If you are buying or selling property in India involving an NRI, understanding the NRI property TDS new rules 2026 is no longer optional — it is essential. The TDS on sale of property by NRI has always been a compliance-heavy area, but with the Income Tax Act, 2025 taking effect from 1 April 2026, the rules have been renumbered, forms have changed, and a landmark Budget 2026 proposal is set to simplify how to deduct TDS on NRI property purchase starting 1 October 2026.

Miss these updates and you risk penalties, interest, and being classified as an “assessee in default” by the Income Tax Department — even if you are a genuine, one-time homebuyer. This guide explains every key change clearly, who it impacts, and exactly what you need to do.

Table of Contents

What Is TDS on Sale of Property by NRI?

When an NRI (Non-Resident Indian) sells immovable property in India, the resident buyer is legally required to deduct Tax Deducted at Source (TDS) from the payment before transferring money to the seller. This obligation cannot be passed on contractually to the seller — the buyer remains liable to the Income Tax Department regardless.

Under the new Income Tax Act, 2025, this transaction is governed by Section 393(2), Table Sl. No. 17 — the successor to the widely-used Section 195 of the old 1961 Act. The key distinction from a resident seller transaction (which is simpler and covered under Section 393(1)) is that NRI seller transactions attract:

Higher TDS rates applied to the full sale consideration
Different forms and compliance filings
Additional foreign remittance documentation in many cases

Understanding this distinction is the very first step to getting your compliance right.

Old Rules vs New Rules: Key Changes

Parameter	Old Rules (ITA 1961)	New Rules (ITA 2025, from April 2026)
Governing Section	Section 195	Section 393(2), Table Sl. No. 17
TAN Requirement (Buyer)	Mandatory	Mandatory until 1 Oct 2026; removed thereafter
TDS Filing Form	Form 27Q (quarterly)	Form 144 (quarterly)
Lower TDS Application	Form 13	Form 128
Remittance Declaration	Form 15CA	Form 145
CA Certificate for Remittance	Form 15CB	Form 146
TDS Certificate to Seller	Form 16A	Form 131
Payment Mechanism	TAN-based challan	TAN-based (PAN-based from 1 Oct 2026)

Bottom Line: The substantive tax liability stays the same. The changes are largely procedural with new section numbers, new form names, and a simplified process incoming from October 2026.

TDS Rates Applicable on NRI Property Sales in 2026

This is where NRI property transactions differ significantly from resident-seller deals. TDS is deducted on the entire sale consideration, not just the capital gain.

Type of Capital Gain	Standard TDS Rate	Plus Surcharge & Cess
Long-Term Capital Gain (LTCG)	12.5%	Yes (effective ~13–14%+)
Short-Term Capital Gain (STCG)	30%	Yes (effective ~34%+)

Why This Hurts More Than It Should

Imagine an NRI selling a property for ₹2 crore that was purchased for ₹1.5 crore. The actual Long-Term Capital Gain is ₹50 lakh. But the buyer must deduct TDS at 12.5% on the full ₹2 crore — amounting to ₹28–31 lakh after surcharge and cess. That is nearly the entire profit, locked with the government until the NRI files a return and claims a refund.

This is exactly why applying for a Lower TDS Certificate before the transaction is critical (covered in a dedicated section below).

Important: No PAN = Higher TDS

If the NRI seller does not furnish a valid PAN, the buyer must deduct TDS at the higher of: applicable rates or 20%, as per Section 397(2)(b)(i) of the ITA 2025. Ensure the seller’s PAN is in place before any payment is made.

How to Deduct TDS on NRI Property Purchase — Step-by-Step

Getting the step-by-step compliance process right protects both the buyer from penalties and the seller from delayed credits. Here is the full workflow as it stands before 1 October 2026:

Step 1: Confirm the Seller’s Residential Status

Before doing anything else, verify in writing whether the seller is a resident or non-resident for income tax purposes. This single determination changes everything like the forms, rates, and compliance track all differ.

Step 2: Obtain TAN (Required till 30th Sep., 2026)

As a resident buyer purchasing property from an NRI, you currently need a Tax Deduction and Collection Account Number (TAN). Apply online via the NSDL/Protean portal. Budget 2026 will eliminate this step from 1 October 2026, but until then, it is mandatory.

Step 3: Verify PAN of the NRI Seller

Collect the seller’s valid Indian PAN. Without it, TDS rates jump sharply. If the seller does not have a PAN, advise them to obtain one before executing the agreement.

Step 4: Check for a Lower Deduction Certificate

Ask the NRI seller whether they have applied for a Lower TDS Certificate (Form 128). If a certificate exists, TDS is deducted at the rate specified in it rather than the full statutory rate.

Step 5: Deduct TDS at the Right Rate and Time

TDS must be deducted at the time of payment — whichever is earlier: when the amount is credited or when it is paid. Deduct at the applicable rate on the full sale consideration.

Step 6: Deposit TDS Within 30 Days

Deposit the deducted TDS with the government using a TAN-based challan within 30 days from the end of the month in which the deduction was made (as per Rule 218(3)(b) of the Income Tax Rules, 2026).

Step 7: File Quarterly TDS Return in Form 144

Unlike the resident-seller route (which uses a challan-cum-statement and requires no separate quarterly return), NRI seller transactions require filing Form 144 — the quarterly TDS statement for non-resident payments. Due dates follow the standard quarterly schedule.

Step 8: Issue TDS Certificate to the Seller

After processing, issue the TDS Certificate (Form 131, the replacement for the old Form 16A) to the NRI seller. The seller needs this to claim TDS credit in their Indian income tax return and for any refund claim.

Step 9: Handle Remittance Documentation (if applicable)

If the sale proceeds are to be remitted abroad, the remittance may require Form 145 (declaration by the remitter — replacing Form 15CA) and Form 146 (CA certificate — replacing Form 15CB), depending on the amount and applicable thresholds. Coordinate this with a qualified CA before initiating the bank transfer.

Do I Need TAN for NRI TDS in 2026?

This is the most frequently misunderstood aspect of the Budget 2026 changes. Here is the precise answer:

Until 30 September 2026: Yes, TAN is required. The current legal framework under the Income Tax Act, 2025 requires resident buyers to obtain TAN when deducting TDS on payments to non-residents under Section 393(2).

From 1 October 2026 onwards: No, TAN will no longer be required for resident individuals or HUFs purchasing immovable property from an NRI. Budget 2026 proposed an amendment to Section 397(1)(c) of the ITA 2025 that enables PAN-based TDS deduction and deposit, aligned with the simpler mechanism already used for resident-seller transactions.

This change is significant because many buyers previously had to obtain a TAN solely for this one transaction — adding delay, confusion, and procedural friction to what should be a straightforward property deal. The PAN-based mechanism removes that barrier entirely.

Key Clarification: This is a procedural change only. The TDS obligation, applicable rates, and the NRI seller’s substantive tax liability remain unchanged.

Lower TDS Certificate for NRI: How to Reduce Your TDS Burden

A Lower TDS Certificate is an order from your Income Tax Assessing Officer that directs the buyer to deduct TDS at a rate lower than the statutory default. Under the Income Tax Act, 2025, this is applied for via Form 128 under Section 395(1) and 395(3) — replacing the old Form 13 under Section 197.

Who Should Apply for Lowe TDS Certificate?

Any NRI seller whose actual tax liability (after factoring in cost of acquisition, improvement, indexation, or Section 54 reinvestment exemption) is materially lower than the TDS that would otherwise be deducted on the full sale consideration.

Benefits of Lower TDS Certificate

TDS deducted at a lower rate (sometimes as low as 3–5% or even nil) instead of the full statutory rate
Avoids large sums being locked with the government pending a refund
Reduces pressure on the buyer and speeds up the transaction

Practical Note

Apply at least 30–60 days before the expected transaction date as processing takes time. The application is filed by the NRI seller on the TRACES portal. The certificate, once issued, is valid for the specific transaction or period mentioned in it.

New Forms Under Income Tax Act 2025 — What Replaced What

The Income Tax Act, 2025 and the accompanying Income Tax Rules, 2026 have renamed virtually every form relevant to NRI property transactions. Here is a consolidated reference:

Old Form	New Form	Purpose
Form 27Q	Form 144	Quarterly TDS return for non-resident payments
Form 13	Form 128	Application for lower/nil TDS certificate
Form 15CA	Form 145	Declaration for foreign remittance
Form 15CB	Form 146	CA certificate for foreign remittance
Form 16A	Form 131	TDS certificate issued to deductee
Form 26QB	Form 141	Property TDS challan-cum-statement (resident seller)
Form 27D	Form 133	TCS certificate

Important: Form 144 is for the TDS-return side (buyer’s compliance), while Form 145 and Form 146 are for the remittance-compliance side (bank transfer of sale proceeds). These are separate obligations — some transactions may require one, some both.

Common Mistakes That Lead to Notices

These are the errors that result in tax department notices, penalties, and interest charges:

Treating NRI seller like a resident seller. Applying the 1% challan-cum-statement route (Form 141) for an NRI seller transaction is incorrect. The rates, forms, and return filings differ significantly.
Not obtaining TAN until the new rules kick in. Until 1 October 2026, TAN remains mandatory for NRI property TDS. Proceeding without it is non-compliant.
Deducting TDS only on the capital gain, not the full sale price. TDS must be on the total sale consideration. This is one of the most expensive errors in practice.
Missing Form 144 quarterly filing. Many buyers complete the deduction and deposit but do not file the quarterly return, triggering late-filing notices.
Not collecting Form 131 (TDS Certificate) for the seller. The NRI needs this to claim TDS credit in their Indian ITR. Missing it delays the seller’s refund process and can sour a transaction.
Ignoring DTAA benefits. If the NRI is a tax resident of a country that has a Double Taxation Avoidance Agreement (DTAA) with India, a lower treaty rate may apply — but only if the seller provides a valid Tax Residency Certificate (TRC) and other documents under Section 159(8).
Skipping remittance forms. Transferring sale proceeds abroad without completing Form 145/146 (where applicable) can attract FEMA scrutiny in addition to income tax notices.

Frequently Asked Questions (FAQs)

What is the TDS rate when buying property from an NRI in 2026?

TDS is deducted on the full sale consideration — 12.5% for long-term capital gains and 30% for short-term capital gains, plus applicable surcharge and cess. This can effectively work out to 14–34%+ depending on holding period and surcharge slab.

Has Budget 2026 changed the TDS rate on NRI property sales?

No. Budget 2026 has not changed the TDS rates. The amendment is purely procedural — it removes the TAN requirement for resident buyers and replaces it with a PAN-based mechanism, effective 1 October 2026.

Do I need TAN to buy property from an NRI right now?

Yes, until 30 September 2026 TAN is still mandatory. The TAN-free, PAN-based route for NRI property TDS takes effect from 1 October 2026 as per the Budget 2026 amendment to Section 397(1)(c).

What form does the buyer file for NRI property TDS in 2026?

The buyer must file Form 144 — the quarterly TDS statement for non-resident payments under the Income Tax Rules, 2026. This replaces the old Form 27Q.

What has replaced Form 15CA and Form 15CB?

From 1 April 2026, Form 15CA (remittance declaration) has been replaced by Form 145 and Form 15CB (CA certificate) has been replaced by Form 146 under the new Income Tax Rules, 2026.

How does a Lower TDS Certificate help an NRI seller?

A Lower TDS Certificate (Form 128) authorises the buyer to deduct TDS at a reduced rate based on the NRI’s actual assessed tax liability. Since standard TDS is applied to the entire sale price rather than just the profit, this certificate can save the seller lakhs of rupees from being unnecessarily blocked pending a refund.

What happens if the NRI seller does not have a PAN?

TDS must be deducted at the higher of the applicable rate or 20% as per Section 397(2)(b)(i) of the Income Tax Act, 2025. The NRI seller should obtain a PAN well before the transaction to avoid this.

Can DTAA reduce the TDS applicable on NRI property sales?

Yes. If India has a Double Taxation Avoidance Agreement (DTAA) with the NRI’s country of residence and a lower rate is provided under the treaty, TDS can be deducted at the treaty rate. The NRI must furnish a valid Tax Residency Certificate (TRC) to the buyer for this benefit to apply.

Is TDS deducted on the profit or the full sale price?

TDS is deducted on the full sale consideration — not just the capital gain. This is a critical point. An NRI selling a ₹2 crore property purchased for ₹1.5 crore still has TDS deducted on ₹2 crore, not ₹50 lakh. The excess can be reclaimed only after filing an Indian income tax return.

What should an NRI do after the property is sold to reclaim excess TDS?

The NRI must file an Indian Income Tax Return for the relevant Tax Year, report the capital gain correctly, claim the TDS credit using Form 131 (received from the buyer), and apply for a refund if TDS deducted exceeds the actual tax liability. Proceeds may also need to comply with FEMA and RBI repatriation norms before being transferred abroad.

What is the deadline to deposit TDS after deducting it on an NRI property purchase?

TDS must be deposited within 30 days from the end of the month in which the deduction was made, as per Rule 218(3)(b) of the Income Tax Rules, 2026.

Are Form 145 and Form 146 the same as the buyer’s TDS return?

No. Form 144 is the buyer’s quarterly TDS return for non-resident payments. Form 145 and Form 146 are part of the foreign remittance compliance framework — relevant when sale proceeds are to be transferred abroad. These are two separate compliance tracks, though some transactions may require both.

Share This Post:

NRI Property TDS New Rules 2026 Explained