The short answer
If the seller is a non-resident (including an NRI or an OCI who is non-resident for tax), the 1% TDS that applies to resident sellers does not apply. Instead, the buyer deducts tax at the 'rates in force' on the part of the payment that is chargeable to tax in the seller's hands. This was section 195 of the Income-tax Act, 1961; from 1 April 2026 it is section 393(2) of the Income-tax Act, 2025 (the entry in its table for payments to non-residents).
For a long-term gain (property held more than 24 months), that is 12.5% plus surcharge (10% where the payment exceeds ₹50 lakh, 15% where it exceeds ₹1 crore) plus 4% cess — an effective 13%, 14.3% or 14.95%. For a short-term gain, it is normally 30% plus surcharge and cess. There is no ₹50 lakh threshold.
Because the buyer usually cannot verify the seller's cost, buyers often deduct on the full price unless the seller produces a lower or nil deduction certificate from the tax department. The seller should apply for one, in Form 128 (earlier Form 13), well before the sale.
From 1 October 2026, a resident individual or HUF buyer does not need a TAN for this deduction. The Finance Act, 2026 amended the Act so that such a buyer deducts and reports using PAN through Form 141 (a new schedule for purchases from non-residents). Companies, firms and other buyers still need a TAN and file the quarterly statement in Form 144 (earlier Form 27Q).
A note on section numbers: the Income-tax Act, 2025 has applied from 1 April 2026 (the start of tax year 2026-27). Anything that happened before that date — a sale, a rent payment, a deduction — is governed by the Income-tax Act, 1961 and its section numbers. This guide gives both numbers where the new one has been confirmed.
Who counts as a non-resident seller
Residence for tax is decided by days spent in India in the tax year (and in some cases earlier years), under the income tax law — not by passport or OCI status. An Indian citizen working abroad for several years is usually non-resident; an OCI living in India most of the year can be resident.
Ask the seller in writing, in the agreement, whether they are resident or non-resident for the tax year of the sale, and get their PAN. If the seller is non-resident and you deduct only 1%, the shortfall, interest and penalties fall on you.
If there are several sellers and only one is non-resident, apply the non-resident rule to that seller's share and the resident rule to the others' shares.
How much to deduct
The deduction is on the 'sum chargeable' — the seller's capital gain, not the price — at the rates in force for the seller. In the absence of a certificate, a buyer cannot verify the seller's cost and holding period, so the cautious and common practice is to deduct on the whole consideration. That protects the buyer but can lock up a large amount of the seller's money until they file a return and claim a refund.
Rates for a non-resident individual seller: long-term gain on land or building at 12.5% without indexation (the 20% indexed option is only for residents). Short-term gain at the rates in force, which buyers apply at 30%. Surcharge for the payment: 10% where it exceeds ₹50 lakh and 15% where it exceeds ₹1 crore; on long-term gains the surcharge is capped at 15%. Cess: 4% on tax plus surcharge.
Effective rates on a long-term gain: 12.5% × 1.04 = 13% (payment up to ₹50 lakh); 12.5% × 1.10 × 1.04 = 14.3% (over ₹50 lakh up to ₹1 crore); 12.5% × 1.15 × 1.04 = 14.95% (over ₹1 crore).
TDS is deducted from each payment as it is made — token, instalments and the balance at registration — not only at the end.
The lower deduction certificate (Form 128, earlier Form 13)
The seller can apply to the assessing officer for a certificate allowing deduction at a lower rate or nil, on the basis of the actual capital gain and any exemption (such as reinvestment in a house or 54EC bonds). Under the 2025 Act this is section 395(1), and the application is Form 128 (it was section 197 and Form 13 under the 1961 Act).
The application is made online on the TRACES portal with the sale agreement, purchase deed, cost and improvement evidence, and details of any planned reinvestment. The certificate names the buyer and the amount or rate; the buyer must deduct as the certificate says.
Processing takes time. Apply as soon as the price and buyer are fixed, and write into the agreement what happens if the certificate is delayed — for example, that the buyer will deduct on the full price and the seller will claim a refund.
The buyer should check that the certificate is genuine and current on the TRACES portal, and keep a copy.
TAN or no TAN: the change from 1 October 2026
Until 30 September 2026, every buyer deducting tax from a non-resident needed a Tax Deduction and Collection Account Number (TAN), had to deposit the tax by challan, and file the quarterly TDS statement for non-residents (Form 27Q, renamed Form 144 from 1 April 2026), then issue the TDS certificate.
Budget 2026-27 proposed removing that burden for ordinary home buyers. The Finance Act, 2026 amended section 397 of the 2025 Act so that a resident individual or HUF buyer deducting tax on consideration for immovable property from a non-resident does not need a TAN, with effect from 1 October 2026. Such a buyer uses PAN and reports the deduction through Form 141, the same challan-cum-statement used for purchases from residents, which has a schedule for non-resident sellers.
Who still needs a TAN: buyers that are companies, firms, LLPs, trusts and other non-individual entities, and any payment made before 1 October 2026. Those buyers apply for a TAN in Form 135 (the non-government version of the old Form 49B) and file Form 144 quarterly.
Whichever route applies, the timeline for deposit and the certificate to the seller follow the rules for that form. Check the current instructions on the income tax portal on the day you pay; this procedure is new.
Contrast with the 1% rule for resident sellers
Resident seller: 1% of the consideration or the stamp duty value, whichever is higher, where that is ₹50 lakh or more (section 393(1) of the 2025 Act, earlier section 194-IA), filed in Form 141 with PAN. No TAN. No surcharge or cess added to the 1%.
Non-resident seller: rate in force on the gain (12.5% plus surcharge and cess on a long-term gain), no threshold, lower deduction certificate available, TAN needed until 30 September 2026 (and still for non-individual buyers).
The difference on a ₹1.5 crore flat is large: ₹1,50,000 at 1%, against up to ₹22,42,500 if a non-resident's TDS is deducted on the full price at 14.95%. See the guide on TDS on a property purchase for the resident rule.
Worked example
Illustrative numbers only. A non-resident sells a flat in Bengaluru in November 2026 for ₹1,50,00,000. He bought it in 2014-15 for ₹60,00,000 including stamp duty and pays ₹1,50,000 brokerage. The flat is a long-term asset. As a non-resident, he is taxed at 12.5% without indexation.
His long-term gain: ₹1,50,00,000 − ₹1,50,000 − ₹60,00,000 = ₹88,50,000. Tax at 12.5%: ₹11,06,250. The payment exceeds ₹1 crore, so surcharge at 15%: ₹1,65,938. Cess at 4% on ₹12,72,188: ₹50,888. Total: about ₹13,23,075 (14.95% of ₹88,50,000).
Without a certificate, a cautious buyer deducts 14.95% on ₹1,50,00,000 = ₹22,42,500. The seller then has about ₹9,19,425 of excess TDS to claim as a refund after filing his return.
With a certificate allowing deduction on the gain, the buyer deducts about ₹13,23,075. If the seller has also committed part of the gain to 54EC bonds or a new house in India and the certificate reflects that, the deduction could be lower still.
The buyer here is a resident individual paying after 1 October 2026, so he uses his PAN and Form 141, not a TAN. Had he paid in September 2026, he would have needed a TAN and Form 144.
Paying the seller and sending money abroad: Forms 145 and 146
Sale proceeds owed to a non-resident are normally paid into the seller's NRO account in India. Money in an NRO account can be remitted abroad within the limits set by the Reserve Bank of India (up to USD 1 million a financial year, with conditions); see the guide on NRIs buying property in India for the repatriation rules.
For the remittance, the person making it furnishes Form 145 (earlier Form 15CA), and where the remittance is chargeable to tax and exceeds ₹5 lakh in the year, a chartered accountant's certificate in Form 146 (earlier Form 15CB), unless a certificate from the assessing officer is obtained instead. Forms 145 and 146 apply to remittances on or after 1 April 2026.
If the buyer pays the seller directly abroad, the buyer is the remitter and must handle these forms with the bank. Most buyers avoid that by paying into the seller's NRO account and leaving the onward remittance to the seller.
What the seller must do
Apply for a lower deduction certificate early if the TDS on the full price would be far above the real tax.
Give the buyer your PAN; without it, the rate rises to at least 20% and the certificate route is closed.
File an Indian return for the tax year of the sale, report the gain, claim any exemption and claim credit for the TDS (and a refund of any excess).
Check whether the country where you live also taxes the gain, and whether the tax treaty gives credit for the Indian tax.
Common mistakes
Deducting 1% because 'that is the TDS on property'. For a non-resident seller it is the rate on the gain, with no threshold.
Not asking the seller's residential status and finding out after the deed.
Ignoring surcharge and cess, and under-deducting by a material amount.
Applying for a TAN after 1 October 2026 as a resident individual buyer when it is no longer needed — or, as a company buyer, assuming the new exemption applies.
Paying the token or instalments without deducting, and trying to recover it all from the last payment.
Paying to a foreign account without Forms 145 and 146.
Relying on a lower deduction certificate issued for a different buyer or a different year.
This is general information, not tax or legal advice. Tax law, rates and forms change with each Finance Act; confirm how the rules apply to your own facts with a chartered accountant before you sign, pay or file.
Common questions
How much TDS do I deduct when buying from an NRI?
On a long-term gain, 12.5% plus surcharge (10% above ₹50 lakh, 15% above ₹1 crore) plus 4% cess — about 13%, 14.3% or 14.95%. Buyers usually deduct on the full price unless the seller gives a lower deduction certificate. On a short-term gain, normally 30% plus surcharge and cess.
Is there a ₹50 lakh threshold for NRI property TDS?
No. The ₹50 lakh threshold applies only to resident sellers. For a non-resident seller, TDS applies from the first rupee.
Do I need a TAN to buy property from an NRI?
From 1 October 2026, not if you are a resident individual or HUF: you use PAN and Form 141. Before that date, and for companies, firms and other buyers, a TAN is required and the quarterly statement is Form 144 (earlier Form 27Q).
What is the new form number for Form 13?
Form 128, under section 395(1) of the Income-tax Act, 2025, for applications from 1 April 2026.
What replaced Forms 15CA and 15CB?
Form 145 (remitter's declaration, earlier 15CA) and Form 146 (chartered accountant's certificate, earlier 15CB), for remittances on or after 1 April 2026.
Can an NRI seller use the 20% indexed rate?
No. The choice between 12.5% without indexation and 20% with indexation is available only to resident individuals and HUFs. A non-resident pays 12.5% without indexation.
Which section covers TDS on purchase from an NRI after 1 April 2026?
Section 393(2) of the Income-tax Act, 2025 (the entry for payments to non-residents). Before 1 April 2026 it was section 195 of the 1961 Act.
Sources
- Income-tax Act, 2025 (as amended by the Finance Act, 2026): section 393(2) (payments to non-residents), section 395(1) (lower deduction certificate), section 397 (TAN exemption for resident individual/HUF buyers from 1 October 2026), section 197 (12.5% LTCG); incometaxindia.gov.in; checked 2 October 2026
- Union Budget 2026-27 (1 February 2026), Budget speech and Memorandum explaining the Finance Bill, 2026 — removal of TAN requirement for resident individual/HUF buyers from non-residents; indiabudget.gov.in and PIB; checked 2 October 2026
- Income-tax Act, 1961: sections 194-IA, 195 and 197; Finance Act, 2022 (15% surcharge cap on long-term gains); indiacode.nic.in; checked 2 October 2026
- Income-tax Rules, 2026: Form 128 (earlier Form 13), Form 141, Form 144 (earlier Form 27Q), Form 135 (TAN application, earlier Form 49B), Forms 145 and 146 (earlier 15CA and 15CB); incometaxindia.gov.in form pages and FAQs; checked 2 October 2026
- Reserve Bank of India, Master Direction on Remittance of Assets (USD 1 million a financial year from NRO accounts); rbi.org.in
Last checked 2026-10-02.