Buying a flat from a resident seller has always been simple on the tax side: deduct 1% under Section 194-IA, pay it with Form 26QB using your PAN, hand over Form 16B. Buying the identical flat from an NRI sent you somewhere else entirely — apply for a TAN, deduct under Section 195 at capital-gains rates, deposit by challan, file a quarterly Form 27Q, issue Form 16A. Plenty of buyers did not know, and discovered it at registration.
From 1 October 2026 that gap narrows. Under a CBDT notification of 22 September 2026, a resident individual or HUF buying immovable property from a non-resident can deduct and report the tax using their PAN, through Form 141 and a newly inserted Schedule E — no TAN required.
What changed
| Before 1 October 2026 | From 1 October 2026 | |
|---|---|---|
| Identifier needed | TAN (separate application, Form 49B) | Your PAN |
| Reporting | Challan + quarterly Form 27Q | Form 141 with Schedule E |
| Who can use the simplified route | — | Resident individuals and HUFs buying from a non-resident |
| Rates | Section 195 capital-gains rates | Unchanged |
| Certificate to the seller | Form 16A | Form 132 |
Schedule E captures the substance of the deal: the property, buyer and seller details, the sale value and the stamp-duty value, the payment instalments, the TDS rate applied and the tax deducted. If the seller has a lower-deduction certificate, its number goes in there too.
What did not change: the rates
This is a procedural simplification, not a rate cut. Section 194-IA — renumbered Section 393(1) under the Income Tax Act, 2025 — does not apply to a non-resident seller, and neither does its ₹50 lakh floor. Deduction is under the old Section 195 (now Section 393(2)) on the capital gain, which in practice means:
- Long-term (held over 24 months): base rate 12.5%, plus surcharge by the seller's income band and 4% health and education cess — roughly 14.95% effective in the ₹1–2 crore band.
- Short-term: the seller's slab rate, typically 30% plus surcharge and cess.
- Deduction is on the whole sale consideration unless the seller produces a certificate limiting it to the gain.
That last point is where the money is. Without a certificate, you deduct on the full price — on a ₹1.2 crore flat that is roughly ₹18 lakh withheld against a possibly much smaller real gain, which the seller then has to claim back in a return. With a lower or nil deduction certificate (Section 197, now Section 395(1), applied for by the seller on Form 128 — formerly Form 13), you deduct only at the certified rate. Ask for it before signing, not after.
Run the arithmetic for your own deal in the TDS calculator, and check the area and rate conversions in the land unit converter before you argue about price per square foot.
The timeline you have to hit
- Confirm the seller's residential status in writing — a PIO with an Indian passport can still be a non-resident for tax. Get it in the agreement, with their PAN.
- Ask for the Section 197 certificate. It takes the seller a few weeks; start early or budget for the full-value deduction.
- Deduct at the time of payment or credit, whichever is earlier — including on each instalment and on any advance.
- Deposit by the 7th of the following month, using your PAN under the new route.
- File Form 141 with Schedule E and issue the certificate to the seller so they can claim the credit.
- Keep everything — the agreement, the certificate, the challans, the bank advices. Count the deposit deadline against bank holidays with the business days calculator.
The cost of getting it wrong
The liability sits on the buyer, not the seller:
- Interest at 1% a month for failing to deduct and 1.5% a month for deducting and not depositing, under Section 201.
- Demand on the buyer for the whole unpaid tax — you can be treated as an assessee in default for the seller's tax.
- Late-filing fees on the statement, plus penalties.
- Registration and resale complications later when the chain of title carries an unresolved tax question.
The amounts are large because the base is a property price. A ₹1.2 crore purchase with no deduction is an ₹18 lakh exposure plus interest — which is why conveyancing lawyers now insist on the clause.
If the seller is a resident
Nothing here applies. You deduct 1% under Section 194-IA (393(1)) where the consideration or the stamp-duty value is ₹50 lakh or more, pay with Form 26QB within 30 days of the month-end, and issue Form 16B. Also keep the cash limits in mind on any part of the consideration — Section 269ST bars receiving ₹2 lakh or more in cash, and the broader limits are in Cash transaction limits under income tax.
Why this sits alongside the bigger renumbering
The section numbers in this piece changed twice over: the Income Tax Act, 2025 took effect on 1 April 2026 and renumbered the entire statute, so 194-IA became 393(1), 195 became 393(2) and 197 became 395(1). Both numberings are still in circulation in bank forms and agreements. What the new Act changed, and what it only renamed, is set out in Income Tax Act 2025: what actually changes.
FAQ
Do I still need a TAN to buy property from an NRI?
Not if you are a resident individual or HUF. From 1 October 2026 you can deduct and report using your PAN through Form 141 and its Schedule E.
What TDS rate applies on a purchase from an NRI?
Long-term capital gains are deducted at 12.5% plus surcharge and 4% cess — about 14.95% in the ₹1–2 crore band; short-term gains at the seller's slab rate. There is no ₹50 lakh threshold as there is for resident sellers.
Is TDS deducted on the sale price or only on the gain?
On the full consideration, unless the seller obtains a lower or nil deduction certificate limiting it to the actual gain. That certificate is the single most useful document in an NRI purchase.
When must the TDS be deposited?
By the 7th of the month following deduction, and deduction itself happens at payment or credit, whichever is earlier — including on advances and instalments.
What happens if I do not deduct?
As the buyer you can be treated as an assessee in default for the seller's tax, with interest at 1% a month for non-deduction and 1.5% a month for non-payment, plus fees and penalties.
Does the 1% TDS under 194-IA apply to NRI sellers?
No. That provision covers resident sellers only. NRI sales fall under Section 195 (now 393(2)) at capital-gains rates.