TDS on NRI Property Sale Under Section 195 for Buyers in 2026
Last updated: 22 October 2026
Quick Answer: TDS on NRI property sale is 12.5% of long-term gains or 30% of short-term gains, plus surcharge and cess, deducted by the buyer. The deduction has no ₹50 lakh threshold, and from 1 October 2026 a resident individual or HUF buyer deposits it by PAN through Form 141 Schedule E, without a TAN.
For TDS on sale of property by NRI, section 195 of the Income-tax Act, 1961 is the withholding rule that makes the buyer, not the NRI seller, answerable for the tax. From tax year 2026-27 the same duty sits in section 393(2) of the Income-tax Act, 2025. Part II of the First Schedule to the Finance Act, 2026 keeps the TDS rates at the FY 2025-26 levels.
How much TDS does a buyer deduct under section 393(2) of the Income-tax Act, 2025 (earlier section 195)?
On long-term capital gains the buyer deducts 12.5%, and on short-term gains 30% (35% for a foreign company), then adds surcharge and 4% Health and Education Cess. A property held for more than 24 months gives a long-term gain, according to the Income Tax Department's FAQ on the TDS rate when a non-resident sells immovable property. For transfers on or after 23 July 2024 the rate is 12.5%; earlier transfers used 20%.
| Holding period | Base rate | With surcharge and 4% cess |
|---|---|---|
| Over 24 months, gain up to ₹50 lakh | 12.5% | 13% |
| Over 24 months, gain above ₹50 lakh | 12.5% + 10% surcharge | 14.3% |
| Over 24 months, gain above ₹1 crore | 12.5% + 15% surcharge (the cap) | 14.95% |
| 24 months or less, individual | 30% | Surcharge of 10% above ₹50 lakh, 15% above ₹1 crore and 25% above ₹2 crore (37% above ₹5 crore outside the default regime), plus 4% cess |
| 24 months or less, firm | 30% | Surcharge of 12% above ₹1 crore, plus 4% cess |
Surcharge stops at 15% for long-term gains taxed under section 112 of the Income-tax Act, 1961 (FY 2025-26). From tax year 2026-27 the same cap covers gains under section 197 of the Income-tax Act, 2025 (Finance Act, 2026, First Schedule, Part II). For an NRI selling property in India, TDS has no minimum.
TDS on NRI property sale with an example
Take an illustrative flat sold in November 2026 for ₹1.6 crore, held since 2015, with a long-term gain of ₹60 lakh. Tax at 14.3% on that gain is ₹8,58,000. If the buyer cannot confirm the gain and deducts 14.95% on the full ₹1.6 crore, ₹23,92,000 is withheld, and about ₹15.3 lakh waits for the seller's refund.
Section 195 of the Income-tax Act, 1961 applies the rate to the "sum chargeable" to tax, and the Department's FAQ describes the deduction as made from the gains. A buyer who deducts short can be treated as an assessee in default and recovered from with interest. Either the seller's certificate or the Assessing Officer's determination on the buyer's application under section 395(2) of the Income-tax Act, 2025 is the clean way to fix the figure.
How can an NRI seller get a lower TDS certificate under section 395(1) of the Income-tax Act, 2025?
Only the NRI seller can apply, in Form 128 under section 395(1) of the Income-tax Act, 2025 (Form 13 under section 197 of the 1961 Act), before the transaction completes. The buyer then deducts at the certificate's rate after checking its rate, amount limit and validity. The lower TDS certificate guide covers eligibility, documents and the TRACES filing.
Does a buyer still need a TAN for TDS on property purchase from NRI?
A resident individual or HUF buyer does not need a TAN to deposit this TDS for deductions on or after 1 October 2026. Section 87 of the Finance Act, 2026 substituted section 397(1)(c) of the Income-tax Act, 2025 from 1 October 2026, so the buyer now pays and reports through Form 141 Schedule E from the PAN login on the e-Filing portal.
Before 1 October 2026, the Schedule E user manual notes, such a buyer had to obtain a TAN and file Form 144 on TRACES. Schedule E is limited:
- Who may use it: only a resident individual or resident HUF buyer. Companies, firms and other buyers still use TAN-based statements.
- Deposit: within 30 days from the end of the month of deduction, with the challan-cum-statement.
- Joint buyers: each buyer files a separate Form 141 for that buyer's share.
- Mixed sellers: a resident co-owner goes in Schedule B and the NRI co-owner in Schedule E.
- No PAN from the seller: the seller's name, e-mail id, contact number, address abroad, tax identification number and tax residency certificate (where issued) avoid the higher rate under section 397(2) of the Income-tax Act, 2025.
How is TDS on NRI property sale in India different from a resident seller?
A resident seller triggers 1% TDS only where the consideration or stamp duty value is ₹50 lakh or more, under section 194-IA of the 1961 Act and section 393(1) Table serial number 3(i) of the 2025 Act. An NRI seller triggers TDS at the rates in force on every rupee chargeable, with no threshold.
| Point | Resident seller | NRI seller |
|---|---|---|
| Provision (tax year 2026-27) | Section 393(1), Table 3(i) | Section 393(2), Table 17 |
| Rate | 1% of consideration or stamp duty value, whichever is higher | 12.5% or 30%, plus surcharge and cess |
| Threshold | ₹50 lakh | None |
| Buyer's filing | Form 141 Schedule B | Form 141 Schedule E (resident individual or HUF buyer) or Form 144 |
Residential status, not passport or citizenship, decides the column.
Which TDS forms changed under the Income-tax Act, 2025?
Every buyer form was renumbered on 1 April 2026 with the same rates and thresholds. Income-tax Act, 2025 section numbers govern TDS on sale of property by NRI where the earlier of payment or credit falls on or after that date.
| Item | FY 2025-26 (Income-tax Act, 1961) | Tax year 2026-27 (Income-tax Act, 2025) |
|---|---|---|
| Duty to deduct on a payment to an NRI | Section 195 | Section 393(2), Table 17 |
| Lower or nil deduction certificate | Section 197, Form 13 | Section 395(1), Form 128 |
| Quarterly statement, non-resident payments | Form 27Q | Form 144 |
| TDS certificate to the seller | Form 16A | Form 131 (Form 132 under Schedule E) |
| PAN-based challan-cum-statement | Not available for an NRI seller | Form 141 Schedule E (from 1 October 2026) |
| Remittance forms | Forms 15CA and 15CB | Forms 145 and 146 |
Buyer's Checklist for TDS on NRI Property Purchase
Use this checklist for TDS on NRI property sale from the term sheet to the final instalment.
| Step | What the buyer does | Resident individual or HUF buyer, deduction on or after 1 October 2026 | Any other buyer, or any deduction before 1 October 2026 |
|---|---|---|---|
| 1 | Confirm the seller's residential status and PAN | Before signing | Before signing |
| 2 | Get the section 197 (1961 Act) or 395(1) (2025 Act) certificate; check its rate and validity | Before the first payment | Before the first payment |
| 3 | Set up to deposit | PAN login on the e-Filing portal | Obtain a TAN |
| 4 | Deduct at payment or credit, whichever is earlier | Every instalment | Every instalment |
| 5 | Deposit the tax | Within 30 days from the end of the month | By the 7th of the next month; March deductions by 30 April |
| 6 | Report the deduction | Form 141 Schedule E with the deposit | Form 144 (Form 27Q for FY 2025-26) by 31 July, 31 October, 31 January and 31 May |
| 7 | Give the seller the TDS certificate | Form 132 from TRACES, within 15 days of the Form 141 due date | Form 131 (Form 16A for FY 2025-26) by 15 August, 15 November, 15 February and 15 June |
| 8 | Keep the file | Agreement, certificate, challans, statements | Same |
Interest for delay runs under section 398(3)(a) of the Income-tax Act, 2025 (section 201(1A) of the 1961 Act). It is 1% a month or part of a month from the date tax was deductible until it is deducted, and 1.5% a month or part of a month from deduction until deposit.
Common Mistakes in TDS on Sale of Property by NRI
Most errors come from treating an NRI sale like a resident sale or from relying on old forms.
- Applying 1% because the seller holds an Indian PAN. Residential status decides the rate, not the PAN.
- Deducting on an unverified gain. Without a certificate, a short deduction leaves the buyer as an assessee in default.
- Old section numbers after 1 April 2026. Section 195 of the Income-tax Act, 1961 in a tax year 2026-27 statement invites a correction.
Consider an illustrative Mumbai developer buying land from three co-owners, one of whom lives abroad. Deducting 1% from all three leaves the NRI owner's share short, and the gap surfaces only when credits fail to match. Checking residential status at term-sheet stage avoids it.
What happens after the buyer deposits the TDS?
Once the buyer deposits the tax, the credit appears against the seller's PAN in the Annual Information Statement (Form No. 168 for tax year 2026-27). The seller then settles the final tax in an Indian return.
- Refund of excess TDS. Where the deduction exceeded the tax, the seller files a return to claim the refund.
- Treaty position. The Income Tax Department's FAQ notes that under most tax treaties India has signed, the country where the property sits keeps the right to tax the gain. So the domestic TDS rate applies (section 393(2) of the Income-tax Act, 2025 from tax year 2026-27).
- Remittance forms. Where the buyer remits the price outside India, the buyer furnishes Form 145 under section 397(3)(d) of the Income-tax Act, 2025 to the authorised dealer before the remittance. A chartered accountant's certificate in Form 146 goes with it above ₹5 lakh unless an Assessing Officer's certificate has been obtained.
Handling the Deduction In-House or With a Tax Adviser
With one purchase and a clean certificate, a buyer can usually handle the deduction alone. Joint buyers, a seller without a certificate, instalments that straddle 1 October 2026, or a company buyer filing Form 144 raise the risk of a short deduction.
Mumbai-headquartered HSAG Consulting lists the management of withholding tax and TDS certification, income tax return filing and double taxation treaty advice among its direct tax and TDS advisory services.
For sellers waiting on excess TDS, the firm's income tax refund support covers delays and mismatches, and its refund advisory services across income tax, GST, customs and FEMA set out the wider refund process.
Form 146 itself is signed by a chartered accountant in practice; separately, the firm's certification and attestation services cover certifications under Income Tax and FEMA. Developers buying land from NRI owners can also draw on its real estate and construction practice.
Plan the Deduction Before the Agreement Is Signed
Settle the seller's status, certificate and filing route before the first cheque. To work through your purchase with HSAG Consulting's tax team, book a consultation on your property purchase.
