NRI Property and Income Tax Guide | Updated 1 November 2026
Buying Property from an NRI in India: TDS Rates, TAN, Returns and Legal Precautions
When a property seller is non-resident for Indian income-tax purposes, the buyer has special tax deduction and reporting responsibilities. The usual 1% resident-property TDS rule must not be applied automatically. The law changed from 1 April 2026, so the date of payment or credit matters.
1. Which income-tax law applies to an NRI property purchase?
For tax deducted on sums paid or credited up to 31 March 2026, section 195 of the Income-tax Act, 1961 governed taxable payments to non-residents. From 1 April 2026, section 393(2), Table serial number 17, of the Income-tax Act, 2025 covers other chargeable sums paid to a non-resident individual or foreign company. The deduction event is generally the earlier of credit and payment. A payment made before registration can therefore trigger TDS.
These provisions apply to sums chargeable to tax in India. The buyer should establish the seller's residential status under income-tax law rather than relying only on nationality, passport or overseas address. See the official section 393 text, the earlier section 195 and the official transition guidance.
2. Applicable TDS rates on NRI property sales
| Nature of capital gain | General base rate | Important qualification |
|---|---|---|
| Long-term gain: immovable property held for more than 24 months | 12.5% | For transfers on or after 23 July 2024; surcharge and 4% health and education cess may apply. |
| Short-term gain: held for 24 months or less | Applicable rates in force | For an individual non-resident, the applicable statutory rate may be 30% before surcharge and cess; verify seller category and governing law. |
| Earlier long-term transfers before 23 July 2024 | Generally 20% | Historical law and applicable indexation rules must be checked. |
The old table showing 20.80%, 22.88% and 23.92% as universal NRI-property TDS rates is outdated. Surcharge depends on the seller's applicable income and statutory limits, not simply the property's sale price. A 12.5% base rate plus 4% cess equals 13% where no surcharge applies; it is not a universal transaction rate. Check the official tax year 2026-27 TDS rate schedule and capital gains guidance.
3. Is TDS deducted from the sale price or only the capital gain?
Tax deduction under the non-resident withholding provision concerns the amount chargeable to tax. In practice, a buyer who cannot reliably establish the chargeable portion should not independently deduct TDS only on an estimated gain. The payer may seek an appropriate determination of the chargeable proportion, or the seller may obtain an applicable lower or nil deduction certificate under the governing provisions. Without suitable documentation or an operative order, deductors commonly withhold on the gross amount paid at the relevant rate to manage exposure.
Ensure the order covers the seller, payment, applicable period and amount. The seller's own final capital gains liability can differ from the TDS withheld. The seller may claim credit and any eligible refund through the income-tax return.
4. Does the buyer need a TAN?
Yes, a buyer deducting tax under the non-resident payment provisions generally needs a Tax Deduction and Collection Account Number (TAN), even if the buyer is an individual purchasing a home. The TAN exception for resident-property challan-cum-statement transactions should not be confused with NRI purchases. Where several buyers make payments, establish the correct deductor details and compliance obligations for each payer. Apply through the Income Tax e-Filing portal or authorised TAN application channel.
5. When must the buyer deduct and deposit TDS?
- Deduct at the earlier of payment or credit, including applicable advances and instalments; do not wait until execution or registration of the sale deed.
- For a non-government deductor, deposit TDS generally by the 7th of the following month; for deductions in March, generally by 30 April, subject to applicable rules.
- Where a bank releases a housing loan directly to the NRI seller, coordinate deduction when the taxable payment or credit occurs, not when the borrower pays EMIs.
- Retain challans, bank remittance evidence, computation and seller correspondence.
See the Income Tax Department's payment and transition FAQs.
6. TDS returns and TDS certificates
For non-salary payments to non-residents, the earlier quarterly return was Form 27Q. For tax year 2026-27 onwards, the corresponding statement is Form 144, under section 397(3)(b) of the Income-tax Act, 2025 and rule 219 of the Income-tax Rules, 2026. Earlier-period corrections remain under the old framework. Issue the prescribed TDS certificate to the seller in the applicable form and within the statutory timeline; Form 16A was used under the earlier framework. Check current certificate forms and filing utilities before submission.
| Quarter | Period | Return filing due date |
|---|---|---|
| Q1 | April to June | 31 July |
| Q2 | July to September | 31 October |
| Q3 | October to December | 31 January |
| Q4 | January to March | 31 May following the tax year |
Official reference: Form 144 FAQs. The buyer should verify that the TDS credit appears against the correct seller PAN.
7. PAN and seller identification
Obtain and verify the seller's PAN, passport/identity details, residential status declaration and ownership documents. Absence of PAN may attract higher withholding or other compliance complications, subject to the applicable law and exceptions. A seller's Indian citizenship does not by itself establish Indian tax residence.
8. Payment to NRO, NRE or other bank accounts
Use a traceable, legally permissible banking channel in the name of the property owner, after confirming the account's eligibility under FEMA and bank rules. An NRO account is commonly used for India-source sale proceeds. NRE or FCNR accounts should not be treated as universally permissible destinations for local sale proceeds; credits and repatriation depend on the source of funds and RBI regulations. Record the beneficiary account, payment schedule and TDS adjustments in the agreement and sale deed.
9. Power of attorney and physical presence of seller
An NRI owner may act through a valid, properly executed and, where required, authenticated power of attorney, subject to local registration and stamp rules. Verify the authority to negotiate, sign and present documents for registration. A power of attorney does not by itself transfer ownership. Prefer payment directly to the legal owner, not to the attorney holder, unless a legally reviewed arrangement expressly authorises otherwise.
10. Jointly owned property and multiple buyers
Check the ownership shares of all sellers and the residential status of each. Allocate sale consideration and TDS reporting to the correct payees. Where some sellers are resident and others non-resident, different withholding provisions may apply to their respective shares. Record separate payment instructions and obtain acknowledgments from all owners.
11. Responsibilities of the NRI seller
- Provide correct PAN, tax-residency details, title and acquisition records, and supporting capital gains computation.
- Consider applying in advance for a lower or nil withholding certificate or payer-side determination where legally available; processing time varies.
- Review capital gains exemptions, where eligible, including reinvestment in qualifying assets. Read the related capital gains reinvestment guide.
- Obtain TDS certificate and verify credit before filing the relevant income-tax return.
- Discuss FEMA-compliant receipt and any eventual repatriation with the authorised dealer bank.
12. Responsibilities and precautions for the buyer
- Conduct title, encumbrance, litigation, mutation, society and local-authority checks before making an advance.
- Confirm every seller's tax residence and property ownership share.
- Obtain TAN and verify PAN; agree on the applicable withholding rate or certificate before payment.
- Deduct tax at each relevant payment or credit event and deposit within the prescribed period.
- File the correct quarterly TDS statement, issue the prescribed certificate and reconcile tax credits.
- Ensure sale deed and payment records clearly distinguish gross consideration, TDS and net remittance.
- Check withholding, FEMA, stamp duty and registration obligations independently; one does not replace another.
13. Consequences of failure to deduct or report TDS
Failure to deduct or deposit TDS may expose the buyer to tax recovery, interest and penalties under the applicable legislation. Late quarterly statements can also attract statutory fees and penalties. The former legislation included a late-filing fee of Rs. 200 per day under section 234E, subject to limits; apply the corresponding 2025 Act provisions for new periods. Correct any defaults promptly through the prescribed portal process.
14. Frequently asked questions
Is 1% TDS sufficient when buying from an NRI?
No. The familiar 1% resident-seller property withholding rule is different from the provisions governing chargeable payments to non-residents.
Is the Rs. 50 lakh threshold applicable to NRI sellers?
The threshold under the resident-property withholding provision is not a general exemption from non-resident withholding obligations. Assess chargeability under the applicable non-resident provisions.
Can the seller obtain a lower TDS certificate?
Yes, subject to eligibility and an order issued under the relevant law. The buyer must follow the operative certificate's conditions rather than a private computation alone.
Can the NRI claim a refund of excess TDS?
Where withholding exceeds final assessed tax liability, the seller may claim applicable credit and refund through the prescribed return and assessment process.
15. Related legal and official resources
For ownership and eligibility questions, consult purchase of property by OCI holders and foreign nationals, NRI immovable property purchase and transfer and the meaning of NRI, PIO and OCI. The Reserve Bank of India publishes the relevant foreign-exchange framework.
This article provides general information as at 1 November 2026. Rates, forms, procedural requirements and individual tax treatment depend on the facts, applicable law and any valid certificate. Obtain professional advice before executing or funding a transaction.