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If you’re buying property in India from an NRI, the seller’s residential status can change your tax deduction obligations before you make the first payment.
For a payment to a non-resident seller involving a sum chargeable to Indian income tax, Section 393(2), Table Serial No. 17, of the Income-tax Act, 2025 is generally the relevant withholding provision. The resident-seller property TDS rule does not automatically apply.
From 1 October 2026, a resident individual or Hindu undivided family (HUF) buying immovable property from a non-resident seller can use PAN-based Form 141, Schedule E, without obtaining a TAN solely for that transaction. Other purchaser categories continue under the applicable TAN-based procedure.
The buyer must still determine the correct deduction, deposit the tax, report it and issue the appropriate TDS certificate. The seller’s final capital gains liability and ability to remit sale proceeds abroad remain separate questions.
For this article, “NRI seller” means an individual seller who is non-resident under Indian income-tax law for the relevant period, unless stated otherwise. Non-resident companies and other entities require their own rate and compliance analysis.
Why does the seller’s residential status change the buyer’s TDS obligation?
Consider two flats in Pune, each being sold for ₹90 lakh.
The first seller is resident in India for income-tax purposes. The second seller is an Indian citizen living in Dubai who is non-resident for the relevant Indian tax year.
The sale prices are identical. The applicable withholding provisions are not.
For a qualifying purchase from a resident seller, Section 393(1), Table Serial No. 3(i), of the Income-tax Act, 2025 provides the resident-seller property TDS mechanism. The generally applicable rate is 1%, subject to the statutory ₹50 lakh threshold, consideration and stamp duty value conditions, and other applicable provisions.
For a payment to a non-resident seller, Section 393(2), Table Serial No. 17 is the relevant starting point where the payment is a sum chargeable under the Act.
The equivalent provisions under the Income-tax Act, 1961 were Sections 194-IA and 195 respectively.
The resident-seller 1% rate and ₹50 lakh threshold cannot simply be imported into a non-resident property purchase.
This remains important even where the non-resident seller has an Indian PAN, signs the sale deed in India or receives payment into an Indian bank account.
Is every Indian citizen or OCI living abroad non-resident for tax purposes?
No.
Income-tax residential status is determined under the relevant Indian statutory tests for the applicable tax year. Citizenship, OCI status, a foreign address or an NRE account does not independently settle that classification.
A returning Indian may be resident but not ordinarily resident (RNOR), while a person continuing to live abroad may still require a more detailed examination of Indian residence conditions.
At the time of deduction, the buyer should examine the relevant statutory tests, the seller’s declarations and the facts reasonably available. Where later instalments or changed facts affect the position, the classification may need reassessment.
The seller’s residential status under FEMA is separately determined and should not be substituted for the income-tax test.
Which TDS forms apply before and after 1 October 2026?
The procedure changed twice during 2026. First, the Income-tax Act, 2025 came into operation from 1 April 2026. Second, a new PAN-based reporting procedure became effective for specified buyers on 1 October 2026.
| Relevant period | Applicable procedure for a non-resident seller |
|---|---|
| Through 31 March 2026 | Section 195, Income-tax Act, 1961. TAN-based Form 27Q reporting where applicable |
| 1 April to 30 September 2026 | Section 393(2), Income-tax Act, 2025. TAN-based Form 144 |
| From 1 October 2026, eligible resident individual/HUF purchaser | Section 393(2). PAN-based Form 141, Schedule E |
| From 1 October 2026, other purchaser categories | Section 393(2). Applicable TAN-based Form 144 procedure |
The October change was implemented through CBDT Notification No. 121/2026 dated 22 September 2026, issuing the Income-tax (Fifth Amendment) Rules, 2026.
Does the new procedure remove the TDS obligation?
No.
It removes the TAN requirement for the specified buyer category and makes PAN-based payment and reporting available.
The underlying withholding obligation remains. The buyer must identify the chargeable payment, apply the correct deduction provisions and comply with the relevant deadlines.
A company, firm, LLP or non-resident individual purchaser cannot use Schedule E merely because the seller is non-resident. The purchaser must itself satisfy the resident individual/HUF condition.
Nor does the October change retrospectively replace statements required for deductions made under an earlier reporting procedure.
How much TDS must the buyer deduct?
Three amounts must be kept separate.
Sale consideration is what the buyer agrees to pay.
Chargeable income or capital gain is the income considered under the applicable Indian tax computation provisions.
TDS is the amount required to be withheld under the relevant withholding law, having regard to the legally applicable deduction base, rates, surcharge, cess and any valid certificate or determination.
They are connected, but not interchangeable.
Does it matter whether the property gain is long-term or short-term?
Yes.
For ordinary immovable property held as a capital asset, the general long-term holding-period threshold is more than 24 months. Property held for 24 months or less is ordinarily short-term.
The law contains specific rules for particular acquisition modes, including inheritance. An asset held as business inventory also requires a different income classification.
For tax year 2026-27, the Income Tax Department’s published TDS rate table identifies the following base withholding-rate categories for relevant payments to non-resident individuals:
| Income category | Base withholding-rate reference |
|---|---|
| Ordinary long-term capital gains falling within the relevant residual LTCG category | 12.5% |
| Short-term gains falling within the applicable residual income category | 30% |
These are withholding-rate references, before applicable surcharge and cess. They are not statements of the seller’s final effective capital gains tax liability.
They also do not mean that every buyer must deduct 12.5% or 30% of the entire sale consideration.
The legally correct amount depends on the classification of the seller and income, the statutory deduction base, applicable rates and any valid lower or nil deduction certificate or chargeable-proportion determination.
For example, the relevant rate for a foreign company cannot be assumed to be identical to that for a non-resident individual.
A treaty may also require examination, but treaty entitlement must be established under the relevant agreement and domestic-law requirements. It does not automatically eliminate withholding.
Can the buyer deduct tax only on the capital gain calculated by the seller?
The buyer should not assume that a privately prepared capital gains worksheet automatically authorises withholding only on the figure shown in that worksheet.
Section 393(2), Table Serial No. 17 refers to sums chargeable under the Act. Section 395 provides a statutory mechanism for determining the appropriate chargeable proportion where the entire payment is not chargeable.
A seller may have substantial eligible acquisition costs or other relevant computation adjustments. That affects the examination of chargeable income, but it does not make an unsupported private estimate a statutory withholding determination.
The appropriate route must be established before the buyer relies on a reduced deduction base or rate.
How can a lower or nil deduction certificate help?
Section 395 provides two legally distinct mechanisms.
Seller’s application: Section 395(1)
A seller seeking lower or nil deduction may apply under Section 395(1), generally using Form 128 under the Income-tax Rules, 2026.
The application requires the prescribed information supporting the requested deduction treatment.
If an appropriate certificate is issued, the buyer must follow its terms, including the covered payment, permitted rate or nil deduction, identified deductor and validity.
Applying for a certificate does not itself authorise lower deduction. The relevant certificate or determination must be effective.
Buyer’s application: Section 395(2)
The buyer may use Section 395(2) where the buyer considers that the entire sum payable to the non-resident is not chargeable.
Under the prescribed procedure, the buyer can apply through Form 129 for an Assessing Officer’s determination of the appropriate proportion of the payment chargeable to tax.
The tax is then deducted in accordance with that determination.
The distinction matters. One mechanism is initiated by the seller seeking a lower or nil rate. The other is initiated by the buyer seeking determination of the chargeable proportion.
Neither is a substitute for the seller’s final capital gains computation or income-tax return.
When should TDS be deducted and deposited?
For payments covered by Section 393(2), Table Serial No. 17, the general deduction point is the earlier of credit or payment, subject to the applicable statutory provisions.
The first advance payment can therefore matter.
A buyer should not assume withholding begins only when the sale deed is registered or possession is handed over.
Form 141 Schedule E: Eligible resident individual/HUF buyers
For deductions covered by the PAN-based procedure from 1 October 2026, Rules 218(3) and 219(5) prescribe payment and filing within 30 days from the end of the month of deduction.
The corresponding Form 132 TDS certificate is due within 15 days after the Form 141 filing deadline under Rule 215.
For example:
| Event | Date |
|---|---|
| Deduction made | 25 October 2026 |
| Form 141 and tax deposit due | 30 November 2026 |
| Form 132 certificate due | 15 December 2026 |
These are the ordinary statutory deadlines, assuming no applicable extension or exceptional rule.
TAN-based Form 144 procedure
For other applicable non-government deductors, the ordinary deposit deadline is generally the seventh day after the deduction month ends, with a 30 April deadline for March deductions.
Form 144 is filed quarterly.
| Quarter ending | Form 144 due |
|---|---|
| 30 June | 31 July |
| 30 September | 31 October |
| 31 December | 31 January |
| 31 March | 31 May |
The corresponding Form 131 TDS certificate is generally due within 15 days after the relevant statement deadline.
The PAN-based and TAN-based procedures must not be combined merely because the same property transaction is involved.
How does an eligible buyer file Form 141 Schedule E?
The Income Tax Department provides a PAN-login process through its e-filing portal.
The standard sequence is:
- Establish the seller’s relevant tax status and determine the applicable withholding treatment.
- Log in to the e-filing portal and select e-File > e-Pay Tax > New Payment, then the Form 141 facility.
- Select the appropriate deductee category, identify the non-resident seller and choose Schedule E.
- Enter the prescribed property, consideration, ownership, instalment and withholding particulars.
- Complete the challan-cum-statement, pay the tax and retain the acknowledgement.
- Obtain Form 132 through the prescribed certificate system and furnish it to the seller within the applicable deadline.
The Department’s guidance requires information concerning the property, buyers, sellers, ownership shares, total consideration, stamp duty value, payment dates, deduction amount and any relevant Section 395 certificate.
Where there are multiple instalments, prior payment and statement acknowledgement details must be carried forward as prescribed.
The notified Schedule E contains a field for the acknowledgement of a corresponding Form 145 where applicable. That field should not be confused with the buyer’s separate withholding obligation.
What if the property is agricultural land?
Agricultural-land transactions require separate attention.
The notified Schedule E classifies the property as land other than agricultural land, a building or part of a building, or both. It does not provide a generic agricultural-land category within that selection.
The treatment of agricultural land cannot be concluded from the label in the sale deed alone. Its location, statutory character, whether it is a capital asset and the nature of the payment can change the chargeability analysis.
The ordinary Schedule E instructions for residential and commercial property should therefore not be applied to an agricultural-land transaction without resolving those questions.
What documents should the buyer obtain?
A defensible transaction record should connect the parties, property, payment chronology and applicable deduction treatment.
| Information or record | Why it matters |
|---|---|
| Seller’s PAN, if held, and identity particulars | Accurate identification and tax reporting |
| Indian income-tax residential status declaration and supporting facts | Selection of resident or non-resident withholding framework |
| Previous title deed and sale agreement | Seller identity, ownership and transaction terms |
| Ownership shares and joint-party particulars | Allocation of consideration and withholding |
| Advance receipts and payment schedule | Determining credit, payment and deduction chronology |
| Relevant acquisition and holding-period records | Establishing the income classification or supporting a certificate application |
| Valid Section 395 certificate or order, if applicable | Authorised deduction rate or chargeable proportion |
| Prior TDS challans and statement acknowledgements | Instalment and reporting continuity |
| TDS payment and certificate records | Evidence of deduction, deposit and reporting |
Some records supply mandatory reporting particulars. Others are supporting evidence rather than prescribed attachments to every Form 141.
The buyer should understand that distinction.
What if the seller does not have PAN?
Section 397(2) provides for higher-rate deduction in specified cases where a valid PAN is not furnished.
Rule 217 creates a conditional exception for qualifying non-resident payments, including payments on the transfer of a capital asset.
Where the buyer relies on that exception, the non-resident seller must furnish the prescribed information and documents to the deductor. These include the seller’s name, email address, contact number, foreign residential address, foreign tax identification number or permitted equivalent, and a tax-residency certificate where the relevant foreign law provides for issuing one.
The exception is not an unconditional waiver of PAN requirements. Separate PAN requirements associated with particular certificate applications may still apply.
What happens with joint buyers or joint sellers?
One sale deed does not necessarily produce one withholding statement.
If a property has a resident seller and a non-resident seller, their respective shares must be examined under the applicable withholding provisions. An eligible purchaser cannot automatically report both shares under the same Form 141 schedule.
Likewise, where there are multiple buyers, each deductor must report the deduction attributable to that deductor’s share through the applicable process.
The Form 141 Schedule E instructions require each deductor to file separately.
One deductor may include multiple deductees only where the Department’s conditions are met, including the same corporate or non-corporate deductee category and deduction month.
The transaction record must therefore distinguish the ownership shares, persons receiving consideration and persons responsible for deduction.
This is not a substitute for property-title due diligence. Separate legal examination may be necessary for succession, encumbrances, registration, state stamp law, RERA, powers of attorney and the seller’s authority to transfer the property.
What if instalments fall before and after 1 October 2026?
Consider a hypothetical residential property purchase.
A resident individual agrees to buy a flat from a non-resident individual for ₹1.20 crore.
| Payment date | Amount | Applicable procedural question |
|---|---|---|
| 20 September 2026 | ₹20 lakh | Examine the TAN-based Form 144 procedure applicable to the September deduction |
| 25 October 2026 | ₹1 crore | Examine the PAN-based Form 141 Schedule E procedure applicable to the October deduction |
Assume the consideration is not credited before the specified payment dates, the purchaser qualifies for the later procedure and there are no unusual facts changing the time of deduction.
The September deduction ordinarily belongs to the reporting regime applicable before 1 October 2026. The October deduction may be reported under Schedule E, with the earlier instalment acknowledgement details recorded as required.
The later filing does not retrospectively replace the earlier statement.
No TDS amount is calculated in this example because the applicable chargeable amount, income category, rate, surcharge, cess and certificate position have not been established.
The important point is that the date of the sale agreement does not automatically decide the reporting process for every instalment.
What happens if the buyer fails to deduct or deposit the correct tax?
Section 398 of the Income-tax Act, 2025 deals with failures to deduct or pay required tax.
Subject to the statutory conditions and exceptions, the buyer may be treated as an assessee in default and may be liable for interest.
| Default | Statutory interest reference |
|---|---|
| Failure to deduct tax when required | 1% per month or part of a month for the applicable period |
| Deducted tax not paid | 1.5% per month or part of a month for the applicable period |
Section 398(2) also provides conditional relief from being treated as an assessee in default where the payee has included the income in the relevant return, paid the tax and the prescribed accountant’s certificate is furnished.
This relief is subject to its conditions and does not necessarily extinguish interest.
What if the tax was paid but the statement is wrong or late?
This is a different default.
An incorrect PAN, seller category, month, deduction amount or certificate reference may require correction through the prescribed statement process.
Section 427 provides a fee of ₹200 per day for delay in furnishing a covered TDS statement, subject to the statutory cap based on the tax deductible or collectible.
A reporting error does not automatically establish that the underlying TDS was never deducted or deposited.
The Department currently directs Form 141 corrections through TDS-TRACES, rather than the original e-filing submission screen. Other applicable penalties must be distinguished from the filing fee and interest.
Does TDS settle the seller’s final tax or permit repatriation?
No.
After the buyer complies with withholding, the seller must separately determine the final Indian income-tax liability, including the applicable capital gains computation, permitted reliefs, treaty treatment where relevant, and credit for tax deducted.
The buyer’s TDS certificate documents tax withheld. It does not establish the seller’s final taxable gain.
Nor does receipt of the proceeds in an Indian bank account automatically establish permission to remit those funds abroad.
The seller’s position under FEMA, how the property was acquired and funded, the type of property, the relevant bank route and applicable RBI permissions can affect repatriation. Separate outward remittance documentation may also be required.
The seller’s country of residence may impose its own tax or reporting rules. US, UK and UAE consequences must be considered separately under the relevant country’s law by an appropriately qualified professional there.
For the same property sale, the buyer’s withholding, the seller’s final tax and the seller’s right to move money abroad are different questions. Completing one does not automatically settle the others.
What should the buyer establish before releasing payment?
The buyer should have a defensible basis for the seller’s Indian tax status, ownership shares, applicable withholding provision, deduction timing, chargeable amount, rate and any valid certificate or determination.
The buyer must then follow the prescribed deposit, reporting and certificate requirements applicable to the particular purchaser and deduction period.
For eligible resident individuals and HUFs, the 1 October 2026 Form 141 Schedule E change removes the specified TAN requirement. It does not remove the obligation to deduct and report the correct tax.
The sale deed records the property transfer. It does not, by itself, establish that the buyer has discharged every withholding obligation.
Primary official sources
- Income-tax Act, 2025, Section 393
- Income-tax Act, 2025, Section 395
- CBDT Notification No. 121/2026
- Income-tax Rules, 2026, Rule 215
- Income-tax Rules, 2026, Rule 217
- Income-tax Rules, 2026, Rule 218
- Income-tax Rules, 2026, Rule 219
- Income Tax Department, Form 141 Schedule E guidance
- Income Tax Department, TDS rates for tax year 2026-27
Effective-period and educational notice
This article explains the India-side withholding position researched as at 22 October 2026. Transactions relating to earlier legal periods require the provisions and forms applicable at the relevant time.
It provides general educational information, not a determination of any particular buyer’s or seller’s tax liability, residential status, FEMA position, property title, repatriation entitlement or foreign-country tax position. The legal result depends on the parties, dates, ownership, payment structure, documents and law in force for the relevant period.
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