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By , founder·11 min read·Published 2026-06-19·Updated 2026-10-11

Short answer: If the person selling you the flat is an NRI, the tax rules flip onto you. You deduct tax on the whole sale price under section 393(2) of the Income-tax Act, 2025 (old section 195), not 1% over ₹50 lakh. From 1 October 2026 a resident individual or HUF buyer needs no TAN and pays and reports on Form 141 within 30 days from the end of the month of deduction, with the seller's overseas details in Schedule E. A company, firm, LLP or trust buyer holds a TAN and files Form 144.

Buying Property From an NRI Seller: The TDS the Buyer Must Handle (Form 141 or Form 144)

If the person selling you the flat is an NRI, the tax rules flip onto you. You deduct tax on the whole sale price under section 393(2) of the Income-tax Act, 2025. From 1 October 2026 a resident individual or Hindu undivided family buyer needs no TAN and reports on Form 141 with the seller's overseas details. A company, firm, LLP or trust buyer still holds a TAN and files Form 144. One wrong form wipes out the seller's tax credit and stalls the deal.

Most buyers know the routine for a resident seller. Pay over Rs 50 lakh, deduct 1%, file the challan-cum-statement online with the seller's PAN, done in an afternoon. Buying from an NRI runs on a different provision and a different part of the form. Get it wrong and the money you deducted never reaches the seller's tax record. We have seen it. Under the old rules the buyer filed 26QB instead of 27Q. The TDS credit never appeared in the NRI seller's records. The deduction happened. The credit vanished. The seller chased it for months.

Here is what the buyer has to do.

The rule: section 393(2), not the resident route

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 on 1 April 2026 and renumbered the provisions. Old numbers are in brackets below.

When the seller is a resident, the buyer deducts under section 393(1) (old section 194-IA): 1% of the price, only if the price crosses Rs 50 lakh, reported on Form 141, the challan-cum-statement that replaced Form 26QB.

When the seller is an NRI, none of that applies. The buyer deducts under section 393(2), Table S.No. 17 (old section 195), which governs payments to non-residents. It has no Rs 50 lakh floor. TDS applies on every rupee of the sale consideration at any price. A Rs 30 lakh flat from an NRI triggers full non-resident TDS. The same flat from a resident triggers none.

A CAclubindia analysis of an April 2026 purchase states it plain: the Rs 50 lakh threshold that protects buyers of resident-owned property does not apply to NRI sellers. For them, the non-resident provision applies regardless of the sale value, even on a property worth Rs 25 lakh.

Which buyer are you? TAN or no TAN

Section 397(1)(a) (old section 203A) requires every person deducting tax to apply for a TAN. Section 87 of the Finance Act, 2026 changed that for this transaction from 1 October 2026. A resident individual or Hindu undivided family deducting tax on the purchase of immovable property under section 393(2) [Table: Sl. No. 17] is not required to apply for one.

  • Resident individual or HUF, payment on or after 1 October 2026: no TAN application. You report on Form 141, which asks for your PAN and carries no TAN field. If you already hold a TAN, section 397(1)(b) still makes you quote it.
  • Company, firm, LLP or trust: outside the exemption. You obtain a TAN before you deduct a rupee and report on Form 144.
  • Payments made up to 30 September 2026: the old position held, and every buyer needed a TAN.

Points that catch people:

  • Joint buyers each file their own form. Note 11 to Form 141 says that where there is more than one buyer, each files a separate form.
  • A TAN application takes time. If you are a company or firm buyer, apply early. You cannot deposit the TDS or file the statement without it, and a botched deduction step fouls the registration of the sale deed.

The rate: 12.5% on long-term gains, slab rate on short-term, on the full price

The rate turns on how long the NRI held the property.

  • Held more than 2 years (long-term): TDS at 12.5% of the sale consideration for transfers on or after 23 July 2024, the rate set by the Finance Act 2024. Before that date it was 20%.
  • Held 2 years or less (short-term): the gain is taxed at the NRI's slab rate, and TDS follows, up to 30%.

On top of the base rate, add the applicable surcharge and 4% health and education cess. For long-term gains the surcharge on the capital-gains portion caps at 15%. That puts the effective ceiling on long-term TDS at 14.95% (12.5% plus 15% surcharge plus 4% cess). Short-term effective rates run higher because the base is the slab rate.

The hard part for buyers: the law makes you deduct on the entire sale consideration, not on the seller's gain. On a Rs 2 crore flat with a long-term gain, you withhold between Rs 25 lakh and Rs 30 lakh before the seller sees the balance. That is the cash-flow shock that makes buyers walk. There is a fix, and it belongs to the seller. More on that below.

For the seller's side of this same transaction, see our guide on TDS on sale of property by an NRI and the broader NRI selling property in India guide.

File the right form: Form 141 or Form 144

This is the error that voids the credit.

Resident individual or HUF buyer, from 1 October 2026: Form 141. The Income-tax (Fifth Amendment) Rules, 2026, G.S.R. 830(E), notified on 22 September 2026, bring this purchase into Form 141. In Part A, pick the transaction option "Transfer of any immovable property by a non-resident to a resident individual or Hindu undivided family". The resident-seller option is the 1% route and is the wrong line for an NRI seller.

  • Deposit and report together. You pay the tax with the Form 141 challan-cum-statement within thirty days from the end of the month in which you deducted it.
  • Fill Schedule E. It asks for the property address and type, each buyer's PAN and share, and for every seller: PAN if available, name, status, contact number, email id, address in the country where the seller is resident, tax residency certificate number, foreign tax identification number and share of the consideration. It also asks for the agreement and registration dates, the stamp duty value, the sale consideration, and any certificate number under section 395. Note 6(a) makes the seller's contact number, email id and overseas address compulsory whether or not the seller has a PAN. Collect these from the seller before the first payment, because you cannot complete the form alone.
  • Issue Form 132 to the NRI seller within fifteen days from the date the Form 141 is due. This is the seller's proof that you deducted and deposited. Without it, the seller cannot reconcile or repatriate clean. Repatriation has its own paperwork, covered in our guide on repatriating sale proceeds through your NRO account.

Company, firm, LLP or trust buyer: Form 144. Rule 219(1), Table entry 2, of the Income-tax Rules, 2026 sends a deduction from a non-resident under section 393(2) to Form 144 (old Form 27Q), the quarterly statement for payments other than salary made to non-residents. Part A asks for your TAN. Confirm the deposit dates and the certificate you issue the seller with your chartered accountant, because the notifications we cite do not restate them for this route.

The fix for deduction-on-full-value: section 395

The deduction sits on the full price by default. But the tax is owed on the gain. So an NRI seller on a long-held flat with a modest gain has lakhs locked up as TDS against a far smaller real liability. That gap is what makes both sides nervous.

Section 395 (old section 197) closes it. The NRI seller applies to the Assessing Officer in Form 128 (old Form 13) for a lower or nil deduction certificate under section 395(1). The officer computes the expected capital gain and issues a certificate that fixes TDS at the real rate, at times close to nil. The buyer then deducts at the certificate rate instead of on the full consideration. Section 395(2) lets the buyer apply for a determination too, and Schedule E has a field for each certificate number.

What the buyer should do:

  • Ask the seller, in writing, before closing: do you hold a section 395 certificate? If yes, get a copy and deduct at the rate it states.
  • If they do not, you deduct on the full value. You cannot decide on your own to deduct less. Only the certificate authorises a lower rate. Deduct short without one and the shortfall, interest, and penalty land on you, the buyer, not the seller.
  • Build the timeline in. The Form 128 process runs for weeks. A seller who wants a lower deduction starts before the deal is papered, not at registration.

FAQ

What TDS does a buyer deduct when buying from an NRI?

For a long-term holding (over 2 years), 12.5% of the full sale price for transfers on or after 23 July 2024, plus surcharge and 4% cess, with the effective long-term rate at 14.95%. For a short-term holding, the seller's slab rate up to 30% plus surcharge and cess. TDS is on the entire consideration, not the gain, unless the seller holds a section 395 certificate.

Do I need a TAN to buy property from an NRI?

From 1 October 2026, not if you are a resident individual or Hindu undivided family. Section 87 of the Finance Act, 2026 removes your duty to apply for one, and Form 141 asks for your PAN. A buyer who already holds a TAN still quotes it under section 397(1)(b). A company, firm, LLP or trust buyer still needs a TAN and files Form 144. For payments up to 30 September 2026, every buyer needed a TAN.

Is it Form 141 or Form 144 for buying from an NRI?

Form 141 for a resident individual or HUF buyer from 1 October 2026, under the transaction option for a transfer by a non-resident, with Schedule E filled in. Form 144 for a company, firm, LLP or trust buyer. Before 1 October 2026 the answer was Form 27Q, now renumbered Form 144, and never Form 26QB. A resident individual buyer issues Form 132 to the seller within fifteen days from the Form 141 due date.

What does the buyer need from the NRI seller?

For Form 141's Schedule E: the seller's PAN if available, name, status, contact number, email id, overseas address, tax residency certificate number, foreign tax identification number and share of the consideration, plus a copy of any section 395 certificate. The contact number, email id and overseas address are compulsory whether or not the seller has a PAN.

Why do buyers avoid buying property from NRIs?

Because the compliance lands on the buyer and the cash hit is steep. You deduct 12.5% to 30% plus surcharge and cess on the full price, deposit it, and file the right form with the seller's details. One wrong form voids the seller's credit and triggers disputes. The 1 October 2026 change removes the TAN step for resident individuals. A section 395 certificate from the seller shrinks the deduction and cuts most of the remaining friction.

Buying from an NRI, or selling as one? Get the paperwork right the first time

66 MG Road manages property for NRI owners in Delhi NCR and Bangalore. One vetted manager per property. Dated photo proof. Itemized billing. Rent collected straight to your NRO account. When a sale comes up, we coordinate the documentation so the buyer's TDS, the Form 141 or Form 144 filing, and any Form 128 application line up before closing, not after it unravels. See what we do or request a proposal. We will not pretend a deal is simple when it is not. We will make sure the forms are right.

Saurabh Garg, founder, 66 MG Road

Sources

Information on this page is as on 2026-10-11. Rules, rates, deadlines and government portals change without notice, so verify against the official source before you act. This page is for information only. It is not tax or legal advice, and it is not a substitute for a qualified adviser who knows your position.