TDS and Capital Gains When NRIs Co-Own a Property

A husband and wife co-own a flat in Bengaluru — he moved abroad a decade ago and is now an NRI, she still lives and works in India as a resident. They decide to sell. Both assumed the tax deduction would be one clean number split evenly at the end. Instead, the buyer's CA came back with two entirely separate TDS computations: one for the resident wife's share under Section 194-IA at 1%, and one for the NRI husband's share under Section 195 at a rate several times higher, deducted against the full consideration attributable to his portion. Same sale deed, same registration date, two different tax worlds.

This scenario — a jointly-owned property where the co-owners have different residency statuses, or even where all co-owners are NRIs but hold unequal shares — is far more common than most sellers expect, and it's a leading source of confusion, mismatched deduction notices, and delayed repatriation. The fix isn't complicated once you understand the underlying principle: capital gains and TDS follow ownership share, not a default 50/50 split, and each co-owner is assessed, deducted from, and refunded individually.

This article walks through how the apportionment actually works, what changes when co-owners have mixed residency status, and the documentation each person needs to keep their return clean.

The Core Principle: Share Governs Everything

According to ClearTax's 2026 guide on TDS for NRIs selling property in India, the capital gains computation and the corresponding TDS obligation attach to the seller — and where there are multiple sellers on one sale deed, each seller's share of the consideration and the resulting gain is computed and taxed separately, based on their ownership share as evidenced by the sale deed or, where relevant, their documented funding contribution. There is no default assumption of an equal split simply because two or more names appear on the title.

This matters enormously in three common family structures:

• Spouses, where contribution to the original purchase may have been unequal even if the deed doesn't spell out percentages.
• Siblings who inherited or jointly purchased a property, often with informal or undocumented funding arrangements.
• Parent and adult child, where a child's name was added to a parent's property for succession planning, without necessarily reflecting an actual ownership stake.

Because tax authorities look at documented share — not assumption — sellers who haven't formalized their ownership percentages in writing are exposed to disputes at exactly the moment they can least afford ambiguity: during a live sale transaction with a deduction deadline attached.

Mixed Ownership: Two TDS Regimes on One Deed

The scenario that trips up the most families is mixed resident/NRI co-ownership. When one co-owner is a resident Indian and another is an NRI, the buyer is legally required to apply two different deduction regimes to the same transaction, split by each owner's share:

• Resident co-owner's share falls under Section 194-IA — a flat 1% TDS, but only if that co-owner's portion of the consideration exceeds the threshold referenced in ClearTax's guide to Section 194-IA (2026), which is ₹50 lakh. Deduction is remitted using Form 26QB, and the buyer needs only the seller's PAN for this leg.
• NRI co-owner's share falls under Section 195 — TDS applies on the full consideration attributable to that share (not the net gain), at the LTCG rate of 12.5% without indexation (or 20% with indexation where applicable), which works out to an effective rate of roughly 14.95% once surcharge and 4% cess are added, per the same ClearTax analysis. This leg is remitted using Form 27Q, and the buyer must obtain a Tax Deduction Account Number (TAN) — a PAN alone will not suffice for this deduction.

The buyer, in other words, is running what amounts to two separate mini-transactions inside one sale deed. Missing this distinction is one of the most common reasons buyers under-deduct on the NRI share (exposing themselves to interest and penalty) or over-complicate the resident share by treating it under the wrong section.

Step by Step: Apportioning Gain and TDS Per Co-Owner

1. Establish each co-owner's documented ownership share from the sale deed, the original purchase deed, or funding evidence (bank transfers, loan EMI records) if the deed itself is silent on percentages.
2. Determine each co-owner's residency status as of the date of sale — this is what decides which TDS section applies to their portion, and it is assessed per person, not for the property as a whole.
3. Split the total sale consideration according to each owner's share to establish the consideration figure each regime will apply against.
4. Compute the resident co-owner's TDS under Section 194-IA (1%, if their share of consideration exceeds ₹50 lakh) and prepare Form 26QB using their PAN.
5. Compute the NRI co-owner's TDS under Section 195 on their full share of consideration, using the applicable LTCG rate plus surcharge and cess, and prepare Form 27Q using a buyer TAN.
6. File separately. Each co-owner reports their own share of the capital gain and their own TDS credit in their individual income tax return — there is no joint filing mechanism for this.

Co-Owner Scenarios at a Glance

Geographic and Family Context

Mixed-ownership sales are especially common in NRI-heavy corridors where families bought property together across a migration timeline — one sibling emigrated for work while another stayed in India, or a couple bought jointly before one partner relocated abroad. This pattern shows up frequently in metro suburbs with strong diaspora ties: Bengaluru's tech corridors, Gurugram's DLF phases, and Kochi and Coimbatore for families with strong Gulf and North American NRI ties.

Repatriation is also a per-owner matter. Each NRI co-owner repatriates their own share of post-tax proceeds through their own NRO account, using Form 15CA/15CB for the outward remittance, and each is independently subject to the USD 1 million per financial year repatriation ceiling — the ceiling does not pool across co-owners or scale with the number of NRI sellers on one deed.

One area that deserves particular caution: adding a spouse's or child's name to a title for convenience, without an actual change in beneficial ownership or funding, can raise gift-tax or clubbing-of-income questions under Indian tax law. This is a nuanced area that depends heavily on individual facts — DrawMagic does not offer tax advice on structuring, and any family in this situation should raise it directly with a CA before the sale, not after.

Mini Scenario: A 60/40 Split on a ₹1.5 Crore Bengaluru Flat

An NRI sister (60% documented share, per the original purchase funding) and her India-resident brother (40% share) jointly sell a Bengaluru flat for ₹1.5 crore.

• Sister's share (60%): ₹90 lakh consideration. As an NRI seller, her portion is deducted under Section 195 on the full ₹90 lakh at the applicable LTCG rate, working out to an effective rate around 14.95% once surcharge and cess are applied — a substantial upfront deduction against her share alone, remitted via Form 27Q against a buyer TAN.
• Brother's share (40%): ₹60 lakh consideration. As a resident, his portion clears the ₹50 lakh threshold for Section 194-IA, so 1% TDS applies to his ₹60 lakh share — a comparatively modest deduction, remitted via Form 26QB against his PAN.

Both siblings then file their own returns, reporting their own share of the capital gain and claiming their own TDS credit. If the sister's actual computed tax liability is lower than the amount deducted at source — which is common given Section 195 deducts on gross consideration rather than net gain — she can apply for a refund, or better, apply for a Section 197 lower-deduction certificate before the sale to avoid the excess deduction altogether.

Reliefs Claimed Individually, Not Jointly

Just as the deduction is per co-owner, so are the reliefs:

• Section 54/54F reinvestment exemption, as described in Tax2win's guide to Section 54 (2026), can be claimed independently by each co-owner against their own share of the gain, provided they individually meet the reinvestment conditions and timelines. One co-owner reinvesting does not extend or share that exemption with another co-owner who does not reinvest.
• Section 197 lower/nil-deduction certificates must be applied for separately by each NRI co-owner. A certificate obtained by one NRI seller does not cover a co-owner's share — each person's application stands on its own facts and is assessed independently by the tax department.

Pro Tips for Co-Owned Sales

1. Document ownership share in writing before the sale, ideally referencing the original purchase deed or funding trail, so there is no ambiguity when the buyer's CA prepares the TDS split.
2. File Section 197 applications individually and early if any NRI co-owner wants to reduce their at-source deduction — don't assume one filing covers the group.
3. Keep each co-owner's NRO account, PAN, and (for NRIs) TRC and Form 10F ready separately — the buyer will need distinct documentation for each leg of the deduction.
4. Confirm the funding-versus-deed-share question with a CA if there's any mismatch between what the paperwork says and how the property was actually funded — this is a common trigger for later scrutiny.
5. Model each co-owner's net proceeds separately, not as a household total, since deduction rates and timelines differ meaningfully between a resident and NRI share.

Common Mistakes to Avoid

• Assuming a 50/50 split by default. Ownership share — from the deed or funding evidence — governs, not the number of names on the title.
• Applying one TDS regime to the whole transaction. Mixed ownership means the buyer must run two separate computations, not average them into one blended rate.
• Filing a single joint 15CA/15CB for the whole family. Repatriation forms and limits apply per NRI co-owner, not per property.
• Assuming Section 54 exemption is shared. Each co-owner must independently meet reinvestment conditions on their own share.
• Overlooking gift/clubbing questions when a name was added informally. This needs a CA's review before the sale, not a retrospective fix.

Bringing It Together With DrawMagic

Coordinating a multi-owner sale with mixed tax treatments is exactly the kind of transaction where getting organized early pays off. DrawMagic can help with the planning and documentation side:

• Use buyer financial planning to model each co-owner's net proceeds separately, accounting for their individual deduction rate and share of consideration, before you agree on a sale price or closing date.
• Run each co-owner's share through the property tax calculator to get an indicative sense of their individual deduction exposure.
• Use the buyers workspace to organize the sale deed, share evidence, and each owner's individual challans and forms in one place — useful when multiple family members are coordinating across time zones.
• For process questions on using these tools, DrawMagic's help center is available — for the apportionment itself, always confirm with a licensed CA.

Value Note

A clean, well-documented per-owner split protects every co-owner from the two most expensive outcomes: a mismatched-deduction notice from the tax department, or one family member's over-deduction sitting unresolved for months because nobody filed the right form for their specific share. On a co-owned sale, the small effort of documenting shares and filing separately upfront is far cheaper than untangling a dispute afterward.

Key Takeaways

• Capital gains and TDS on a co-owned property sale are split by documented ownership share, not by an assumed equal division among co-owners.
• Mixed resident/NRI co-ownership triggers two separate TDS regimes on one sale deed: Section 194-IA (1%, Form 26QB, PAN) for the resident share, and Section 195 (~14.95% effective, Form 27Q, buyer TAN) for the NRI share.
• Section 195 deducts on the NRI co-owner's full share of consideration, not their share of the net gain — a distinction that surprises many families.
• Each NRI co-owner repatriates independently through their own NRO account, subject to their own USD 1 million per financial year limit.
• Section 54/54F reinvestment exemptions and Section 197 lower-deduction certificates must be claimed and applied for individually by each co-owner.
• Adding a family member's name to a title without a genuine change in funding or ownership can raise gift-tax or clubbing questions — get a CA's view before the sale.
• Documenting ownership share via the original deed or funding trail before the sale prevents disputes at the deduction stage.
• DrawMagic's financial planning and tax calculator tools can help each co-owner model their individual position, but the apportionment and filings should be confirmed with a licensed CA.

FAQ

If the sale deed doesn't specify percentages, how is the share determined? Tax authorities generally look to the original purchase deed or documented funding contribution when the current sale deed is silent — this is a factual determination best confirmed with a CA before the transaction, since it directly affects each owner's deduction and gain computation.

Can one co-owner's Section 197 certificate cover the whole family's shares? No. Each NRI co-owner must apply for their own Section 197 certificate against their own share of the transaction; a certificate obtained by one seller does not extend to a co-owner.

Does the resident co-owner also need a TAN like the NRI co-owner's buyer does? No — the resident share is deducted under Section 194-IA using Form 26QB, which requires the seller's PAN. The TAN requirement applies specifically to the Section 195/Form 27Q deduction on the NRI share.

What happens if the buyer deducts the wrong rate on the NRI co-owner's share? Under-deduction exposes the buyer to interest and penalty; over-deduction locks up the NRI seller's cash until they file a return and claim a refund (or, better, apply for Section 197 in advance). Either way, it's worth having a CA verify the buyer's computation before registration.

Ready to plan a co-owned sale with confidence? Model each co-owner's numbers on DrawMagic's buyer financial planning suite, sanity-check exposure with the property tax calculator, and bring the details to your CA for the final apportionment and filings.