NRI Property TDS 2026 Rules for Buyers
NRI property TDS 2026 change from 1 October
NRI property TDS 2026 changes from 1 October for an eligible resident individual or Hindu Undivided Family buying immovable property from a non-resident. Such a buyer will not need to obtain TAN solely for that specified deduction and will use the prescribed PAN-based mechanism.
This change, made through the Finance Act, 2026 by amending Section 397 of the Income-tax Act, 2025, removes an administrative step. It does not abolish TDS on payment to the NRI seller.
The most important message for buyers is therefore simple: no TAN does not mean no TDS.
What changes on 1 October 2026?
Up to 30 September 2026, a resident individual or HUF buying property from an NRI generally continues under the TAN-based non-resident withholding procedure. From 1 October 2026, the specified buyer can use PAN and the notified challan-cum-statement process.
The relaxation is targeted. A company, LLP, partnership, trust or another entity should not assume that it is automatically covered. The buyer’s status and the date of the relevant payment or credit event must be checked.
Where an agreement is signed in September, an advance is paid before 1 October and the balance is paid later, the transaction should be reviewed payment-wise. The registration date alone may not decide the applicable mechanism.
Do not use the normal one per cent property rule
The familiar one per cent deduction and Rs. 50 lakh threshold relate to specified purchases from resident sellers. They should not be imported into an NRI sale.
Payment to a non-resident seller falls under the non-resident withholding framework, now reflected in Section 393(2). The buyer must determine the correct rate and base after considering the seller’s residential status, nature of capital gain, surcharge, cess, tax treaty where relevant and any valid lower-deduction order.
The buyer should also verify residential status under income-tax law. Citizenship, foreign passport, OCI status, an overseas address or an NRO account is not by itself conclusive. The NRI tax consultant guide explains the broader residential-status, capital-gain and FEMA issues.
Why lower TDS planning matters
TDS on gross consideration can block a large amount even when the seller’s actual capital gain is much smaller. If the property has a substantial acquisition cost, improvement expenditure, brought-forward capital loss or an eligible reinvestment exemption, the NRI seller should consider a lower or nil deduction application before substantial consideration is released.
Under the 2026 framework, Form 128 is used for an application under Section 395(1), replacing the earlier Form 13 route. Form 129 provides a payer-side mechanism in appropriate cases for determining the amount chargeable to tax.
Waiting until after the full payment defeats much of the practical benefit. The sale agreement should therefore align the payment schedule with the expected lower-TDS process.
Reporting and documentation
For non-salary payments to a non-resident, Form 144 replaces the earlier Form 27Q under the new framework. Buyers should preserve the agreement, seller’s PAN, residential-status declaration, lower-deduction certificate where applicable, challans, return acknowledgements and TDS certificate. The buyer may also review the practical TDS on property sold by an NRI checklist before releasing consideration.
The seller should reconcile the credit with Form 26AS and AIS and report the capital gain in the appropriate Indian return. If the money will later be remitted abroad, that is a separate stage involving FEMA, authorised-dealer documentation and Forms 145 and 146 where applicable. Relevant service information is available through Wealth4India foreign remittance and repatriation and NRI and FEMA assistance in Dwarka.
Buyer checklist
Before making payment, the buyer should:
1. Confirm whether each seller is resident or non-resident for tax purposes.
2. Identify whether the buyer qualifies for the PAN-based relaxation.
3. Map each payment and credit date around 1 October 2026.
4. Review the seller’s capital-gain estimate and holding period.
5. Check whether a Form 128 or Form 129 route is being used.
6. Deduct and deposit tax through the correct mechanism.
7. Complete Form 144 or the notified PAN-based reporting, as applicable.
8. Ensure the seller receives correct TDS credit.
For connected capital-gain issues, TaxParley’s discussion on Section 54 exemption for multiple houses may also be useful.
Key takeaway
NRI property TDS 2026 becomes procedurally easier for specified buyers from 1 October, but an NRI transaction does not become a resident-seller transaction. Correct residential status, withholding, reporting and lower-TDS planning remain essential. For related capital-gain planning, read TaxParley’s guide to Section 54 exemption for multiple houses.
Frequently asked questions
Does a buyer need TAN for NRI property TDS after 1 October 2026
An eligible resident individual or HUF can use the prescribed PAN-based mechanism for the specified transaction. Companies, firms and other buyers should separately verify whether the relaxation applies to them.
Is TDS on an NRI property purchase only one per cent
No. The one per cent resident-property rule should not be applied to an NRI seller. The buyer must apply the non-resident withholding provisions and any valid lower-deduction order.
Can an NRI seller obtain a lower TDS certificate
Yes, where the statutory conditions are met. The application should be completed before substantial sale consideration is released.
