Lower TDS Certificate for NRI: Major Changes in New TDS Certificate Rules for NRIs

A lower TDS certificate is an official approval under Section 197 of the Income Tax Act, 1961. It ensures TDS aligns closely with the true tax liability for NRIs, which prevents long refund delays and improves financial control.

Earlier, the NRIs could apply for a NIL TDS certificate too but according to the 2025 Income Tax bill, NRIs can no longer opt for it.

Get a detailed download of lower TDS Certificate for NRIs here.

Quick Synopsis

• TDS for NRIs is deducted at fixed, often higher rates. Lower TDS certificates reduce upfront tax deduction. 
• The certificate is especially useful for NRIs earning rent, interest or selling property.
• NRI income categories, like 194R and 194LC, now qualify for lower TDS certificates.
• Form 13 must be filed on TRACES to apply for a lower TDS certificate. 

Understanding the TDS for NRIs

TDS works differently for NRIs because most incomes earned in India are taxed at fixed, higher rates rather than slab-based rates. For example, property sale proceeds may attract TDS of 12.50% plus surcharge and 4% cess, even if the actual capital gains tax is much lower. This mismatch locks up a large amount of money unnecessarily. 

The section 197 of Income Tax Act gives NRIs an opportunity to align TDS closely with their true tax liability.

Remittances from NRIs touched nearly $135.46 billion in 2025. It highlights how strongly global Indians continue to invest in assets back home. With higher transaction volumes, many NRIs face steep TDS deductions on property sales, rental income and interest earnings. 

Major Changes in TDS Certificate Rules for NRIs

The Income Tax Bill 2025 has introduced key revisions that directly impact how NRIs manage their tax deductions at source. Below is a closer look at the two most significant changes:

The End of Nil TDS Certificates

Previously, eligible NRIs could obtain a certificate for nil TDS. The new Income Tax Bill 2025 has discontinued nil TDS certificates, which makes lower TDS certificates the only option. NRIs must now file an income tax return (ITR) to claim refunds on any excess TDS deducted.

Expanded Scope of Lower TDS Certificates

The 2025 law broadens who can apply for a lower TDS certificate. Now, NRIs receiving income from sources such as benefits under Section 194R or foreign interest under Section 194LC can also apply. It means a lower TDS rate can often be secured on more types of income than before. 

What are the Benefits of a Lower TDS Certificate for NRIs?

A lower TDS exemption certificate for NRI online creates a meaningful difference in how your income is taxed and how much liquidity you retain. To understand its impact clearly, here are some of its advantages:

Reduced Tax Liability

A lower TDS certificate allows NRIs to pay less or no tax on property sales. Instead of the usual 12.5% TDS on long-term gains or slab rates on short-term gains, NRIs can benefit from reduced rates with this certificate.

Compliance Support

The lower TDS certificate acts as proof of compliance with Indian taxation laws. It protects the investor and ensures there are no legal consequences.

Streamlined Refunds

Without this certificate, NRIs have to pay a higher tax rate. This could lead to an extra deduction and refund claim process. Thus, a lower TDS certificate helps to avoid the need to claim large refunds, which makes refund claims quicker and less tedious.

These benefits make the certificate especially valuable for NRIs earning rental income, interest or selling property, where TDS deductions are typically high.

Application Process of Obtaining a Lower TDS Certificate for NRI

If you want to apply for a lower deduction certificate, you must submit Form 13 to the assessing officer. Once the AO reviews your details and is satisfied, they will issue the certificate. 

Here’s how to file this form: 

• Step 1: Start by logging in to the TRACES portal.
• Step 2: Go to the ‘Forms’ section on the homepage.
• Step 3: Select the request for Form 13 and choose your residential status.
• Step 4: Set the request type to ‘Original’ and pick the relevant financial year.
• Step 5: Choose ‘Online’ as the application type.
• Step 6: The basic details of the authorised person (as registered) will appear automatically.
• Step 7: Enter your state and district.
• Step 8: Provide the responsible TAN, nature of receipt, and the required TDS/TCS deduction rate.
• Step 9: Upload details of income and tax liability for the current and previous 4 financial years.
• Step 10: Complete e-verification using the digital signature certificate (DSC).

Important Documents Required to Apply for a Lower TDS Certificate for NRIs

Before starting the lower TDS certificate application, keep the following documents ready to avoid unnecessary delays:

• Registration on the TRACES portal for filling in the Form 13 online 
• Copy of Passport and PAN card
• Proof of NRI status
• Property acquisition and purchase-related documents
• Capital gain calculations or income statements
• Bank statements of the previous 3 financial years
• Acknowledgement of e-TDS return for the past 2 financial years
• Deductor details, including TAN

Submitting all the required documents helps the assessing officer make a quick and fair decision. It ensures a seamless application process.

Final Word

A lower TDS certificate for NRI is one of the most practical ways to avoid heavy, unnecessary deductions and protect your cash flow. With updates for 2025, early application is now more important. Whether you earn rental income or plan to sell property, the certificate ensures efficient tax management and smoother financial planning.