NRI property sale from Australia: the two forms, the withholding tax and the US$1 million rule

When a person living in Australia sells a flat in India, Indian law turns the buyer into a tax collector. Since 1 April 2026 the rules sit in the Income-tax Act 2025, which repealed the 1961 Act that day. The department’s transition FAQ says the old Act’s deduction sections, 192 to 194T, “are now consolidated under two sections, section 392 and section 393”. A buyer paying a non-resident seller deducts under section 393(2), the successor to section 195, and the 1 per cent deduction used when the seller is resident does not apply. An NRI property sale then meets a second gate at the bank, which needs income tax forms before it remits, and a third at the Reserve Bank of India, which sets an annual limit on most remittances of rupee assets.

Step one: the buyer deducts under section 393(2), not the resident table

Section 393(1) of the 2025 Act covers payments “to a resident”. Its Table Sl. No. 3(i), formerly section 194-IA, sets a deduction of 1 per cent of the consideration or stamp duty value, whichever is higher, on property transfers of ₹50 lakh (₹5,000,000) or more. That buyer files Form 141, which replaced Form 26QB, “using PAN of the deductor”. Section 393(2) covers sums paid “to a non-resident” at the “rates in force”. That buyer files Form 144, the quarterly statement “in respect of payments other than salary made to non-residents”, which replaced Form 27Q and asks for the deductor’s TAN.

The department’s FAQ for non-resident sellers, written under the 1961 Act, puts the deduction at 12.5 per cent where the property was held for more than 24 months and the transfer took place on or after 23 July 2024 (20 per cent for earlier transfers), and 30 per cent on a short-term gain where the seller is an individual. The FAQ adds that the “TDS rate shall be further increased by applicable surcharge and Health and Education cess”. Section 197 of the 2025 Act sets the tax on long-term capital gains at 12.5 per cent, and on deduction at source the transition FAQ states: “Broadly, there is no change in policy”.

Step two: the seller’s lower deduction certificate under section 395

The seller’s remedy is a lower or nil deduction certificate, which section 395(1) of the 2025 Act provides in place of section 197 of the 1961 Act. According to the transition FAQ, “the Assessing Officer, on being satisfied that the total income of the payee justifies a lower rate or no deduction, will issue a certificate”. Once it is issued, section 395(1) requires the payer to deduct at the rate it specifies “till its validity”, and the transition FAQ ties the deduction to the “event earlier of credit or payment”. The application, Form 128 (formerly Form 13), is open to “any person (resident or non-resident)” and, the department’s FAQ says, “has to be mandatorily furnished electronically through the TRACES portal”.

For land or buildings acquired before 23 July 2024, section 197(3) of the 2025 Act lets the owner pay the lower of 12.5 per cent without indexation and 20 per cent with indexation, but only for “an individual or a Hindu undivided family, being a resident”. The department’s tutorial says the relief is “applicable only to a resident individuals or HUF”, so a non-resident seller cannot use it.

Step three: Forms 145 and 146 before the bank will remit

Rule 220 of the Income-tax Rules 2026 governs Form 145, which replaced Form 15CA. The department’s FAQ says it “must be submitted before the remittance is made outside India”. Part A covers taxable remittances that total no more than ₹5 lakh (₹500,000) in the tax year. Above that, Part B applies where a certificate under section 395(1) or 395(2) has been obtained from the Assessing Officer, and Part C applies where “a certificate in Form No. 146 from an accountant has been obtained”. Form 146, which replaced Form 15CB, is a chartered accountant’s certificate that “has to be filed before the part C of Form No.145 is filed”. Part B filers, the transition FAQ says, “are not required to obtain Form 146 from a Chartered Accountant”. The RBI’s remittance of assets FAQ states that all remittances “are subject to payment of taxes as applicable in India” and that authorised dealers “are to convince themselves on this aspect”.

Where the money from an NRI property sale can go: the US$1 million rule

The RBI’s FAQ on accounts for non-residents, as on 16 January 2025, states that “when a resident Indian becomes a person resident outside India, his existing resident account should be designated as NRO account”, and that “balances in an NRO account of NRIs/ PIOs are remittable up to USD 1 (one) million per financial year (April-March) along with their other eligible assets”. It adds that funds “can be transferred to NRE account within this USD 1 Million facility”, a transfer the RBI wrote into its Deposit Regulations by a notification dated 18 June 2026 (FEMA 5(R)(6)/2026-RB). The RBI’s remittance of assets FAQ counts the sale proceeds of “immovable property or any other asset held in India” and assets “acquired from legacy/ inheritance/ deed of settlement” within the US$1 million limit. Anything above it needs prior RBI approval.

Under the RBI’s property FAQ, updated 6 April 2023, where the property was acquired under the exchange law in force at the time and paid for in foreign exchange through banking channels or from an FCNR or NRE account, an NRI or PIO may repatriate the proceeds under a separate heading from the US$1 million limit, but “in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties”. Other sale proceeds fall under the US$1 million limit.

The Australian side: worldwide capital gains and the foreign income tax offset

The Australian Taxation Office states: “As an Australian resident for tax purposes, you must declare income you earn anywhere in the world in your Australian tax return”, and “if you own an asset overseas, you may have to pay Australian capital gains tax when you sell the asset”. It states that when you become an Australian resident, other than a temporary resident, you are taken to have acquired your CGT assets on that day “at their market value”, except assets acquired before 20 September 1985 and taxable Australian property. Inheriting generally triggers no CGT, and a beneficiary counts ownership from when the deceased acquired the asset (if on or after 20 September 1985) or died (if before), which matters for the resident’s 50 per cent discount after 12 months. The ATO adds that “the full CGT discount can’t be used for capital gains made by foreign or temporary residents after 8 May 2012″.

The Australia-India tax agreement lets gains from the alienation of real property be taxed where the property is situated and, subject to Australian law, requires Indian tax paid by an Australian resident on Indian-source income to be “allowed as a credit against Australian tax payable”. The ATO gives that relief as a foreign income tax offset. Its foreign income tax offset rules guide 2026 requires that you “have actually paid, or be deemed to have paid” foreign income tax on income or gains included in your assessable income, including “gains of a capital nature”. Up to A$1,000 can be claimed by recording the tax paid; above that an offset limit applies, and foreign tax beyond the limit “isn’t available to be carried forward to a later income year and can’t be refunded to you”. The offset “can only be claimed after the foreign tax is paid”, and the guide allows up to four years from that payment to request an amendment.

The takeaway

The rules set a sequence. The buyer deducts first, at the non-resident rates unless a section 395 certificate has been issued, so a seller seeking a lower deduction applies in Form 128 before the price is paid or credited. Form 145, with Form 146 where Part C applies, comes next, and outside the two-property route the US$1 million limit caps each financial year’s remittances. Finally, the gain goes into the Australian return, with the Indian tax claimed as an offset. This article is general information, not legal or tax advice.