If you're an NRI planning to sell property in Kerala, the tax mechanics are genuinely different from a resident Indian selling the same property — and 2026 brought a structural change to the entire framework they sit inside. Here's what actually applies.

This is general information, not tax advice. Rules, rates, and procedures change, and your specific situation (holding period, residency status, DTAA country, how the property was originally funded) changes the answer. Confirm your numbers with a chartered accountant before you sell.

The single most important thing to understand

When an NRI sells property in India, TDS is deducted on the full sale consideration — not just on the capital gain. This surprises a lot of first-time NRI sellers, who assume tax withholding works the way it does for residents (deducted on the gain only). Under Section 195 of the Income Tax Act, the buyer is responsible for deducting TDS on the entire sale value before paying you, unless you've separately obtained a Lower or Nil TDS Certificate.

Current TDS rates

Holding period	Classification	TDS rate (plus surcharge & cess)
More than 24 months	Long-term capital gains	12.5%
24 months or less	Short-term capital gains	As per applicable NRI income tax slab, up to 30%

Because this is deducted on the full sale value rather than the gain, sellers with a lower actual profit margin can end up with a large amount of cash tied up until they file a return and claim a refund — which is exactly why the Lower/Nil TDS Certificate route exists.

Getting a Lower or Nil TDS Certificate

If the standard TDS deduction (on the full sale value) would significantly overstate your actual tax liability, you can apply in advance for a Lower or Nil TDS Certificate, which instructs the buyer to deduct tax only on your actual estimated gain rather than the full consideration. As of the current rules, this is processed under Section 395(1) of the Income-tax Act, 2025, using Form 128. This application needs to be filed with supporting computation well before the sale closes — it isn't something you can request after the transaction is done.

What changed with the new Income-tax Act, 2025

From 1 April 2026, India's decades-old Income-tax Act, 1961 was replaced by the Income-tax Act, 2025, alongside a new set of Income-tax Rules, 2026. This is the most significant restructuring of India's direct tax law in over sixty years — but for NRIs specifically, it's more of a reorganisation than a rewrite of the substance:

The familiar "Previous Year" and "Assessment Year" terminology is gone, replaced by a single unified "Tax Year."
Residency rules are unchanged: the 182-day default test, the 120-day rule for visiting NRIs earning more than ₹15 lakh from Indian sources, the deemed-resident rule for Indian citizens who don't pay tax anywhere, and the RNOR transition window for returning NRIs all continue to apply as before.
Foreign asset reporting requirements are stricter, with heavier penalties for failing to disclose foreign bank accounts, property, or shares — relevant if you're an NRI with assets both in India and abroad.
A useful procedural simplification: from 1 October 2026, a resident buyer purchasing property from an NRI seller can discharge their TDS obligation using their PAN and a challan-cum-statement, instead of the older, more cumbersome requirement to obtain a separate TAN and file quarterly TDS returns. This mainly benefits buyers, but it can meaningfully reduce friction and delay in closing a sale to a resident buyer.

Practical steps before you sell

Get a professional capital gains estimate early — before you're negotiating a sale price, so you know roughly what you'll actually net after tax.
Decide whether a Lower/Nil TDS Certificate is worth applying for, based on how large the gap is between full-consideration TDS and your actual estimated liability.
Keep your original purchase documents and any improvement/renovation records — these directly affect your cost basis and therefore your taxable gain.
Check whether a Double Taxation Avoidance Agreement (DTAA) between India and your country of residence affects your position — this varies significantly by country.
Plan for repatriation separately from tax — clearing your tax obligation is a different step from moving the sale proceeds abroad, which is governed by FEMA rules. See our guide to FEMA and repatriation.

The bottom line

The core mechanics NRIs need to plan around — TDS on full sale value, the option of a Lower TDS Certificate, and unchanged residency tests — are largely the same in substance as before, just under new terminology and a new Act. The real risk isn't the law changing under you; it's going into a sale without a CA's estimate in hand and being surprised by how much gets withheld at closing.

Kerala Guardian coordinates property sale transactions with vetted advocates and can connect you with a chartered accountant for tax planning ahead of a sale. Get in touch or see our legal and land transaction services — and always verify current rates and procedures with a qualified CA before you act.