Introduction
Buying property from a Non-Resident Indian, commonly known as an NRI, is not the same as buying property from a resident seller. In a normal resident-to-resident property transaction, buyers generally deduct TDS at 1% under the applicable property TDS provision. However, where the seller is a non-resident, the TDS compliance is different and more detailed.
If a resident Indian buyer purchases immovable property from an NRI seller, the buyer is responsible for deducting and depositing TDS under the non-resident TDS provisions. For Tax Year 2026-27 onwards, this falls under the Income-tax Act, 2025 framework.
Until 30 September 2026, the buyer must generally use TAN-based payment for depositing TDS on NRI property purchase. From 1 October 2026, the law provides relief for resident individual and HUF buyers by allowing PAN-based challan compliance for such NRI property transactions.
For NRI property taxation, capital gains computation and TDS compliance support, taxpayers may visit TaxClear’s NRI taxation services.
Why TDS Is Different When Seller Is NRI
When the seller is a resident, the buyer usually deducts TDS at a fixed percentage on the property consideration, subject to the applicable threshold and conditions.
But when the seller is an NRI, the buyer must consider the taxability of capital gains in the hands of the NRI seller. This means the rate may depend on whether the gain is:
- long-term capital gain;
- short-term capital gain;
- covered by a lower deduction certificate;
- subject to surcharge; and
- subject to health and education cess.
Therefore, the buyer should not blindly deduct 1% TDS in NRI property transactions.
Resident Seller vs NRI Seller: Key Difference
| Particulars | Resident Seller | NRI Seller |
|---|---|---|
| Common TDS approach | 1% property TDS | TDS as per non-resident provisions |
| Seller status | Resident | Non-resident |
| TAN requirement before 1 October 2026 | Generally not required for specified resident property cases | Required for NRI seller cases |
| PAN-based simplified payment | Already available in resident property cases | Available for resident individual/HUF buyer from 1 October 2026 |
| Return/challan | Challan-cum-statement mechanism | TAN-based challan and Form 144 until applicable change |
| Rate | Fixed statutory rate in resident cases | Based on applicable capital gains/tax rate |
TAN-Based Payment Required Until 30 September 2026
For NRI property purchase transactions made before the PAN-based change becomes effective, the resident buyer should first obtain TAN.
TAN means Tax Deduction and Collection Account Number. It is required for deducting, depositing and reporting TDS in TAN-based cases.
The practical steps are:
- apply for TAN;
- create TAN login on the income tax portal;
- deduct TDS from payment to NRI seller;
- deposit TDS through e-Pay Tax;
- download challan;
- file quarterly TDS return in Form 144; and
- issue TDS certificate to the NRI seller as applicable.
For professional assistance with TDS deposit and NRI property documentation, taxpayers may use TaxClear.in.
New PAN-Based Relief from 1 October 2026
From 1 October 2026, resident individual and HUF buyers purchasing immovable property from a non-resident seller are proposed to be relieved from the requirement of obtaining TAN for such transaction.
This means PAN-based challan compliance will become available for such cases from the effective date.
However, until 30 September 2026, buyers should continue with the TAN-based process.
| Period | Compliance Method |
|---|---|
| Up to 30 September 2026 | TAN-based payment and reporting |
| From 1 October 2026 | PAN-based challan mechanism for eligible resident individual/HUF buyers |
| Seller type | NRI/non-resident seller |
| Buyer type for PAN relief | Resident individual or HUF |
Step-by-Step Process to Deposit TDS on NRI Property Purchase
The following process applies where TDS is being deposited through TAN login under the Income-tax Act, 2025 payment system.
Step 1: Login With TAN on Income Tax Portal
The buyer should visit the income tax e-filing portal and login using TAN credentials.
The login should not be made through the buyer’s PAN for TAN-based payment. The payment is to be made through the buyer’s TAN login.
Keep Ready
- TAN;
- login password;
- NRI seller details;
- amount of TDS;
- surcharge, if applicable;
- cess;
- payment date;
- property transaction details; and
- capital gains/TDS computation.
Step 2: Go to e-File → e-Pay Tax
After logging in through TAN, go to:
e-File → e-Pay Tax
The portal will show payment options under different laws. For Tax Year 2026-27 onwards, select:
Income Tax Act, 2025
If the payment relates to an earlier period up to FY 2025-26/AY 2026-27 under the old law, the old Act option should be selected. For Tax Year 2026-27 onwards, the new Act should be used.
Step 3: Select New Payment
After selecting the Income-tax Act, 2025, choose the New Payment option.
Then select the tile for:
Pay TDS/TCS
This tile is used for TDS and TCS payments under the new payment system.
Step 4: Select Deductee Type and Residential Status
The portal will ask for the deductee type and residential status.
In an NRI property transaction:
- deductor/buyer: resident Indian buyer;
- deductee/seller: NRI/non-resident seller.
You need to select the residential status of the deductee as Non-Resident.
The deductee type may be:
- company deductee; or
- other than company deductee.
In most individual NRI seller cases, the deductee will generally be other than company. However, if the seller is a foreign company or non-resident company, the correct deductee type should be selected accordingly.
| Field | What to Select |
|---|---|
| Login | TAN login of buyer/deductor |
| Tax law | Income-tax Act, 2025 for TY 2026-27 onwards |
| Payment tile | Pay TDS/TCS |
| Deductee residential status | Non-resident |
| Deductee type | Company or other than company, as applicable |
| Transaction | Purchase of property from NRI seller |
Step 5: Select Section Code 1057
For TDS on payment to a non-resident in respect of property purchase, the relevant non-resident TDS provision is covered under Section 393(2), Table Serial No. 17 of the Income-tax Act, 2025.
In the portal, the relevant section code for such non-resident payment is 1057.
This code is used for:
Any interest or any other sum chargeable under the Act, not being income chargeable under the head “Salaries”, payable to a non-resident or foreign company.
In NRI property purchase cases, the buyer should select the relevant non-resident TDS code carefully and verify it before payment.
Step 6: Enter Tax, Surcharge and Cess
After selecting the correct code, enter the TDS amount.
For NRI property transactions, the TDS amount may include:
- basic tax;
- surcharge, if applicable;
- health and education cess;
- interest, if payment is late;
- fee, if applicable; and
- penalty/other amounts, if applicable.
The rate should not be assumed as 1%. The correct TDS should be computed based on the taxability of the NRI seller’s capital gains and applicable rates.
Where the NRI seller has obtained a lower deduction or nil deduction certificate, the buyer should deduct TDS according to that certificate.
Step 7: Verify the Challan Details
Before making payment, carefully check:
- TAN;
- tax year;
- deductee residential status;
- section code;
- tax amount;
- surcharge;
- cess;
- interest;
- fee;
- penalty;
- total amount; and
- payment mode.
If any mistake is found, use the edit option before final payment.
Step 8: Choose Payment Mode
The portal generally allows different payment modes such as:
- net banking;
- debit card;
- payment gateway;
- UPI;
- credit card, where available;
- pay at bank counter;
- cheque or demand draft;
- RTGS/NEFT.
The buyer may choose the suitable payment mode and complete the payment.
Step 9: Download and Save Challan
After successful payment, the challan receipt should be downloaded and safely stored.
This challan is very important because it will be required for:
- TDS return filing;
- seller’s TDS credit;
- future verification;
- property documentation;
- response to notice, if any; and
- professional records.
Form 144: TDS Return After Payment
Depositing TDS is not the end of compliance. After making the TDS payment, the buyer/deductor must file the applicable TDS return.
For non-resident payments under the new framework, the relevant quarterly TDS return is Form 144, which corresponds to earlier Form 27Q.
Form 144 is used for quarterly reporting of TDS on payments other than salary made to non-residents.
| Earlier Form | New Form |
|---|---|
| Form 27Q | Form 144 |
| Purpose | TDS return for non-resident payments |
| Applicable for | Payments other than salary to non-residents |
| Filed by | Deductor |
| Required after | TDS deduction and payment |
For TDS return filing and NRI transaction compliance, taxpayers may visit TaxClear.in.
Common Mistakes in NRI Property TDS Payment
| Mistake | Correct Approach |
|---|---|
| Deducting only 1% TDS | NRI seller cases require non-resident TDS treatment |
| Not obtaining TAN before 1 October 2026 | TAN-based process applies until effective PAN relief |
| Using PAN login for TAN-based payment | Use TAN login for existing process |
| Selecting resident deductee status | Select non-resident |
| Wrong section code | Use correct non-resident TDS code, such as 1057 where applicable |
| Ignoring surcharge and cess | Include applicable surcharge and cess |
| Not filing Form 144 | File quarterly TDS return after payment |
| Not saving challan | Download and keep challan safely |
| Not checking lower deduction certificate | Apply certificate rate if valid |
Practical Checklist for Buyer
Before paying consideration to an NRI seller, the buyer should check:
- seller’s residential status;
- property sale consideration;
- capital gains computation;
- holding period of property;
- applicable TDS rate;
- surcharge and cess;
- lower/nil deduction certificate, if any;
- TAN availability;
- correct section code;
- tax year;
- challan payment;
- Form 144 filing;
- TDS certificate issuance; and
- documentation for property registration.
Key Takeaways
- Purchase of property from an NRI seller is not covered by simple 1% resident property TDS treatment.
- Until 30 September 2026, TAN-based payment continues for NRI seller property TDS.
- From 1 October 2026, resident individual/HUF buyers get PAN-based relief for such transactions.
- For Tax Year 2026-27 onwards, select Income-tax Act, 2025 on the e-filing portal.
- Use TAN login for the current TAN-based payment process.
- Select deductee residential status as non-resident.
- Section 393(2), Table Serial No. 17 covers non-resident payments such as sums chargeable under the Act.
- Code 1057 is relevant for such non-resident payment reporting in the current form/code framework.
- TDS payment must be followed by Form 144 TDS return filing.
- Correct computation and documentation are essential to avoid notice or mismatch.
Conclusion
TDS on purchase of property from an NRI seller is a sensitive compliance area. A resident buyer should not treat it like a normal resident property transaction. The buyer must deduct correct TDS, deposit it through the correct process, select the correct non-resident code, include surcharge and cess where applicable, and file Form 144 after payment.
Until 30 September 2026, TAN-based compliance remains important. From 1 October 2026, resident individual and HUF buyers will get relief through PAN-based challan compliance for NRI property transactions.
For NRI property sale taxation, lower TDS certificate guidance, TDS deposit, Form 144 filing and ITR support, visit TaxClear.in.
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