Buying Property From an NRI? Your TDS Obligations as the Buyer

Somewhere in the middle of a straightforward-looking purchase, a buyer often discovers the seller lives in Dubai, London or Toronto, and everything about the TDS process changes. If you were expecting to withhold a token 1% the way you would from a resident seller, you’re about to find out the real number is much larger, and that you, not the seller, carry the risk of getting it wrong.

Are you the NRI, buying from a seller who lives in India? Then the simpler resident-seller rule applies to you instead, see if you are an NRI buying from a resident seller below.

Why buying from an NRI is different

For a resident seller, Section 194-IA is almost an afterthought: 1% of the price, and only if the property costs ₹50 lakh or more. Section 195 governs a non-resident seller instead, and it works nothing like that. (Under the Income-tax Act, 2025, which governs a purchase from 1 April 2026, both rules sit in Section 393.) There is no ₹50-lakh threshold, TDS applies from the first rupee. And unless the seller hands you a specific certificate, you must deduct on the entire sale price, not their profit, because you have no legal way of knowing what they originally paid. On a ₹1.2 crore flat, that can mean withholding close to ₹18 lakh rather than the ₹1.2 lakh you’d deduct for a resident seller at the same price. Sellers understandably want that number renegotiated or explained; as the buyer, understanding it protects you from a much bigger problem than an awkward conversation.

Step 1: confirm the seller’s residential status, in writing

Don’t assume. Residential status for tax purposes turns on days spent in India over the relevant years, not on passport or citizenship, so ask the seller directly and get their answer into the agreement to sell. If a buyer deducts the ordinary 1% under Section 194-IA and the seller turns out to have been a non-resident, the tax department can and does come after the buyer for the shortfall, with interest and penalties. Protecting yourself here is simple: ask early, get it in writing, and see their PAN before you finalise the deduction rate.

Step 2: work out the correct rate

How long the seller has held the property decides the rate. Over 24 months is a long-term sale; under 24 months is short-term and taxed, and withheld, at their slab rate, effectively 30% plus surcharge and cess. For a long-term sale, here are the effective rates you’re withholding against, absent a certificate:

Base rate of 12.5% on the gain plus applicable surcharge and 4% cess, applied to the full sale price without a certificate. Rates move with each year’s Finance Act, confirm the current figures before you rely on them.

If the seller has held the property under two years, expect to withhold at roughly 30% plus surcharge and cess instead, materially higher, and one more reason sellers who can wait out the two-year mark generally do. Our NRI TDS calculator turns a sale price and holding period into the amount you actually have to withhold.

Step 3: deposit the tax, by PAN or by TAN

If you are a resident individual or HUF, you no longer need a TAN for this. Since 1 October 2026, a Finance Act 2026 change lets you deduct and deposit the TDS using your own PAN through Form 141, the PAN-based challan-cum-statement under the Income-tax Rules, 2026. It is the same simplified pattern that resident-seller purchases used under the old Form 26QB, which Form 141 replaced. The tax rates and your liability as a buyer are unchanged; only the paperwork got lighter.

If you are a company, a firm or another kind of buyer, or your payment was made on or before 30 September 2026, the TAN route applies: obtain a TAN (Tax Deduction Account Number) if you don’t already have one, deposit the TDS by the monthly due date (the 7th of the following month under the old rules; confirm the current date with your CA), file a quarterly TDS statement (Form 144, formerly Form 27Q), and issue the seller a TDS certificate (Form 131, formerly Form 16A) as proof.

What changed on 1 October 2026

Before that date, every buyer from an NRI seller had to apply for a TAN they would likely never use again, the step that most surprised people and a large part of why deals with NRI sellers sometimes stalled. For resident individual and HUF buyers that step is gone. If your purchase straddles the date, with some instalments paid before 1 October 2026 and some after, ask your CA which route each payment falls under before you deposit anything.

If the seller has a lower-deduction certificate

Many NRI sellers apply for a lower-deduction certificate (under Section 395 of the 2025 Act, formerly Section 197; the application is Form 128, formerly Form 13) before the sale completes, which instructs you to deduct tax only on their actual expected gain rather than the full price. If your seller produces one, deduct exactly what it specifies and keep a copy for your records, it’s your protection if the deduction amount is ever questioned later. Don’t accept a verbal assurance that a certificate is coming, if it isn’t in hand by the time you pay, deduct at the standard rate above and let the seller recover any excess through their own tax return. It helps to know what the certificate looks like from the other side of the table: our guide to TDS on an NRI property sale covers the certificate application, how long it takes, and why a seller who has not started it early will usually rather delay than complete without it.

What happens if you get it wrong

This is the section worth reading twice. If you deduct too little, whether because you assumed a seller was resident, applied the wrong rate, or skipped withholding altogether, the tax department pursues you, the buyer, for the shortfall plus interest, and potentially a penalty. The seller having already received and possibly spent the money doesn’t change that. This asymmetry is exactly why careful buyers confirm status and rate before they pay, rather than after a tax notice arrives.

If you are an NRI buying from a resident seller

Turn the situation round and the rules turn with it. TDS on a property purchase follows the seller’s residence, not the buyer’s, so an NRI buying from a seller who is resident in India uses the resident-seller rule: Section 194-IA of the 1961 Act, now part of Section 393 of the Income-tax Act, 2025. That section applies to “any person, being a transferee”, so living abroad does not exempt you, but it is far lighter than everything above:

• Deduct 1% of the price or of the property’s stamp duty value, whichever is higher.
• Only if the price or the stamp duty value is ₹50 lakh or more. If both are below ₹50 lakh, there is no TDS. Where several buyers or sellers are involved, the test uses the total price, not each person’s share.
• Count the extras. Club membership, car parking, electricity or water connection and maintenance charges paid as part of the deal are treated as part of the price.
• No TAN. The section switches the TAN requirement off. You deposit and report the TDS on your own PAN through the challan-cum-statement, Form 141 since 1 April 2026 (Form 26QB before that), and give the seller a TDS certificate on Form 132 (formerly Form 16B).

Pay the price itself from your NRE, NRO or FCNR account or by inward remittance, as our guide to buying property in India from abroad explains. If the seller is also a non-resident, everything earlier in this guide applies to you instead, and because the PAN-based Form 141 route for that case is only for resident individual and HUF buyers, you will need a TAN.

A practical checklist

1. Get the seller’s residential status confirmed in writing in the agreement to sell.
2. Ask whether they hold, or are applying for, a lower-deduction certificate (Section 395, formerly Section 197), and get a copy before you finalise the rate.
3. Work out your route: a resident individual or HUF can use their PAN and Form 141; a company, firm or other buyer needs a TAN, so apply early, it takes time you don’t want to lose at closing.
4. Deposit the TDS on time, file Form 141 (PAN route) or the quarterly Form 144 (TAN route, formerly 27Q), and get the seller their TDS certificate promptly, they need it to claim credit and any refund.
5. Keep every document, the certificate, challan and return acknowledgement, for your own records well beyond the sale itself.

The bottom line

Buying from an NRI seller means more paperwork and a much larger withholding than buying from a resident, but none of it is optional and all of it is manageable if you start early. Since 1 October 2026 it is also materially simpler for individual buyers: a one-off property purchase from an NRI no longer requires a TAN you’ll never use again. Whichever route applies to you, treat the seller’s residential status and certificate paperwork as things to settle before you pay, not after.

Tax rules and thresholds change with each Finance Act. Confirm the current rates and process with a chartered accountant before you deduct or deposit TDS on an actual transaction.