News: NRIs Selling Indian Property: Transfer Date and Tax Bill-21-02-2026
Priya Shah, an NRI in Singapore, was selling her Pune apartment for Rs 1.2 crore when she noticed she was weeks short of holding it for 24 months. She pushed registration back slightly so the gain would count as long-term, applied for a lower TDS certificate because her actual gain was far smaller than tax deducted on the full sale value, and aligned the transfer with her Section 54 reinvestment. The result was less excess deduction and smooth repatriation.
What counts as the transfer date
For capital gains purposes, the registration date of the sale deed is generally treated as the date of transfer, because that is when ownership legally passes. Abhishek Soni, CEO, Tax2win, said merely signing an agreement to sell does not usually amount to a transfer unless possession and substantial payment have also been completed in a legally enforceable way.
Anil Harish, Managing Partner, D. M. Harish & Co., Advocates, noted that Section 2(47) of the Income-tax Act, 1961 defines "transfer", and that it occurs when the deed is executed or possession is handed over, whichever is earlier.
Kunal Savani, Partner, Cyril Amarchand Mangaldas, said the buyer’s TDS obligation is triggered on the actual date of transfer regardless of the agreement or registration date, and deduction and statutory timelines must follow it. A frequent error is to treat the agreement date as the transfer date, which leads to gains being reported in the wrong financial year and mismatches with the buyer’s TDS.
He advises planning so that agreement and registration fall in the same financial year, the property has been held more than 24 months before transfer, and available exemptions are evaluated.
When TDS should be deducted
Section 195 requires tax to be deducted on any payment to an NRI. Where the whole amount is paid at once, TDS is computed on that date and deposited by the 7th of the following month.
Difficulty arises with staged payments, Harish said. If earnest money is paid on February 10 and the balance on March 20, it is unclear whether TDS applies on each date or only the last. Some deduct on the 10% and later on the 90%; others deduct entirely on the deed.
Deducting on an advance can backfire if the deal collapses because of a title defect or the buyer’s lack of funds. On a Rs 10 crore deal, a buyer paying Rs 1 crore in advance and deducting Rs 15 lakh leaves the seller with Rs 85 lakh. If the sale is cancelled, the seller may be unable to return the full Rs 1 crore, and cannot claim credit for the Rs 15 lakh either, since no income arose.
Many parties therefore state in the agreement that the advance is refundable if the deal is not completed and becomes part of the sale proceeds if it is, so TDS is deducted entirely on the final date.
Planning points
Soni recommends transferring only after 24 months, applying for a lower or nil TDS certificate where the real gain is below the default rate, timing the sale so Sections 54 or 54F exemptions can be claimed, keeping documents ready for repatriation, and filing the Indian return on time to claim TDS credit or refund.
Tushar Kumar, Advocate, Supreme Court of India, said wrongly assuming that registration alone governs transfer often causes excess deduction, denial of treaty benefits or a mismatch between the year of taxability and the year TDS credit becomes available, creating cash flow problems and disputes. By synchronising possession, receipt of consideration and execution of the conveyance, he said, an NRI can secure long-term treatment, maximise exemptions and streamline repatriation under foreign exchange rules.
