidity crunch for NRIs. For example, if you sell a property for ₹1 Crore, the buyer might deduct ₹13-15 Lakhs as TDS, even if your actual profit is only ₹5 Lakhs.
How to Save TDS: The Lower Deduction Certificate (Section 197)
The best way to avoid having your funds blocked for a long time is to apply for a Lower or Nil TDS Certificate under Section 197 (using Form 13).
- Why apply? It allows the buyer to deduct TDS only on the actual capital gains rather than the full sale price.
- The Process: You must apply online on the TRACES portal at least 30–40 days before the sale.
- Required Documents: You will need the Sale Agreement, PAN Card, Passport, and proof of property purchase.
By obtaining this certificate, an NRI can save significant cash flow and avoid waiting for a year to get a tax refund from the government.
Reinvesting for Zero Tax: Why Dholera SIR is the Smartest Pick
Once you sell your property, the next big question is: “How do I save the Capital Gains Tax?”
Under Section 54F, if an NRI sells any capital asset (like a plot or commercial land) and reinvests the net proceeds in a residential house property in India, they can claim a full tax exemption.
This is where Dholera SIR (Special Investment Region) becomes the perfect destination for NRIs.
- Capital Growth Potential: While prices in cities like Mumbai or Bangalore are saturated, Dholera is at its early-stage pricing. With the Dholera International Airport and the Tata Semiconductor Plant nearing completion in 2026, land prices are expected to jump significantly.
- Safety & Transparency: Dholera is a government-notified smart city. Every plot is RERA-approved with a “Clear Title,” making it 100% safe for NRIs who cannot visit India frequently.
- High Yield Strategy: As I have discussed in my book “Building Bharat,” reinvesting your old property gains into Dholera’s residential zones ensures you catch the next big wave of Indian infrastructure.
Repatriation: Moving Your Money Back Abroad
After paying your taxes and completing the sale, you might want to move your money to your foreign bank account in the USA, UAE, or UK.
- FEMA Guidelines: NRIs can repatriate up to USD 1 Million per financial year from their NRO account.
- Form 15CA & 15CB: You will need these forms certified by a Chartered Accountant to prove that all taxes (including TDS) have been paid.
By choosing to reinvest in Dholera, you are not just saving tax; you are placing your money in a liquid and high-growth asset that will be much easier to repatriate or resell in the future due to its world-class planning.
Conclusion
TDS on the sale of property by NRIs doesn’t have to be a loss. With the right planning and a Lower TDS Certificate, you can keep more of your money today. And by reinvesting those gains into the future of India—Dholera SIR—you ensure that your legacy grows at a rate that traditional markets simply cannot match.
FAQ
How can I save the 20% TDS when selling my old property in India?
To avoid the heavy 20.8% TDS on the total sale value, you should apply for a “Lower Tax Deduction Certificate” (Form 13) from the Income Tax Department. Once you get this certificate, you can reinvest that money into high-growth areas like Dholera SIR. By reinvesting in a residential plot in Dholera under Section 54F, you can effectively reduce your total capital gains tax to zero.
Is the TDS rule different for buying a plot in a Smart City like Dholera?
No, the TDS rules are uniform across India, but the benefit of Dholera is its “Legal Transparency.” Since most projects in Dholera are RERA-approved and have clear titles, your tax documentation becomes very simple. For NRIs, this means faster processing of tax refunds and a hassle-free experience with the Income Tax Department.
Can I reinvest my sale proceeds from a commercial property into Dholera?
Yes! Under Section 54F, if you sell any asset (like a shop, shares, or old land) and reinvest the money in a residential house or plot in Dholera SIR, you get tax exemptions. Given Dholera’s upcoming International Airport and Industrial Hub, your reinvestment will not only save you tax today but also provide multi-fold appreciation in the future.
