A retroactive tax residency certificate won't fix a buyer's skipped TDS on your India property sale. Under the US-India treaty, each country taxes capital gains under its own law, so a certificate doesn't lower what India can tax. What fixes it is paying the tax yourself and getting the buyer to deposit the missing TDS.
Why a retroactive tax residency certificate doesn't change your property tax
A tax residency certificate (TRC) proves which country taxes you as a resident. It doesn't shrink what India can tax on a flat you sold in Pune. That depends on the treaty and on India's own law.
What the US-India treaty says about gains
Article 13 of the US-India treaty says each country may tax capital gains under its own domestic law. It sets no treaty rate cap and no exemption for the gain. So India taxes your gain at its own rates whether or not you hold a certificate.
Relief comes later, on your US return, as a foreign tax credit for the Indian tax you paid. That credit is how you avoid being taxed twice on the same gain.
What a certificate does cover
A TRC matters when a treaty gives you a lower rate, such as on interest or dividends from India. You claim that benefit with the TRC for NRIs and Form 10F, which carries your residency details.
For a US resident, the certificate is IRS Form 6166, requested on Form 8802. The IRS charges individuals a $105 user fee for it from 1 October 2026, and it doesn't lower your India property tax. I'd drop the certificate hunt entirely.
Step 1: Work out what the buyer should have deducted
Pull out your sale deed and calculate the TDS the buyer owed. The buyer withholds tax on the full sale price, not on your gain, and that's your starting number.
The rule sits in section 195 of the Income-tax Act, 1961 (section 393(2), Table Sl. No. 17 of the Income-tax Act, 2025, from 1 April 2026). A long-term gain on property held over 24 months faces 12.5% plus surcharge and cess, about 14.95% in total. A short-term gain faces 30% before surcharge and cess.
Say Priya, an NRI in Austin, sold her Pune flat after 23 July 2024 for Rs 1.5 crore. She bought it for Rs 50 lakh, so the numbers run like this:
- Long-term gain: Rs 1.5 crore minus Rs 50 lakh is Rs 1 crore.
- Her tax: Rs 12,50,000 at 12.5%, plus Rs 1,87,500 surcharge and Rs 57,500 cess, makes Rs 14,95,000.
- TDS the buyer should have deducted: 14.95% of Rs 1.5 crore, which is Rs 22,42,500.
That gap of Rs 7,47,500 is why NRIs apply for a lower deduction certificate on Form 13. You must have it before the sale, so a Form 13 application can't be backdated. The TDS rules for NRIs explain the standard rates.
Step 2: Pay the tax on your gain yourself
Pay the tax on your gain through the Income Tax e-filing portal, then file your Indian return for the year of sale. The buyer's missed TDS doesn't cancel your liability. TDS only collects tax in advance, and now you do the collecting.
Priya pays her Rs 14,95,000 herself and keeps the payment challan, the receipt the portal gives her. Skipped TDS also removes the prepaid tax, so interest under section 234B may apply. Pay as early as you can.
You can still reduce the bill. Reinvesting the gain in another Indian house under Section 54, or putting up to Rs 50 lakh in specified bonds under Section 54EC, can cut or remove the tax.
The 54EC window is six months from the sale deed registration, and a skipped TDS doesn't extend it. Property sale tax planning shows how the options compare.
Step 3: Ask the buyer to deposit the missing TDS
Write to the buyer and ask them to deposit the missing TDS with the Income Tax Department. A buyer who skips TDS under section 195 is treated as an assessee in default under section 201, so the buyer has reason to act.
The default means the buyer owes the tax that should have been withheld, plus simple interest at 1% a month. On Priya's sale, that's Rs 22,42,500 of tax and Rs 22,425 of interest for every month it stays unpaid.
The relief that stops a buyer being treated as in default once the seller has paid the tax is written for resident sellers only. As an NRI seller, your own payment may not protect the buyer, which leaves the buyer more exposed.
The buyer needs a TAN, the tax deduction account number, before depositing. The buyer then files Form 27Q, the quarterly return for payments to non-residents, and issues you Form 16A.
Check your Form 26AS once the buyer has filed. If the tax shows up there, claim it in your return and reduce what you pay yourself. I'd pay your own tax first and ask the buyer second, because the buyer's timeline isn't yours.
Step 4: Gather your repatriation papers
Gather proof of tax paid before you ask your bank to send the proceeds abroad. A bank typically asks for these:
- The registered sale deed and your original purchase deed
- An NRO account statement showing the sale proceeds
- Your PAN card and passport copy
- The tax payment challan and your ITR acknowledgment
- Form 15CB from a chartered accountant, and the Form 15CA acknowledgment
Skipped TDS leaves a gap where Form 16A usually sits, so your challan and return acknowledgment carry the proof. Unfiled returns are a common reason for rejection, so file first. NRO account proceeds are capped at USD 1 million per financial year, and the rules on Form 15CA and 15CB apply to every remittance.
Step 5: Report the sale on your US return
Report the sale on your US return even though India collected no TDS. Use Form 8949 and Schedule D for the gain, convert cost and proceeds at the exchange rate on each transaction date, and claim a credit for the Indian tax on Form 1116.
India's tax usually exceeds the US tax on the same gain, so the credit often covers the whole US bill. Currency swings and the 3.8% Net Investment Income Tax can still leave some US tax. If your foreign accounts together exceed $10,000 at any point in the year, the FBAR applies too.
Your next move
Work out your gain, pay the tax, and file your return, then ask the buyer in writing to deposit the missing TDS. I'd rather you spend a week on that than on a certificate that can't lower India's tax. If the buyer won't respond, InvestMates can walk through the filing with you.
Frequently asked questions
What happens if TDS is not deducted on purchase of property from NRI?
The buyer is treated as an assessee in default under section 201 of the Income-tax Act, 1961, and owes the missing tax with interest. The NRI seller still owes tax on the gain, paid through a return filed as part of selling property in India.
Why is my TDS not reflecting in ITR?
Your TDS isn't reflecting because Form 26AS shows only tax the deductor reported on its quarterly return. On a property sale, that return is Form 27Q, filed by the buyer. If the figures differ, ask the buyer to file a corrected Form 27Q before you file your return.
Is NRI required to deduct TDS on purchase of property?
Yes, an NRI who buys property from a resident seller must deduct 1% TDS under section 194-IA when the sale consideration or stamp duty value is Rs 50 lakh or more. The buyer deposits it using Form 26QB within 30 days. When the seller is an NRI, section 195 applies instead.
Do I still owe Indian tax if the buyer never deducted TDS on my property sale?
Yes, you owe Indian tax on the gain whether or not the buyer deducted TDS, because TDS is only a way of collecting it early. Calculate the gain, pay the tax, and file your return, using the tax on capital gains for NRIs rates.