7 Sep 2026
9 min read
Cinegha
⚡ Quick Answer: Who Deducts TDS When You Buy From an NRI?
You do — the buyer. If your seller is resident and the price is above ₹50 lakh, deduct 1% and file Form 26QB using your PAN. If your seller is a non-resident, deduct at capital-gains rates on the full sale value — not on their profit — and file Form 27Q, which has required a TAN. From 1 October 2026, resident individual and HUF buyers can use a PAN-based challan instead. Companies and firms still need a TAN.
If the person selling you a property is a non-resident, the tax obligation is yours. You calculate the deduction, withhold it before paying, deposit it with the government and issue the seller a certificate. Miss a step and the shortfall — plus interest — is recovered from you, not from them.
For years that has been heavy enough to break deals. Buying from a resident seller means one online form. Buying from an NRI has meant registering for a TAN and filing quarterly returns, for a single house purchase. That changes on 1 October 2026, and this guide covers what to deduct, on what amount, which form to file, and what the new rule means if you are buying in Coimbatore.
TABLE OF CONTENTS
Everything turns on one question: is your seller resident or non-resident?
The rate, the threshold, the form and the paperwork all branch from this. Settle it at the agreement stage, not at registration. Residential status is a tax test, not a nationality one, and none of the things buyers usually rely on actually decide it:
Ask your lawyer to put a declaration of residential status, with PAN, into the sale agreement as a standard clause. Where real doubt remains, deducting on the non-resident basis is the safer error: the seller can reclaim any excess, whereas an under-deduction becomes your liability.
The one-line version worth remembering
You do not pay the seller in full and trust them to settle their own tax. You hold back the tax portion, remit it yourself, and pay the seller the balance.
TDS Rate and Threshold by Seller Residential Status
| Your seller is | TDS applies to | Rate | Threshold |
|---|---|---|---|
| Resident | The sale consideration | 1% | Only where consideration exceeds ₹50 lakh |
| Non-resident — held over 2 years | The full sale consideration | 12.5% plus surcharge and cess | None — applies from the first rupee |
| Non-resident — held 2 years or less | The full sale consideration | Slab rate plus surcharge and cess | None — applies from the first rupee |
Rates as set by the Finance Act 2024 for transfers on or after 23 July 2024, and unchanged since. Verify against the current provisions in the Income-tax Act, 2025 published by the Income Tax Department before you rely on them.
There is a legitimate way to reduce this. The seller can apply to the Assessing Officer for a lower deduction certificate before completion; if granted, it directs you to deduct on the actual gain rather than the gross value. Ask early — it takes weeks, and if the seller is applying it will move your completion date.
The full-value rule — the mistake that costs most
For a non-resident seller, TDS is computed on the entire sale value, not on the capital gain.
On an ₹80 lakh property the seller originally bought for ₹50 lakh, the real gain is ₹30 lakh and the tax genuinely due on it at 12.5% is roughly ₹3.75 lakh. But the deduction is calculated on the full ₹80 lakh — around ₹10 lakh.
The seller is out of pocket by roughly ₹6 lakh until they file and claim the refund. Figures illustrative, excluding surcharge and cess.
What changes on 1 October 2026
Under the Finance Act 2026, the TAN requirement falls away for most private buyers. From that date a resident individual or HUF buying from a non-resident can deposit the TDS with a PAN-based challan-cum-statement — the same route already used for resident-to-resident purchases. The rate does not change and the deduction base does not change. Only the mechanism does.
TAN requirement before and after 1 October 2026
Form 26QB vs Form 27Q
| Form 26QB — resident seller | Form 27Q — non-resident seller | |
|---|---|---|
| What it is | Challan-cum-statement, filed per transaction | A quarterly TDS return |
| Identifier needed | Your PAN | A TAN — until 30 September 2026 |
| Filing rhythm | Once, shortly after payment | Every quarter while deductions continue |
| Certificate you issue | Form 16B | Form 16A |
| Effort | Low — a single online form | High — registration, then recurring returns |
Both are filed through the Income Tax Department e-filing portal.
If you are mid-transaction: a completion in late September carries the full TAN registration process; the same completion in October does not. If your timeline has a fortnight of give and you are buying as an individual, the later date is materially less work.
A note on section numbers
The Income-tax Act 2025 replaced the 1961 Act from 1 April 2026, and the Income-tax Rules 2026 replaced the 1962 Rules. This is renumbering and consolidation rather than a change to what you owe. The provision on deductions from payments to non-residents, long known as Section 195, now sits at Section 393(2).
Rather than trust any article on a section number — this one included — the Income Tax Department publishes a utility that maps every provision of the old Act against the new one.
Buying new from a developer? This mostly does not apply
Everything above concerns buying from an individual who happens to be non-resident — in practice, a resale. Buying a new home direct from a developer is simpler: a developer is a resident Indian company, so the non-resident provisions, the TAN question and Form 27Q do not arise. What applies is the ordinary 1% deduction where consideration exceeds ₹50 lakh, on Form 26QB with your PAN.
OPAL by Infrastride is 35 DTCP-approved freehold villas at Kariyampalayam on the Sathy Road corridor. Each plot is registered in the buyer's name, and the full document set is handed over at completion. If you are buying from abroad, we set out the whole remote process — FEMA eligibility, Power of Attorney, NRE and NRO routing — in a separate guide rather than repeating it here, and we explain how we work with buyers living overseas on our NRI page.
Where this comes back to you later
If you buy now and your family is abroad when the property is eventually sold, you become the non-resident seller in someone else's transaction — and sections 2 and 3 apply to your buyer.
Clean freehold title and a complete document trail are what make that future sale straightforward, and they are exactly what a lower deduction certificate application is built from.
The buyer's sequence
Cost and Timeline of the TDS Process
| Item | Cost | Timeline |
|---|---|---|
| TAN application, where still required | ₹65 plus GST | Typically 7–15 working days |
| Depositing the TDS | Nil — you are remitting the seller's tax, not your own | By the 7th of the month following deduction; Form 26QB within 30 days of month end |
| Filing Form 27Q | Nil if self-filed; a CA typically charges ₹2,000–₹5,000 | Quarterly |
| Issuing the TDS certificate | Nil | Form 16B or 16A, after the return is processed |
| Seller's lower deduction certificate | Borne by the seller | Allow 4–8 weeks — the item that most often moves a completion date |
| Interest on late deduction | 1% per month on the shortfall | From the date deduction was due |
| Interest on late deposit | 1.5% per month | From deduction to deposit |
Statutory fees, due dates and interest rates as published by the Income Tax Department; CA fees are indicative market rates from our own transactions and vary. Confirm all figures with your chartered accountant before relying on them.
The tax mechanics are only one part of a safe purchase. The approval and title checks matter at least as much, and we set out the full list in our villa buyer's checklist for Coimbatore. If you are working out affordability, we have also broken down what owning a villa here actually costs beyond the headline price.
This is general information, not tax advice
This article is general information from a property developer, not tax advice. We build homes; we are not chartered accountants. Tax rules change with each Finance Act and their application depends on residential status, treaty position and individual circumstances. Confirm anything here with a qualified CA before acting on it.
The buyer. In every Indian property transaction the obligation sits with the payer, so you calculate the deduction, withhold it before paying, deposit it with the government and issue a TDS certificate. If you under-deduct or fail to deduct, the shortfall plus interest at 1% per month is recovered from you, not the seller.
Until 30 September 2026, yes. From 1 October 2026 a resident individual or HUF buyer can deposit the TDS with a PAN-based challan-cum-statement instead, with no TAN and no quarterly return. Company and firm buyers still require a TAN.
On the full sale consideration where the seller is non-resident, not on their capital gain. On an ₹80 lakh property bought for ₹50 lakh, the deduction is computed on ₹80 lakh even though the gain is ₹30 lakh. The seller can reduce this with a lower deduction certificate obtained from the Assessing Officer before completion.
Form 26QB is a challan-cum-statement filed per transaction using your PAN, and applies when the seller is resident. Form 27Q is a quarterly TDS return that applies when the seller is non-resident and has required a TAN. You issue Form 16B to a resident seller and Form 16A to a non-resident seller.
Ask directly and get it in writing. Citizenship, an Indian passport, a PAN, an Aadhaar or an Indian address do not determine residential status, and a seller can travel to India to sign while remaining non-resident for tax purposes. Have your lawyer include a declaration of residential status in the sale agreement.
No. A developer is a resident Indian company, so the non-resident provisions and the TAN requirement do not apply. Only the ordinary 1% deduction applies where consideration exceeds ₹50 lakh, filed on Form 26QB using your PAN.
TDS on a purchase from an NRI seller is one of the few points in an Indian property transaction where the buyer carries a liability that is not their own tax. The two failures that recur are assuming a seller is resident, and calculating on the gain rather than the full sale value. Confirm status in writing, deduct on the correct base, file the right form. If your completion falls after 1 October 2026 and you are buying as an individual, the paperwork gets considerably lighter. If it falls before, start the TAN application now.
Book a Site Visit
Looking at villas in Coimbatore? OPAL at Kariyampalayam is DTCP-approved and freehold, bought direct from the developer — with the full document set at handover.
Book a Site Visit
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