When Priya finalized an apartment deal in Bengaluru for ₹95 Lakh, she assumed the tax deduction would be a straightforward 1% TDS deduction under Section 194-IA. But during paperwork verification, her lawyer flagged a critical roadblock: the seller was a Non-Resident Indian (NRI) living in Singapore.
Under the old Indian tax framework, buying from an NRI meant resident buyers like Priya had to apply for a corporate-style Tax Deduction and Collection Account Number (TAN), file cumbersome quarterly TDS returns (Form 27Q), and risk penalty notices of ₹200 per day for procedural delays.
Effective October 2026, the Central Board of Direct Taxes (CBDT) has eliminated this bureaucratic nightmare. Resident individuals and HUFs purchasing real estate from an NRI seller no longer require a TAN. You can now deduct, report, and deposit TDS using your standard PAN.
Resident individuals buying immovable property from an NRI seller no longer need to apply for a TAN. Under CBDT Notification No. 121/2026, the entire transaction is processed through a PAN-based challan-cum-statement using Form 141 (Schedule E).
Resident Seller vs. NRI Seller: The Critical Differences
Many home buyers mistakenly believe the 1% TDS rule applies universally across all property transactions in India. The rules, thresholds, and tax liability differ fundamentally based on the seller’s residential tax status:
The Danger of the Missing ₹50 Lakh Threshold
The single most expensive trap for property buyers is assuming that deals below ₹50 Lakh are exempt when dealing with an NRI.
If you purchase a studio apartment or plot from an NRI for ₹38 Lakh and fail to deduct TDS because it sits below the resident ₹50 Lakh threshold, the Income Tax Department treats you as an “assessee-in-default”. You will face statutory interest penalties under Section 201 at 1% to 1.5% per month, alongside personal recovery proceedings for the unpaid tax amount.
There is no ₹50 Lakh threshold exemption when purchasing property from an NRI. Even if the sale value is ₹15 Lakh, you must deduct tax and file Form 141 Schedule E within the statutory timeline.
Step-by-Step TDS Compliance for Resident Buyers
1. Ascertain the NRI Seller’s Holding Period
Determine whether the property sale generates Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG):
- Held for 24 months or less: Treated as STCG and subject to TDS at the seller’s maximum applicable income tax slab rate (up to 30% plus surcharge and cess).
- Held for more than 24 months: Treated as LTCG and taxed at 12.5% without indexation (under updated capital gains amendments).
2. Request a Lower Deduction Certificate (Form 13)
By default, if an NRI does not hold a Lower Deduction Certificate under Section 197, you are legally required to deduct TDS on the gross sale value, not just the profit.
For example, on a ₹1 Crore transaction where the seller’s net capital gain is only ₹15 Lakh, deducting 12.5% plus surcharge on the entire ₹1 Crore locks up ₹13+ Lakhs of the seller’s capital. Encourage the NRI seller to apply for a Lower Deduction Certificate from their Jurisdictional Assessing Officer well in advance of the registry date.
3. Deposit TDS via Form 141 (Schedule E)
- Log in to the official Income Tax e-Filing Portal.
- Navigate to e-Pay Tax and select Form 141 - Schedule E (Immovable Property from Non-Resident).
- Enter your PAN, the NRI seller’s PAN, property address, and agreement value.
- Complete the online payment via net banking, debit card, or RTGS/NEFT.
4. Provide the TDS Certificate (Form 132) to the Seller
Once the payment clears, download Form 132 from the TRACES portal and hand it over to the NRI seller. This certificate serves as their official proof of tax credit when filing their annual Indian income tax return.
To evaluate stamp duty and registration expenses alongside your TDS obligations, check our PaisaTalk Stamp Duty Calculator and estimate total transaction liabilities using our Capital Gains Tax Calculator.
Deposit Deadlines and Penalties
Under the updated framework, the deadline to deposit TDS is aligned with standard property transaction guidelines:
- Due Date: Within 30 days from the end of the month in which the deduction is made. (For example, if you pay the advance token or registry amount on October 14, TDS must be deposited on or before November 30).
- Late Deduction Penalty: 1% per month from the date tax was deductible to the date of actual deduction.
- Late Payment Penalty: 1.5% per month from the date of deduction to the actual date of deposit into the government treasury.
For prospective home buyers weighing loan budgets against these upfront closing costs, calculate your monthly cash flows with our Home Loan EMI Calculator.
Frequently Asked Questions
Do I need a TAN to buy property from an NRI after October 2026?
No. Individual buyers and Hindu Undivided Families (HUFs) do not require a TAN. Under CBDT Notification 121/2026, you can complete the entire TDS payment and reporting process using your PAN through Form 141 Schedule E.
Can I deduct 1% TDS under Section 194-IA if the seller is an NRI?
No. Section 194-IA applies exclusively to resident sellers. Deducting 1% for an NRI transaction is illegal and will result in penalty notices for short deduction of tax under Section 201.
What is the penalty for not depositing TDS on property purchased from an NRI?
The buyer is held personally liable for the unpaid tax amount, along with mandatory interest of 1.5% per month under Section 201 and potential penal action under Section 271C equal to the amount of tax failed to be deducted.
What if the NRI seller does not possess an Indian PAN card?
If the NRI seller does not furnish a valid PAN card, the buyer is legally obligated to deduct TDS at the higher rate of 20% under Section 206AA, or the applicable rate plus surcharge, whichever is higher.
How does the NRI seller claim back excess TDS deducted on the sale?
The NRI seller must file an Income Tax Return (ITR-2) in India for the relevant assessment year, reporting the capital gains and claiming a refund for any excess TDS deducted beyond their actual tax liability.