Buying Property From an NRI Seller: The TDS the Buyer Must Handle (Form 27Q, Not 26QB)

If the person selling you the flat is an NRI, the tax rules flip onto you. You get a TAN, you deduct tax on the whole sale price, and you file Form 27Q. 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 Form 26QB online with the seller's PAN, done in an afternoon. Buying from an NRI runs on a different statute and a different form. Get it wrong and the money you deducted never reaches the seller's tax record. We have seen it. 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 195, not Section 194-IA

When the seller is a resident, the buyer deducts under Section 194-IA: 1% of the price, only if the price crosses Rs 50 lakh, filed on Form 26QB.

When the seller is an NRI, none of that applies. The buyer deducts under Section 195, which governs payments to non-residents. Section 195 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 Section 195 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, Section 195 applies regardless of the sale value, even on a property worth Rs 25 lakh.

You need a TAN before you deduct a rupee

Section 194-IA lets a resident buyer deduct with just a PAN. Section 195 does not. The buyer must obtain a TAN (Tax Deduction Account Number) under Section 203A before deducting TDS from an NRI seller. A PAN does not cover it.

Points that catch people:

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.

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 roughly Rs 25 lakh to 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 Form 27Q, not 26QB

This is the error that voids the credit. Form 27Q, not Form 26QB.

The income tax department states it in its Income Tax Forms FAQ: Form 26QB, 26QC, 26QD and 26QE are available only to resident deductees. If the seller or deductee is a non-resident, the applicable form is Form 27Q. 26QB has no field that maps a deduction to a non-resident's record. File the NRI deduction on 26QB and the system has nowhere to post the credit. The seller's Form 26AS stays blank for that amount. They cannot claim it against their tax. They cannot get it refunded without a fight.

The mechanics:

The fix for deduction-on-full-value: Section 197

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 197 closes it. The NRI seller applies to the Assessing Officer in Form 13 for a lower or nil deduction certificate. 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.

What the buyer should do:

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 197 certificate.

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

Yes. Section 195 read with Section 203A requires the buyer to obtain a TAN before deducting any TDS from an NRI seller. A PAN is not enough, unlike a purchase from a resident under Section 194-IA. Joint buyers each need their own TAN. Apply early, because you cannot deposit the tax or file Form 27Q without it.

Is it Form 26QB or 27Q for buying from an NRI?

Form 27Q, not 26QB. The income tax department restricts Form 26QB to resident sellers. For a non-resident seller, the deduction goes on Form 27Q, filed quarterly. Use 26QB by mistake and the credit never posts to the NRI seller's tax record, so they cannot claim or refund the tax you deducted. Issue Form 16A within 15 days of the return deadline.

Why do buyers avoid buying property from NRIs?

Because the compliance lands on the buyer and the cash hit is steep. You obtain a TAN, deduct 12.5% to 30% plus surcharge and cess on the full price, deposit it, and file Form 27Q right. One wrong form voids the seller's credit and triggers disputes. A Section 197 certificate from the seller shrinks the deduction and cuts most of the friction.

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

66 MG Road manages property for NRI owners across Mumbai, Pune, Bangalore, Hyderabad, Chennai, and Gurgaon. 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 27Q filing, and any Section 197 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

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