Major Shift in NRI Property Tax Compliance
Resident individuals and Hindu Undivided Families (HUFs) purchasing immovable property from Non-Resident Indians (NRIs) will see a significant change in tax compliance requirements effective October 1, 2026. From this date, eligible buyers will be permitted to deposit Tax Deducted at Source (TDS) using their Permanent Account Number (PAN), thereby removing the current mandate to first obtain a Tax Deduction and Collection Account Number (TAN).
Until September 30, 2026, buyers must continue to adhere to the existing regulations, which include securing a TAN before remitting TDS for such property transactions.
TDS Rates for NRI Property Sellers
Transactions involving NRI sellers are subject to a distinct TDS regime compared to sales by resident Indians. Notably, there is no minimum sale consideration threshold for TDS deduction when the seller is an NRI, unlike the over Rs 50 lakh limit for resident sellers.
The applicable TDS rate is determined by the nature of the capital gains:
- Long-Term Capital Gains (LTCG): For immovable property held for more than two years (as per new tax law), the TDS rate is 12.5% (plus applicable surcharge and cess).
- Short-Term Capital Gains (STCG): For property held for two years or less, TDS is deducted at the NRI's slab rates (plus surcharge and cess).
Chartered Accountant Suresh Surana notes that these rates are governed by Section 393(2), Table Sl. No. 17 of the Income-tax Act, 2025.
Why Proof of TDS Payment is Crucial
Neeraj Agarwala, Senior Partner at Nangia & Co LLP, highlights that the TDS rate on property sales by NRIs is considerably higher than the 1% applicable under Section 194-IA for resident sellers. Consequently, many state sub-registrar offices demand proof of TDS payment during the property registration process.
Agarwala emphasizes that buyers must ensure the correct TDS amount has been deposited and retain all necessary documentation, such as the TDS Certificate (in cases of lower or no deduction) or the TDS challan, to facilitate smooth registration.
Obtaining the TDS Challan and Form Changes
The process for paying TDS has also been updated. According to Surana, an online challan facility became available from April 1, 2026, as part of the standard TDS compliance system. The challan is automatically generated when payment is made through the income-tax portal, eliminating the need for advance procurement.
Furthermore, Form 27Q is being replaced by Form 144 under the Income-tax Rules, 2026, with a filing due date before July 31, 2026.
Online Payment Process
Buyers are required to log in to the Income-tax portal using their TAN credentials (until October 1, 2026, after which PAN will suffice for eligible individuals/HUFs). Under the "e-Pay Tax" module, they must enter TDS details, specifying whether the seller is a company or non-company deductee, along with their residential status. The appropriate deduction description and other TDS particulars must also be selected.
The tax must be deposited within seven days from the end of the month in which the TDS was deducted.
Continued TAN Requirement Until October 2026
For any NRI property sales completed before October 1, 2026, the buyer remains obligated to obtain a TAN and comply with the filing requirements under Form 144 (formerly Form 27Q) of the Income-tax Rules, 2026.
The amendment, introduced under Section 397(1)(c) of the Income-tax Act, 2025, by the Finance Act, 2026, permits resident individuals and HUFs to use their PAN for TDS deposits under Section 393(2) [Table: Sl. No. 17] only from the specified implementation date.
Applying for TAN (Pre-October 2026)
For transactions occurring before the rule change, resident buyers must apply for a TAN. Agarwala outlines the online application process:
- Complete the online application form and send the duly signed acknowledgment, along with specified identity, address, and date of birth proofs, to Protean.
- Superscribe the envelope with "APPLICATION FOR TAN - Acknowledgment Number." The application will be processed upon receipt of the signed acknowledgment and fee payment.
It's important to note that joint buyers must obtain separate TANs to deposit their respective shares of the applicable TDS. This will change for eligible individuals and HUFs post-October 1, 2026, when a single PAN will suffice.