NRI Taxation and Compliance (Part 8): TDS under Section 195, Lower Deduction Certificate and Forms 15CA/15CB
TDS on payments to NRIs, property sale TDS on full consideration, lower deduction certificate, Form 27Q, 15CA/15CB and treaty benefit with TRC and Form 10F.
A Hyderabad buyer agrees to purchase a flat from an NRI seller for Rs 1.2 crore. The bank says “deduct TDS on the full price”. The seller says “I only have gain on Rs 30 lakh”. Who is right, and how does the seller send the balance abroad?
- Part 1: Residential status
- Part 2: Income taxation
- Part 3: Property
- Part 4: Banking and investments
- Part 5: Returning to India
- Part 6: Investing in Indian businesses
- Part 7: Gifts, inheritance and succession
- Part 8: TDS, Section 195 and Forms 15CA/15CB (you are here)
- Part 9: Return filing, refunds and notices
1. Section 195 in one table
| Point | Position (confirm section numbers under the Income-tax Act, 2025) |
|---|---|
| Who deducts | Any person paying to a non-resident (or a foreign company) any sum chargeable to tax in India, other than salary |
| When | At the time of credit or payment, whichever is earlier |
| Rate | Rates in force or treaty rate, plus surcharge and cess |
| Registration | TAN of the deductor is mandatory; PAN of the payee or a higher rate applies |
| Deposit and return | Deposit by the 7th of next month; quarterly statement in Form 27Q; certificate to the payee |
| Default | Deductor is treated as an assessee in default: tax, interest and penalty; expense may be disallowed |
2. Typical TDS rates for payments to NRIs (indicative)
| Payment | Typical TDS |
|---|---|
| Long-term capital gain on property or unlisted shares | 12.5% plus surcharge and cess on the gain (confirm) |
| Short-term capital gain on property | Slab or applicable rate; 30% where the payer cannot compute (confirm) |
| Long-term capital gain on listed equity | 12.5% above the exemption limit (confirm TDS treatment) |
| Short-term capital gain on listed equity | 20% |
| Rent to an NRI landlord | 30% plus surcharge and cess |
| Interest on NRO account | 30% unless reduced by treaty |
| Dividend | 20% unless treaty rate applies |
| Professional or technical fees | Rate in force or treaty rate (confirm) |
3. Lower or nil deduction certificate
- Apply when: the real tax on the gain is much lower than TDS on the full price, or the payment is not taxable.
- How: application to the Assessing Officer (TDS) on the income tax portal with the sale agreement, cost proof, computation of gain and the seller’s PAN.
- Result: certificate with the rate or amount at which the buyer may deduct tax.
- Timing: apply before registration or payment. Fix the agreement so that payment depends on the certificate (confirm current form and process).
ComplianceKart computes the correct TDS, applies for the lower deduction certificate, files Form 27Q and issues the 15CA and 15CB. See our NRI tax and FEMA service.
4. Forms 15CA and 15CB for remittance abroad
| Part | When used (confirm current thresholds and form numbers) |
|---|---|
| 15CA Part A | Taxable payment up to Rs 5 lakh in a financial year, filled by the remitter |
| 15CA Part B | Taxable payment above Rs 5 lakh with a lower deduction certificate or order |
| 15CA Part C | Taxable payment above Rs 5 lakh with a Chartered Accountant certificate in 15CB |
| 15CA Part D | Payment not chargeable to tax, or covered by the exemption list under Rule 37BB |
| 15CB | Certificate by a Chartered Accountant: nature of remittance, taxability, DTAA benefit and TDS rate |
The forms may be renumbered under the Income-tax Rules, 2026, so check the portal for the current form numbers. The AD bank also needs the usual FEMA declarations, supporting documents and proof of tax paid.
5. Treaty benefit: TRC and Form 10F
To claim the lower treaty rate, the NRI gives the payer a Tax Residency Certificate from the country of residence, the Form 10F particulars and a no-permanent-establishment declaration where relevant. Without these, the payer must deduct at the domestic rate. Check the specific treaty article (dividend, interest, capital gains) and any limitation-of-benefit clause.
6. Mistakes in practice
- Buyer deducts nothing on a property purchase from an NRI.
- Buyer deducts on the full price when a lower certificate was possible.
- No TAN, so the deduction cannot be deposited.
- Missing Form 27Q or wrong PAN, so the seller loses credit.
- Remittance abroad without 15CB or with wrong tax classification.
- No TRC, so treaty rate is denied.
Why work with ComplianceKart
ComplianceKart is a boutique practice bringing Chartered Accountants, Company Secretaries and advocates under one roof. Think of a multi-speciality hospital: the physician, the radiologist and the pharmacist read from one patient file, so you never carry reports between buildings. One property or payment can trigger income tax, FEMA and registration issues at the same time. A multi-disciplinary team coordinates all three.
Frequently Asked Questions
Do I deduct TDS on payments to an NRI for property?
Yes, under Section 195, on the full consideration unless a lower deduction certificate is obtained.
Who files Form 15CB?
A Chartered Accountant on the basis of documents and the tax computation.
Is 15CA needed for every remittance?
Not for all; some payments are exempt under Rule 37BB. Check the list before filing.
Can the NRI claim treaty benefit?
Yes, with a TRC and Form 10F, subject to treaty conditions.
What if TDS was short deducted?
The deductor faces interest and penalty, and the NRI may need to pay the balance tax.
Sources
- Income-tax Act, 1961, sections 195, 197 and 90 / Income-tax Act, 2025 (corresponding sections, confirm)
- Income-tax Rules (Rule 37BB, Forms 15CA, 15CB, 27Q, 10F) and the Income-tax Rules, 2026 (confirm renumbering)
- FEMA (Current Account Transactions) Rules, 2000 and RBI Master Direction on Remittances
Ready to act? Start with our NRI tax and FEMA service, check pricing, or contact us.
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Educational article, last updated 11 November 2026. General information, not advice on a specific case. Laws and due dates change; confirm on the date you act. Items marked (confirm) came from secondary sources and need checking against the official text.
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