Buying Property from an NRI in India (2026): TDS Without TAN and Form 141

Many property deals in India involve a seller who now lives abroad. Until recently the buyer, often a salaried person, had to obtain a TAN, deduct tax on a large share of the price, pay it by challan and file a quarterly TDS return, much like a business. From 1 October 2026 a resident individual or HUF buying property from a non-resident can deduct and pay the tax through a single PAN-based form. The tax itself has not gone away.

The terms you will meet

• NRI / non-resident: a person who is not resident in India for tax in that year. This depends on the number of days spent in India, not on citizenship or passport.
• HUF: a Hindu Undivided Family, which is taxed as a separate person.
• TDS (tax deducted at source): the buyer keeps back part of the price, pays it to the government in the seller’s name, and pays the seller only the balance. The seller later gets credit for this tax in their own Indian return.
• Deductor and deductee: the deductor is the buyer, who deducts the tax. The deductee is the seller, whose tax is deducted.
• PAN: Permanent Account Number, the 10-character tax ID of every taxpayer.
• TAN: Tax Deduction and Collection Account Number, a separate number that businesses and other regular deductors must obtain to deduct TDS.
• Challan: the payment slip through which tax is paid into the government account.
• Capital gain: the profit on sale of the property, broadly the sale price minus the cost of buying and improving it.
• Long-term and short-term: property held for more than 24 months gives a long-term capital gain. Held for 24 months or less, the gain is short-term.
• Indexation: increasing the original purchase cost by a government inflation index, so that only the “real” gain is taxed. It lowers the taxable gain on property held for many years.
• Surcharge: extra tax, worked out as a percentage of the tax, once the amount crosses certain limits.
• Cess: the 4% health and education cess, added on tax plus surcharge.
• Stamp duty value: the value fixed by the State government for registration of the property, which can differ from the agreed price.

What changed on 1 October 2026

Under the Income-tax Act, 2025 (in force from 1 April 2026), TDS on a payment to a non-resident falls under section 393(2), Table serial number 17. This corresponds to section 195 of the Income-tax Act, 1961. Two changes now apply to property purchases:

• No TAN needed. The Finance Act, 2026 substituted section 397(1)(c) with effect from 1 October 2026. Clause (iii) exempts a resident individual or HUF from obtaining a TAN when deducting tax on consideration for transfer of immovable property under section 393(2) [Table: Sl. No. 17].
• One form to pay and report. CBDT Notification No. 121/2026 (G.S.R. 830(E), 22 September 2026), the Income-tax (Fifth Amendment) Rules, 2026, added a new Schedule E to Form No. 141.

Companies, LLPs, firms, trusts and non-resident buyers are not covered by this relief. They still need a TAN, pay by challan and file the quarterly non-resident statement in Form No. 144 (earlier Form 27Q).

The two forms: Form 141 and Form 132

Form No. 141: what the buyer files

Form No. 141 is a challan-cum-statement. In one online form on the income tax e-filing portal, the buyer both pays the tax deducted and reports the details of the deal: buyer and seller PANs, property address, price, date of payment and tax deducted. It replaces the earlier Form 26QB. Schedule E is the part of the form used when the seller is a non-resident. The buyer files it using their own PAN; no TAN is needed.

Due date: the tax and Form 141 must be filed within 30 days from the end of the month in which tax was deducted (rule 218(3)(e) and rule 219(5)(e) of the Income-tax Rules, 2026).

Form No. 132: what the buyer gives the seller

Form No. 132 is the TDS certificate. It is proof for the seller that tax was deducted from their money and paid to the government in their name. It replaces the earlier Form 16B. The buyer cannot prepare it by hand. After Form 141 is filed and processed, the buyer downloads Form 132 from the TRACES portal of the Income Tax Department and gives it to the seller. The seller uses it to check the tax credit and claim it, or a refund, in their Indian return.

Due date: within 15 days from the due date of Form 141, not from the date it was actually filed (rule 215(1), Table Sl. No. 3).

Who must deduct, and when

Tax is deducted when the amount is credited or paid, whichever is earlier. Every instalment, including the token or advance amount, is covered. Where there are two or more buyers, each buyer files a separate form for their own share of the price.

TDS rates on an NRI seller (Tax Year 2026-27)

The rates come from Part II of the First Schedule to the Finance Act, 2026:

• Long-term capital gain (held for more than 24 months): 12.5%.
• Short-term capital gain (held for 24 months or less): 30% for an individual seller.
• Surcharge applies where the amount exceeds ₹50 lakh (10%) or ₹1 crore (15%), rising to 25% or more on short-term gains above ₹2 crore. On long-term capital gains the surcharge is capped at 15%.
• Cess of 4% is added on tax plus surcharge.

If the seller does not give a valid PAN, section 397(2) requires deduction at the higher of the normal rate or 20%. Under the rules, a non-resident without a PAN can avoid the higher rate by giving details such as the tax residency certificate and foreign tax identification number, which Schedule E now asks for.

Is there indexation for the NRI seller?

No. For transfers on or after 23 July 2024, the Finance (No. 2) Act, 2024 fixed the long-term capital gains rate at 12.5% without indexation. This continues as section 197(1) of the Income-tax Act, 2025 (earlier section 112).

There is one carve-out in section 197(3). For a resident individual or HUF selling land or a building acquired before 23 July 2024, tax is worked out both ways, 12.5% without indexation and 20% with indexation, and any excess over the 20% figure is ignored. In effect, the resident pays the lower of the two.

Section 197(3) applies only to residents. A non-resident seller is taxed at 12.5% on the gain worked out without indexation, and TDS follows the same basis.

The process in order

1. Confirm that the seller is a non-resident for the year, and collect their PAN, overseas address, email, phone, tax residency certificate and foreign tax ID, plus the agreement and stamp duty value.
2. Check how long the seller has held the property (long-term or short-term), or obtain the seller’s lower deduction certificate, if any.
3. Deduct tax from each payment, including the advance.
4. Pay the tax and file Form No. 141 (Schedule E) within 30 days from the end of the month of deduction.
5. Download Form No. 132 from TRACES and give it to the seller within 15 days from the Form 141 due date.

Tax deducted up to 30 September 2026 follows the earlier route: TAN, challan by the 7th of the next month and a quarterly Form 144. Payments made up to 31 March 2026 remain under section 195 of the 1961 Act.

Examples

Each example assumes a resident individual buyer, an individual NRI seller with a PAN, no lower deduction certificate and TDS on the full sale price.

Lower or nil deduction certificate

Look again at Example 1. Suppose the seller bought the flat for ₹50,00,000. Ignoring other costs, the gain is ₹80,00,000 − ₹50,00,000 = ₹30,00,000. As explained above, an NRI gets no indexation, so the ₹50,00,000 cost is not raised for inflation.

Tax on the gain: ₹30,00,000 × 12.5/100 = ₹3,75,000, plus cess ₹3,75,000 × 4/100 = ₹15,000, a total of about ₹3,90,000. Yet ₹11,44,000 was deducted, so about ₹7,54,000 stays blocked until the seller files a return and gets a refund.

To avoid this, the seller can apply to the tax department under section 395(1) in Form No. 128 (earlier Form 13 under section 197) before the payment. The certificate states a lower rate based on the actual gain. The buyer then deducts at that rate and enters the certificate number in Schedule E. The Finance Act, 2026 also allows such certificates to be issued after electronic verification under section 395(6).

Mistakes we often see

• Deducting only 1% because the seller holds an Indian passport. Residential status for tax, not citizenship, decides the rule.
• Skipping TDS on the advance or token money.
• Ignoring surcharge and cess, which leaves the buyer short and liable for the difference with interest.
• Working out the NRI seller’s gain with indexation. Only residents get the section 197(3) comparison.
• Using the old 1961 Act section numbers or forms for payments made after 1 April 2026.
• Assuming the new route applies to a company or firm buyer. It does not.
• Remitting sale proceeds abroad without the required Form No. 145 (earlier 15CA) and, where applicable, Form No. 146 (earlier 15CB) and FEMA compliance.

Disclaimer: This article is for general educational purposes only, based on the law as understood on the date of last update. It is not professional advice or an offer of services. Tax laws and rates change; please verify the current position and consult a qualified professional for your specific facts. Palak Batheja & Co. accepts no liability for actions taken on the basis of this article.

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