Selling Property in India as a Canadian NRI: TDS Rules and Repatriation Steps

A guide for Indian NRIs in Canada on navigating Section 195 TDS obligations when selling Indian real estate, applying for a lower TDS certificate, and remitting the proceeds to Canada.

Summary

When an NRI sells property in India, the buyer is required to deduct TDS under Section 195 of the Indian Income Tax Act — not the standard 1% that applies to resident sellers. The rate depends on capital gains type. Knowing how to reduce TDS and repatriate proceeds legally to Canada is essential.

TDS Rates for NRI Property Sales

  • Long-term capital gains (property held >2 years): TDS at 20% (+ surcharge + cess)
  • Short-term capital gains (held <2 years): TDS at applicable income tax slab rate

Note: TDS is deducted on the full sale price, not just the gain. NRIs frequently over-pay TDS and must claim refunds through filing Indian tax returns.

Applying for a Lower TDS Certificate (Form 13)

To reduce TDS to the actual capital gains tax liability (rather than the blanket rate on the gross sale price), apply to the Indian Income Tax officer in your jurisdiction for a Lower Deduction Certificate using Form 13 before closing the transaction. This certificate directs the buyer to deduct TDS only on the actual gain amount.

Capital Gains Tax Calculation

  • Long-term capital gains: Sale price minus indexed cost of acquisition, taxed at 20% with indexation benefit (or 12.5% without, post-Budget 2024 changes — verify current rules).
  • Exemptions: Section 54 exemption if proceeds are reinvested in another residential property in India. Section 54EC: Invest in NHAI/RECL bonds within 6 months to defer tax.

Repatriating Sale Proceeds to Canada

  1. File your Indian income tax return for the year of sale.
  2. Obtain Form 15CA and 15CB (Chartered Accountant certificate) for the repatriation amount.
  3. Submit to your Indian bank with the RBI Purpose Code (P1302 for property proceeds).
  4. Transfer from NRO account to NRE account, then wire to Canada.
  5. Limit: Up to USD $1 million per financial year per NRI.

Common Mistakes Indians Make

  • Allowing the buyer to deduct TDS on the full sale price without applying for a lower deduction certificate — often results in excessive TDS.
  • Not filing an Indian income tax return after the sale, losing the ability to claim refunds on excess TDS.
  • Missing the Section 54/54EC reinvestment deadline and losing capital gains exemptions.
  • Repatriating without filing Form 15CA/15CB, causing bank rejections.

Official Resources

  • Income Tax India (Form 13, Form 15CA/15CB): incometax.gov.in
  • RBI NRI Repatriation: rbi.org.in
  • NHAI Capital Gains Bonds: nhai.gov.in