Last updated: October 2026  |  Applies under the Income-tax Act, 2025

If you are a resident individual or HUF buying a house, flat or plot from a Non-Resident Indian (NRI), you have always had to deduct TDS from the price. Until now, that also meant applying for a Tax Deduction and Collection Account Number (TAN) just for this one transaction, and then filing a quarterly TDS return.

From 1 October 2026, that is no longer required. Eligible buyers can deduct, deposit and report the TDS using their own PAN, through a single online challan-cum-statement in Form 141, in much the same way buyers from resident sellers have done for years.

No TAN does not mean no TDS. Only the paperwork has become simpler. The obligation to deduct tax, the rates and the consequences of getting it wrong are all unchanged.

This guide explains what has changed, who can use the new process, how much TDS to deduct, how to file, and the mistakes buyers most often make.

What Has Changed From 1 October 2026?

The Finance Act, 2026 removed the TAN requirement for this category of buyer. The CBDT then notified the procedure through the Income-tax (Fifth Amendment) Rules, 2026 (Notification No. 121/2026 dated 22 September 2026), effective 1 October 2026.

Transition: what matters is the date on which TDS is deducted (that is, the date of payment or credit to the seller, whichever is earlier), not the date of the agreement. If part of the price was paid, and TDS deducted, before 1 October 2026, that deduction follows the old TAN route. Instalments paid on or after 1 October 2026 can use Form 141.

Who Can Use the PAN-Based Process?

The relaxation is narrow. It applies only when all of the following are true:

• The buyer is a resident individual or HUF
• The asset is immovable property (land, building, flat, or part of a building)
• The seller is a non-resident

Companies, firms, LLPs, trusts and other buyers are not covered. They still need a TAN and must file the quarterly TDS statement (Form 144) for payments to non-residents.

Does TDS Still Apply? Yes — and the Rules Differ From Resident Sellers

Under the Income-tax Act, 2025, TDS on payments to a non-resident is governed by section 393(2), Table Sl. No. 17 (earlier section 195 of the 1961 Act). Two points catch many buyers out:

• There is no ₹50 lakh threshold. The threshold applies only when the seller is resident. When the seller is an NRI, TDS applies whatever the price.
• The rate is not 1%. The 1% rate is for resident sellers. For an NRI seller, the rate depends on whether the gain is long-term or short-term (see below).

How Much TDS Should Be Deducted?

Surcharge and cess are added on top. For long-term gains of an individual seller, surcharge is 10% where the amount exceeds ₹50 lakh and 15% where it exceeds ₹1 crore (capped at 15% for these gains), plus 4% Health and Education Cess. At the top end, the effective rate for a long-term gain is therefore about 14.95%. For short-term gains, surcharge rises with the amount, so the effective rate can be higher.

Indexation is not available to NRIs. The option to pay 20% with indexation on property acquired before 23 July 2024 is available only to resident individuals and HUFs. An NRI seller is taxed at 12.5% without indexation.

On what amount is TDS deducted?

In law, tax is deducted on the portion of the payment that is chargeable to tax, i.e. the seller’s capital gain. In practice, a buyer has no reliable way to compute the seller’s cost and gain, so TDS is usually deducted on the full sale price unless the seller produces a certificate from the Income Tax Department.

Lower or nil deduction certificate

An NRI seller whose actual gain is small (or who has a loss) can apply for a lower or nil deduction certificate under section 395 of the Income-tax Act, 2025 (earlier section 197), in Form 128 (earlier Form 13). The buyer then deducts at the rate stated in the certificate. Form 141 Schedule E has a field to report the certificate. Because the certificate takes time to obtain, the seller should apply well before the registration date.

Does a tax treaty (DTAA) help?

Rarely, for property. Most of India’s tax treaties allow India to tax gains from immovable property situated in India, so a treaty seldom reduces TDS on a property sale. The seller’s Tax Residency Certificate should still be kept on file if any treaty position is taken.

Step-by-Step: TDS Without TAN

1. Confirm the seller’s residential status. Take a written declaration from the seller and keep supporting documents (passport, visa, overseas address).
2. Obtain and verify the seller’s PAN. Without a valid PAN, a higher rate of TDS can apply.
3. Work out the TDS. Identify whether the gain is long-term or short-term, apply the rate, surcharge and cess, and check for a lower or nil deduction certificate.
4. Deduct TDS from each payment, including advances and instalments.
5. File Form 141 (Schedule E) using your PAN, quoting the seller’s PAN, and pay the TDS, within 30 days from the end of the month of deduction. Joint buyers each file their own Form 141 for their share; for instalments, give details of earlier payments and acknowledgements.
6. Issue Form 132 (the TDS certificate) to the seller.
7. Keep the records — acknowledgement, challan, certificate and transaction documents.

Documents to Keep

• Buyer’s and seller’s PAN
• Agreement to sell and sale deed
• Seller’s declaration of residential status and supporting documents
• Seller’s Tax Residency Certificate (where a treaty position is taken)
• Lower or nil deduction certificate (if any)
• Payment schedule and bank records for each payment
• Form 141 acknowledgements, challans and Form 132 certificates

Common Mistakes Buyers Make

1. Assuming no TAN means no TDS. The obligation continues.
2. Applying 1% because the price is under ₹50 lakh. Neither the 1% rate nor the threshold applies to NRI sellers.
3. Ignoring surcharge and cess. These must be included in the TDS amount.
4. Accepting indexation for an NRI seller. The 20%-with-indexation option is for residents only.
5. Deducting on the gain without a certificate. Unless the seller has a lower deduction certificate, deduct on the full price.
6. Missing advances and instalments. TDS applies to each payment, not just the final one.
7. Using the new process when not eligible. A company or firm buyer still needs a TAN.
8. Not issuing Form 132. The seller needs it to claim credit for the tax.

What If TDS Is Not Deducted or Paid Correctly?

The buyer can be treated as an “assessee in default” for the shortfall. Interest applies at 1% per month from the date tax was deductible until it is deducted, and 1.5% per month from deduction until it is paid. A late fee of ₹200 per day applies for late filing of the statement (capped at the TDS amount), and penalties may also apply. Errors should be corrected promptly.

Resident Seller vs NRI Seller at a Glance

Conclusion

The removal of the TAN requirement is a welcome simplification for individuals and HUFs buying property from NRIs. A one-time buyer no longer needs to obtain a TAN or file quarterly returns. A single Form 141 filed with their PAN is enough.

The substance, however, is unchanged. The buyer must still confirm the seller’s status, apply the right rate with surcharge and cess, deduct on each payment, file on time and issue the certificate. With large sums involved, it is worth getting this right before the first payment is made.

How Aplite Advisors Can Help

• Computing TDS, including surcharge, cess and the holding-period position
• Assisting NRI sellers with lower or nil deduction certificates (Form 128)
• Filing Form 141 and issuing Form 132
• Reviewing transaction documents and the compliance trail

For assistance with a property transaction involving an NRI seller, you may contact Aplite Advisors.

Disclaimer: This article is for general information only and reflects the law as of October 2026. It is not legal or tax advice. Please seek professional advice on the facts of your transaction before acting.