NRI Selling Property In India? The Sale Deed Is Registered — So Why Is Your Money Still Stuck?

NRI Selling Property in India? The Sale Deed Is Registered — So Why Is Your Money Still Stuck?

Picture this: you live in Dubai, the US, or the UK. Your property in India sells, the sale deed gets registered — and then the buyer withholds a large chunk of the amount as TDS, and the bank refuses to send the remaining proceeds abroad without further paperwork.

This scenario plays out often enough that it's worth breaking down properly. An NRI property sale runs across four separate tracks that all need attention: Title/Legal, Tax, the Buyer's TDS obligation, and FEMA/Repatriation. Here are eight of the most common mistakes NRIs make across these tracks — and what to do instead.

Mistake 1: Assuming TDS Works Like It Does for Resident Sellers

Buyers often assume they only need to deduct 1% TDS, the way it works for a resident seller. That's incorrect. For an NRI seller, the applicable provision is Section 195, and the actual rate depends on the nature of the gain, applicable surcharge, cess, and any DTAA benefit or certificate in place — it isn't a flat percentage. Compute it properly rather than assuming; get this done by a CA before registration, not after.

Mistake 2: Not Applying for a Lower or Nil Deduction Certificate

Without this certificate, TDS often gets withheld on a much higher base than your actual tax liability — sometimes on the entire sale consideration rather than just the taxable gain. TDS is a credit, not your final tax. On an illustrative ?1 crore transaction with an estimated tax liability of roughly ?8 lakh, if TDS gets withheld on the full consideration rather than the actual gain, a significantly larger amount can get blocked than what you actually owe — money that only comes back to you after filing a return and claiming a refund. Applying for a lower or nil deduction certificate in advance avoids this large, avoidable holdup.

Mistake 3: Treating Capital Gains as a Guess, Not a Computation

Capital gains aren't estimated — they're computed, based on the holding period, cost of acquisition, cost of improvement, and transfer expenses. Sale consideration minus these components gives you the capital gain, and whether it's classified as long-term or short-term depends on the holding period, which changes the applicable rate. Skipping this computation and guessing at a number is where many disputes with the tax department originate later.

Mistake 4: Getting Inherited Property Wrong

For inherited property, the previous owner's cost of acquisition and holding period are generally relevant when computing your capital gain — not a fresh cost basis starting from when you inherited it. This is subject to current law and the specific facts of your case, so it's worth confirming rather than assuming a rule that may not apply to your situation.

Mistake 5: Overlooking the Stamp Duty Value

The stamp duty value assigned to a property can be higher than the actual agreement value — and that stamp duty value may be the figure used to compute your capital gain, not the price you actually agreed to. This can catch sellers off guard if they haven't checked it before finalising the transaction, and the exact treatment depends on applicable tolerance limits under the law.

Mistake 6: Assuming Tax Paid Means Money Sent

Sale proceeds first land in your NRO account in India — moving them overseas isn't automatic. The bank independently verifies compliance before releasing funds for remittance, regardless of whether your taxes are settled. Routes like the well-known facility allowing remittance of funds (subject to applicable limits and conditions) exist, but the specific conditions should always be verified directly with your Authorised Dealer (AD) Bank — the bank licensed to handle foreign exchange transactions — rather than assumed. Tax paid does not automatically mean money sent; repatriation is a separate, verified process.

Mistake 7: Not Keeping the Right Documentation for Remittance

Banks typically require documentation — historically Form 15CA/15CB or their current renamed equivalents — to process the remittance and report it correctly. The exact form names should be confirmed for the relevant year, since these requirements get updated. The broader point: banks need documentary proof of tax compliance, not just an assurance that "everything is settled."

Mistake 8: Assuming Registration Is the End of the Process

TDS deducted at the time of sale is a credit against your final tax liability — it isn't the final tax itself. The only way to get any excess amount refunded is to file your ITR. Registration of the sale deed is a milestone, not the finish line.

A Note on Power of Attorney

If you're using a POA to manage the sale from abroad, be deliberate about its scope. A broad, perpetual POA is risky — a POA should be built for convenience, not function as a blank cheque. Watch for red flags like self-dealing clauses, no defined validity period, no clause directing proceeds back to the owner, or unnecessarily broad and perpetual scope. Keep it specific, time-bound, and reviewed by a professional.

A Simple Three-Stage Checklist

Organise your preparation into three stages: before the advance is accepted (verify title, plan the tax computation, and check the TDS approach), at agreement and registration (confirm the correct TDS rate, apply for a lower/nil deduction certificate if applicable, and verify stamp duty value against agreement value), and after registration (file your ITR to claim any refund, gather remittance documentation, and coordinate with your AD Bank before initiating the transfer abroad).

In Summary

An NRI property sale in India isn't a single transaction — it's four parallel processes (title, tax, TDS, and repatriation) that all need to be reviewed together, ideally before you sign the sale agreement. Sorting out the tax computation, the TDS certificate, and the remittance documentation in advance is what determines whether your proceeds move smoothly to your overseas account, or sit blocked for months while you sort it out after the fact.

Disclaimer: This article is for general educational purposes only and does not constitute personalised legal or tax advice. Figures and scenarios mentioned are illustrative only. Rules around TDS, capital gains, stamp duty value, and repatriation are subject to current law and your specific facts — please consult a qualified Chartered Accountant before entering into or completing a property transaction as an NRI.

CA Dhiraj Ostwal & Associates — NRI Services Desk FC Road, Shivajinagar, Pune – 411004 ? +91-70200 45454 | ? www.cadhirajostwal.com | ? dhiraj@cadhirajostwal.com