From 1 October 2026, a resident individual or HUF buying immovable property from an NRI does not need a TAN to deduct and deposit TDS. You can now pay and report the tax using your own PAN through Form 141, the challan-cum-statement, by filling the newly inserted Schedule E. The TDS rate and the amount on which tax is deducted have not changed. Only the paperwork has.

This is based on the Income-tax (Fifth Amendment) Rules, 2026, notified by CBDT vide G.S.R. 830(E) dated 22 September 2026, effective 1 October 2026, under Section 393(2) of the Income-tax Act, 2025.

If you are buying a flat, house, plot or commercial unit from an NRI, this is probably the most useful compliance change of the year for you. Until now, this was the one property deal where an ordinary household buyer had to register as a deductor, get a TAN, file a quarterly TDS return and issue a certificate to the seller, all for a single transaction. Most buyers had never heard of a TAN until their lawyer or banker said the word. Plenty found out only when a late-filing notice landed.

This guide is written for the buyer. If you are the NRI selling, our guides on TDS on sale of property by NRI and the lower or nil TDS certificate (Form 128) cover your side.

What Changed on 1 October 2026?

The CBDT amended three rules and two forms. Read together, they move NRI-seller property deals onto the same simplified track that resident-seller purchases have always used.

Old route vs new route

Here is the change at a glance.

What Has Not Changed

The relief is procedural. It is not a tax cut, and the headlines can give the wrong impression.

• The rate is the same. Long-term capital gains still attract TDS at 12.5% plus surcharge and cess. Short-term gains are deducted at the applicable slab rate, which in practice means buyers deduct at 30% plus surcharge and cess.
• There is still no threshold. The ₹50 lakh floor applies only when the seller is resident. A ₹20 lakh flat bought from an NRI still attracts TDS.
• The base is still wide. Unless the NRI seller holds a lower or nil deduction certificate under Section 395(1), or the buyer has a certificate under Section 395(2), tax is deducted on the sale consideration, not on the seller's actual gain.
• The buyer is still liable. Short or late deduction brings interest and penalty on the buyer, not the seller.

Section 393(2) vs Section 194-IA: How an NRI Deal Differs From a Resident Deal

Buying from an NRI and buying from a resident are two different compliance worlds, even after the 2026 simplification. This table is the one most buyers get wrong.

Note on holding period: property is long-term when held for more than 24 months. Anything shorter is short-term and is deducted at slab rates, which usually means 30% plus surcharge and cess.

Who Can Use the New Route (and Who Can't)

The test is the buyer's residential status, not citizenship or where the money comes from.

One point that catches people out: an OCI cardholder who is resident in India for the tax year can use this route when buying from an NRI. An NRI buying from another NRI cannot, because the deductor must be resident.

What Schedule E of Form 141 Asks For?

Schedule E is far more detailed than the form resident-seller buyers are used to. Here is what each block covers and where buyers usually get stuck.

If the NRI seller has no PAN

Normally, no PAN means a higher TDS rate. Schedule E lets you furnish the seller's tax residency certificate number and foreign tax identification number instead, in line with Rule 217, so the higher rate does not apply.

This only works if the seller actually holds a valid TRC. Without one, you are back to the higher rate. Our advice is still to get the seller a PAN well before the deal, because they will need it for Form 128, their Indian return and any refund anyway.

How Do You Deduct and Deposit TDS When Buying From an NRI? Step by Step

You deduct TDS on each payment, deposit it with Form 141 using your PAN, and hand the seller a certificate. Here is the full sequence.

1. Confirm the seller's residential status with documents, not a verbal declaration. Passport stamps and the seller's own tax filings help.
2. Ask whether the seller holds a Section 395(1) certificate (applied for through Form 128). If yes, get a copy and deduct only at the rate on it.
3. Collect the Schedule E details from the seller before the agreement is signed. Use the checklist below.
4. Work out the TDS on each payment, including surcharge and cess.
5. Pay the balance to the seller and deposit the TDS by filing Form 141 with Schedule E on the e-filing portal, using your PAN, within the prescribed due date.
6. Issue the TDS certificate to the NRI seller through the simplified route once the deposit is processed.
7. Repeat for every instalment, quoting the previous acknowledgement number each time.

When is the TDS due?

Form 141 follows the challan-cum-statement timeline that resident-seller buyers already use, so the deposit is tied to the month in which you deducted. Miss it and interest runs at 1% a month for late deduction and 1.5% a month for late deposit, plus late-filing fees. Deposit early rather than on the last day; bank cut-offs cause more defaults than forgetfulness does.

Worked Example: TDS on a ₹1.2 Crore Flat Bought From an NRI

Numbers make this clearer than rules do.

Mr. and Mrs. Sharma, both resident, jointly buy a flat in Gurugram from an NRI based in Dubai for ₹1.2 crore. The seller has held the flat for six years, so the gain is long-term. No lower deduction certificate is in place.

Two things stand out. Each spouse is a separate deductor and files a separate Form 141, which the notes to Schedule E state expressly. And if the seller's actual gain was only ₹25 lakh, nearly ₹18 lakh is still withheld unless a certificate is in place.

That gap is exactly why sellers who plan ahead apply for a lower deduction certificate before the agreement, and why buyers should raise it early.

How to Reduce the TDS Legally

The only clean way to cut the deduction is a certificate from the Income Tax Department, not a private arrangement with the seller.

• The seller applies under Section 395(1) using Form 128 (the successor to the old Form 13) for a lower or nil deduction certificate.
• The department fixes a rate based on the seller's estimated capital gain rather than the full sale price.
• The buyer deducts only at the certified rate and enters the certificate number in Schedule E.
• A buyer can also apply under Section 395(2) in limited cases.
• Apply well before the agreement. These certificates take weeks, not days.

Never agree to deduct less because the seller says their gain is small. If the department disagrees later, the shortfall, interest and penalty land on you.

Documents to Collect Before You Sign

Put these in writing, ideally as an annexure to the agreement to sell, so nothing is chased on the day of payment.

• PAN of each seller, or TRC number and foreign TIN where there is no PAN
• Address in the country of residence, phone number and email of each seller
• Each seller's share of the sale consideration
• Date of acquisition, to decide long-term or short-term
• Whether the seller is opting out of the default tax regime for the year
• Copy of any lower or nil deduction certificate under Section 395(1)
• Bank details of the NRO account where the balance will be credited
• Sale agreement, title documents and stamp duty valuation
• Your own PAN and proof of your residential status

Common Mistakes Buyers Make

Most defaults come from a handful of avoidable errors.

Leaving out surcharge and cess

The form states that the TDS amount must include surcharge and cess. Deducting a flat 12.5% on a ₹1.5 crore deal leaves a shortfall of more than ₹3.6 lakh, and that shortfall is your problem.

Joint buyers filing one form

Couples assume one form covers the purchase because the flat is one asset. It doesn't. Each deductor files separately for their share.

Treating it like a resident-seller deal

The 1% rate and the ₹50 lakh threshold do not apply. Buyers still deduct 1% because a property portal showed that figure.

Relying on the seller's word about residency

If the seller turns out to be non-resident and you deducted as though they were resident, the shortfall is yours to fund.

Losing acknowledgement numbers

Every instalment filing needs the previous acknowledgement number. Keep a simple log from the first payment.

Using the new route for a payment made before 1 October 2026

On our reading, the new route applies from the date the amended rules take effect. Deductions made earlier follow the older TAN-based process. If your deal straddles the date, take advice on the earlier instalments.

What This Means for the NRI Seller?

Sellers gain too, mostly in speed. Under the old system, TDS credit appeared only after the buyer filed a quarterly return, and many buyers filed late or not at all.

With one Form 141 per transaction, the credit and the certificate should reach the seller faster. That makes it easier to file the Indian return, claim a refund where the actual gain is lower than the amount withheld, and move on to repatriation.

Repatriation itself still needs the usual remittance paperwork through the authorised dealer bank, including the chartered accountant certification, before funds leave the NRO account. For the full seller-side process, see our Sale of Property in India services and our guide on capital gains tax for NRIs.

Need Help With a Purchase From an NRI?

We handle both sides of these deals every week: computing the correct TDS for resident buyers, filing Form 141 with Schedule E, and helping NRI sellers get lower deduction certificates and repatriate their proceeds.

If you are about to sign with an NRI seller, one short call before the first payment can prevent an expensive correction later.

Book a consultation: WhatsApp +91-98999 69645 or explore our NRI and OCI Services