The Income Tax Act, 2025 is in force from 1 April 2026. For most taxpayers, the visible changes are cosmetic — Form 16 is now Form 130, Form 26AS is now Form 168. But for anyone buying property from a Non-Resident Indian (NRI), Budget 2026 has delivered a genuinely meaningful procedural relief: from 1 October 2026, individual and HUF buyers no longer need a TAN to deduct and deposit TDS. Your PAN is enough.
The legal framework at a glance
When a resident buys property from an NRI, the TDS obligation flows from two sections:
KEY SECTIONS — INCOME TAX ACT, 2025
Section 393(2) — Table Sl. No. 17— the deduction obligation
Requires the buyer to deduct TDS on every payment to an NRI seller. No minimum threshold applies even a ₹10 lakh property triggers TDS.
Section 397(1)(c) — the TAN exemption (from 1 Oct 2026) Individual and HUF buyers are exempt from obtaining TAN. PAN-based compliance is sufficient. Companies, firms, and other entities continue to need TAN.
Section 395(1) — lower/nil deduction certificate
NRI sellers may apply in Form 128 (replacing old Form 13) on TRACES portal to obtain a lower or nil TDS certificate and avoid excess deduction on the full sale price.
What TDS rates apply?
The TDS rate for NRI sellers depends on the nature of capital gains — and the buyer cannot simply apply the 1% resident rate. Getting this wrong creates personal liability for the shortfall plus interest.
Long-term capital gains (held 24+ months)
12.5%+ applicable surcharge + 4% cess
Short-term capital gains (held under 24 months)
Slab rate – Buyer typically deducts at 30%+ applicable surcharge + 4% cess
No PAN furnished by NRI seller
20% Or rate in force — whichever is higher. Section 397(2)
Note: TDS to be deducted on total sale consideration, not just capital gains — unless Form 128 LDC obtained
Step-by-step compliance (from 1 October 2026)
1 Verify seller’s residential status
Collect passport, visa stamps, and a self-declaration of NRI status. NRI status is determined by days spent in India — under 182 days in the tax year — not by passport alone.
2 Collect seller’s valid PAN and DTAA documents
Insist on PAN before any payment. If a DTAA applies to the seller’s country of residence, obtain a Tax Residency Certificate (TRC) under Section 159(8) to apply treaty rates.
3 Check for Form 128 lower deduction certificate
If the NRI seller has applied under Section 395(1), they may have a lower or nil TDS certificate (Form 128). Deduct only at the certified rate. Without it, deduct on the full sale price.
4 Calculate TDS correctly
For LTCG: 12.5% + surcharge + 4% cess. Compare actual consideration vs. stamp duty value — deduct on whichever is higher. Include parking, club membership, and all incidental charges in the base (Section 26(9)).
5 Deposit TDS using buyer’s PAN
From 1 Oct 2026, individual/HUF buyers use their PAN via the challan-cum-statement process. Deposit within 30 days from the end of the month of deduction (Rule 218(3)(b)).
6 Issue TDS certificate to seller
Under Section 395(4), download the TDS certificate from TRACES after deposit and issue it to the NRI seller to enable their ITR credit claim.
7 Handle repatriation separately with Form 145/146
If the NRI seller repatriates proceed to an overseas bank, Form 145 (buyer’s declaration, Previously Form 15CA) and Form 146 (CA certificate, Previously Form 15CB) are still required — the PAN-based TDS route does not waive this obligation.
10 frequently asked questions
1. Is the ₹50 lakh threshold applicable for NRI property?
No. Under Section 393(2), TDS applies from the first rupee there is no minimum threshold for NRI sellers.
2. Can I still use a TAN if I already have one?
Yes. TAN-based compliance remains valid. From 1 October 2026, individual and HUF buyers may choose the PAN-based route instead it is optional, not mandatory.
3. What if the NRI seller does not have a PAN?
Under Section 397(2), deduct TDS at 20% or the applicable rate in force whichever is higher. Insist on PAN before completing any payment.
4. What is the TDS deposit deadline?
Within 30 days from the end of the month in which the deduction was made under Rule 218(3)(b) of the Income-tax Rules, 2026.
5. Can I deduct TDS only on the capital gains amount?
Only if the seller furnishes a lower deduction certificate (Form 128) from the Income Tax Department under Section 395(1). Otherwise, TDS must be deducted on the total sale consideration.
6. What is the penalty for late deposit?
Interest at 1.5% per month from the date of deduction to the date of deposit. The buyer may also be treated as an “assessee in default.”
7. Is Form 15CA/15CB required?
Yes, for repatriation of sale proceeds to an overseas account. Under the 2025 Act, Form 15CA is now Form 145 and Form 15CB is Form 146. The PAN-based TDS route does not replace this obligation.
8. What is “Tax Year” under the new Act?
The Income Tax Act, 2025 replaces “Previous Year” and “Assessment Year” with a single unified term — “Tax Year.” Income earned from 1 April 2026 onwards is referred to as Tax Year 2026-27.
9. Can the NRI seller claim a refund of excess TDS?
Yes, by filing their Income Tax Return in India for the relevant Tax Year and declaring the actual capital gains. The excess TDS will be refunded after assessment.
10. Does a DTAA affect the TDS rate?
Yes. If India has a Double Taxation Avoidance Agreement with the NRI’s country of residence, a lower treaty rate may apply. The NRI must furnish a Tax Residency Certificate (TRC) under Section 159(8) to claim the benefit.
Conclusion
The shift to PAN-based TDS for individual and HUF buyers — effective 1 October 2026 — removes a genuine administrative burden from one-off property transactions. But procedural simplicity does not reduce substantive risk. The correct rate, the correct base (full consideration, not just gains), and the DTAA position still require careful professional assessment before every transaction.
A pre-transaction compliance audit is your best protection against notices, interest demands, and personal liability as a buyer.
Written by Asha Ahuja Sethi (Head Admin) and Shilpa Khata — Jatin Sethi & Co., Chartered Accountants.
This article is for informational purposes only and does not constitute legal or tax advice.
About the Author
cajatinsethi
Professional Chartered Accountant with expertise in taxation, financial planning, and business advisory services. Committed to helping businesses and individuals achieve their financial goals through personalized solutions and expert guidance.
