Lower TDS Certificate (Form 128, formerly Form 13) for NRIs (2026): Property Sales & Rent

The problem: TDS on the gross amount

When a resident buys property from a resident, the buyer deducts just 1% TDS. When the seller is an NRI, the buyer must deduct TDS under the rules for payments to non-residents (formerly section 195), and must do it on the full sale price, not the profit. For a long-term sale, the rate is 12.5% plus surcharge and 4% cess, which is 13% for most sales and up to about 14.95% for large ones.

If you bought a flat for ₹80 lakh and sell it for ₹1.2 crore, your real long-term gain is ₹40 lakh and your actual tax is about ₹5.2 lakh. But the buyer will deduct around ₹17.9 lakh. You get the difference back only after filing your return and waiting for a refund, often 12–18 months later.

What Form 128 (formerly Form 13) does

Under the Income-tax Act 2025 and Income-tax Rules 2026, Form 128 replaces the legacy Form 13. It is an electronic application on TRACES to your Assessing Officer (AO) for a certificate authorising the payer to deduct tax at a lower rate, or not at all, under section 395. The AO estimates your actual tax liability for the year, considering the cost of acquisition, improvement costs, exemptions under sections 54 or 54EC and any losses, and issues a certificate stating the rate. The buyer or tenant then deducts at that lower rate.

• The certificate is specific to the payer (buyer or tenant) and the transaction.
• It is valid for the financial year in which it is issued, or for the specific transaction.
• The buyer verifies it on TRACES before applying the lower rate.
• If the sale happens before the certificate is issued, the full rate applies.

Documents you need

1. PAN of the seller with non-resident status updated.
2. PAN of the buyer(s) or tenant(s).
3. Passport and visa or OCI card.
4. Purchase deed and proof of payment (bank statements).
5. Agreement to sell or MoU with the buyer showing sale price and payment schedule.
6. Proof of improvement costs, if any.
7. Capital gains computation prepared by a CA.
8. Details of exemption plans: new property booking for section 54 or bond application for 54EC.
9. Last three years' ITR acknowledgements, if filed.
10. For rent: rent agreement and the tenant's details.

How to apply on TRACES

1. Register on the TRACES portal (tdscpc.gov.in) as a taxpayer using your PAN.
2. Go to Statements/Forms and select Request for Form 128.
3. Fill estimated income for the year, details of the payer, nature of payment and amount.
4. Upload the documents as PDFs.
5. Submit with a digital signature or electronic verification.
6. The application is routed to your jurisdictional AO (often the international taxation ward).
7. Respond to any notice or query through the portal quickly.
8. Download the certificate once issued and share it with the buyer.

Common mistakes

• Applying after the sale deed is registered: the certificate cannot apply retrospectively.
• Not updating PAN residential status, which causes the application to be routed to the wrong officer.
• Missing buyer PANs, especially when there are multiple buyers.
• Forgetting to include the advance received when calculating TDS amounts.
• Assuming one certificate covers all buyers; each payer needs to be listed.

Even with a certificate, you must file ITR-2 for the year to report the gain and claim any exemption.

Using Form 128 for rent

NRI landlords receiving rent above modest amounts face TDS at 31.2% on gross rent. Since 30% of rent is deductible as a standard deduction and municipal taxes are also deductible, the actual tax is usually much lower. A Form 128 certificate tells the tenant to deduct at a lower rate for the year. Apply each year before April so the tenant can apply it from the first payment.

Corporate tenants are generally comfortable with certificates. Individual tenants may need you to explain the process; share the TRACES verification steps with them.