Buying Property From an NRI After 1 October 2026: PAN-Based TDS, TAN Change & New Process

The purchase of property from an NRI will become easier from 1 October 2026.

One of the most significant compliance challenges for an individual purchasing property from a non-resident has been the need to obtain a TAN (Tax Deduction and Collection Account Number) for TDS deduction.

This requirement for specified resident individual and HUF buyers has been removed from 1 October 2026 under the change announced in Budget 2026.

Eligible buyers will instead be able to complete the required TDS compliance using PAN.

However, it is important to note that TAN itself is not being eliminated. The TAN requirement is being removed only for eligible buyers in the specified NRI property transaction.

When buying property from an NRI, the buyer must still determine and deduct the appropriate tax.

What Changes From 1 October 2026?

Until the new relaxation comes into effect, an individual who buys property from an NRI may be required to follow TAN-based TDS compliance even if the buyer does not otherwise require a TAN.

From 1 October 2026, a resident individual or HUF covered by the new provision will not be required to obtain TAN merely for deducting tax on consideration paid for the transfer of immovable property by a non-resident.

The buyer will instead use a PAN-based challan-cum-statement mechanism prescribed for the transaction.

In simple terms:

The change makes compliance easier. It does not relieve the buyer of the obligation to deduct tax.

Does TDS of 1% Apply While Purchasing Property From an NRI?

No. This is one of the most important mistakes that buyers should avoid.

Buyers are generally aware of the 1% property TDS rule and the ₹50 lakh condition when buying property from a resident seller.

An NRI seller is different.

The buyer should not automatically assume that only 1% TDS has to be deducted merely because the transaction involves the purchase of property.

Payment to a non-resident is subject to the provisions applicable to non-resident withholding, and the correct tax treatment depends on the facts of the transaction.

Likewise, it should not be assumed that there is no TDS liability only because the property is being sold by an NRI for less than ₹50 lakh.

The normal resident-property TDS rules should not automatically be applied to an NRI seller.

Section 195 vs New Income-tax Act, 2025

A lot of people search online for the term “Section 195 TDS on NRI property.”

This term comes from the Income-tax Act, 1961, where Section 195 was popularly associated with payments made to non-residents.

But India now has the Income-tax Act, 2025, which applies from 1 April 2026.

Under the new Act, the non-salary TDS provisions have been reorganised mainly under Section 393. The Income Tax Department has also clarified that payments or credits occurring from 1 April 2026 are governed by the corresponding withholding provisions of the new Act.

Therefore, the term “Section 195” is still useful when referring to the old law and is still commonly searched online, but transactions under the new Act should follow the relevant new statutory provisions and forms.

Read more about TDS and TCS compliance.

What Is the NRI Property TDS Rate in 2026?

There is no one-size-fits-all answer such as “always deduct 1%.”

An important consideration is whether the property results in a long-term or short-term capital gain for the NRI seller.

Under the applicable rules, immovable property held for more than 24 months is generally treated as a long-term capital asset.

The applicable capital gains tax treatment will depend on the nature and date of the transaction.

Surcharge and Health and Education Cess may also affect the effective tax amount.

The tax treatment of short-term capital gains may be different.

That is why it is important for the buyer to establish the correct withholding position before making any significant payment instead of simply using a generic online calculator and selecting a TDS percentage.

The Income Tax Department has also clarified that under the new Act, Section 393 contains separate tables for different categories of payees, including non-residents.

Is It Possible for an NRI Seller to Get a Lower TDS Certificate?

Yes, this can be very important in high-value property transactions.

Suppose an NRI sells a property for ₹2 crore, but the actual taxable capital gain is much lower than the total sale consideration.

If too much tax is withheld, a significant amount of the seller’s money may remain blocked until the income-tax return is filed and the eligible refund is issued.

Where permitted under the law, the NRI seller may apply to the Income Tax Department for a lower or nil deduction certificate.

If a valid certificate is issued for the transaction, the buyer should deduct tax according to the terms of that certificate.

However, the buyer should not reduce TDS merely because the seller or the seller’s CA has prepared a private capital-gain calculation.

The applicable statutory provisions and, where required, the valid certificate issued by the Income Tax Department should be considered.

Explore TaxClear NRI taxation guidance and services.

How to Buy Property From an NRI After 1 October 2026

1. Verify the Seller’s Residential Status

Residential status should not be decided only on the basis of:

• citizenship,
• Aadhaar,
• Indian passport,
• OCI status, or
• Indian address.

There are specific statutory rules for determining income-tax residential status.

The buyer should verify whether the seller is actually a non-resident for Indian income-tax purposes.

The Income Tax Department confirms that residential status is determined under the statutory residence tests and that the Income-tax Act, 2025 applies to residential status for tax years beginning on or after 1 April 2026.

2. Verify PAN

Obtain and verify the NRI seller’s PAN well before making the final payment.

Correct PAN reporting becomes even more important under the PAN-based compliance mechanism.

Any mistake in PAN may create problems in matching the TDS credit with the NRI seller’s tax records.

3. Determine Whether the TAN Relaxation Is Applicable

The new relaxation applies to the prescribed case of a resident individual or HUF acquiring immovable property from a non-resident.

Do not assume that every buyer is automatically entitled to the same exemption.

The buyer should first check whether the transaction and the status of the buyer fall within the new relaxation.

4. Compute the Correct TDS

Take into account:

• residential status of the seller,
• holding period of the property,
• nature of capital gain,
• applicable tax rate,
• surcharge,
• Health and Education Cess, and
• any valid lower or nil deduction certificate.

These issues should ideally be resolved before making any significant payment to the NRI seller.

5. Check for a Lower or Nil TDS Certificate

If the NRI seller has obtained a lower or nil deduction certificate, the buyer should verify the certificate before applying the reduced rate.

The buyer should check whether the certificate is valid for the particular seller, transaction and payment.

A private calculation made by the seller or tax consultant should not be treated as a substitute for a valid certificate where such a certificate is required.

6. Deduct TDS at the Appropriate Time

Property consideration may be paid through:

• advance payment,
• instalments,
• home-loan disbursement, and
• final registration payment.

Do not assume that TDS becomes relevant only on the date of property registration.

Under the new Act, the Income Tax Department explains that TDS applicability generally depends on the earlier event of credit or payment for the relevant withholding provision.

Therefore, the payment structure should also be considered while determining the TDS obligation.

7. Use the Prescribed PAN-Based Process

For an eligible transaction after 1 October 2026, the buyer will not be required to obtain TAN merely for this specified property purchase and will instead use the prescribed PAN-based challan-cum-statement mechanism.

However, buyers should use the exact form and Income Tax e-Filing portal utility prescribed for an NRI property transaction on the date of payment.

This point is important because the existing Form 141 cannot currently be filed where the deductee is a non-resident. The Income Tax Department specifically states that Form 141 is available only for resident deductees.

Therefore, the buyer should not automatically select Form 141 merely because it is a PAN-based TDS form.

The correct notified process applicable to the NRI property transaction should be followed.

See TaxClear’s income-tax filing guides.