Tax rules for NRI property transactions changed in Budget 2026 with a procedural update affecting how tax is deducted during property purchases. Resident buyers are no longer required to obtain a Tax Deduction and Collection Account Number (TAN) when purchasing immovable property from non-resident Indians. Instead, TDS can now be deposited using a PAN-based challan.
This change affects property transactions in Delhi NCR, where purchases from NRI sellers are common. The following sections explain how TDS on the sale of property by NRI now works under the revised process, how the PAN-based payment system is used for TDS deposits, and which tax exemptions for NRI in India provisions may apply to property investments. Understanding these rules helps buyers complete property transactions while meeting the required tax compliance steps.
What Changed in Budget 2026 for NRI Property Transactions
No More TAN Requirement for Buyers
Budget 2026 introduced a procedural change affecting how tax is deducted when resident buyers purchase property from non-resident Indians. The government proposed an amendment to Section 397(1)(c) of the Income Tax Act, removing the requirement for resident individuals or Hindu Undivided Families (HUFs) to obtain a Tax Deduction and Collection Account Number (TAN) for such transactions. Earlier, buyers purchasing property from an NRI seller had to apply for a TAN even if the transaction occurred only once. This process required submitting forms, providing supporting documents, and waiting for approval before completing tax compliance. After obtaining the TAN, buyers were also required to file quarterly TDS returns. These additional steps often delayed payments and extended property registration timelines.
The revised rule will take effect from October 1, 2026. Rajarshi Dasgupta, Executive Director at AQUILAW, noted that removing the TAN requirement addresses procedural delays that previously affected property transactions involving non-resident sellers.
How PAN-Based TDS Payment Works Now
Under the revised framework, tax deduction and payment for NRI property transactions will follow a simpler process. Buyers can now deduct and deposit TDS using a PAN-based challan, similar to the system already used in property transactions between resident buyers and sellers.
The revised procedure generally includes the following steps:
- Calculate the TDS amount based on the applicable tax rate
- Prepare the tax payment challan using the buyer’s PAN
- Deposit the TDS amount with the Income Tax Department
- Submit the transaction details along with the challan information
Because the PAN-based system replaces the earlier TAN requirement, buyers no longer need to apply for a separate tax account or wait for approval before depositing TDS. The reporting process now follows a format similar to Form 26QB compliance used in resident property transactions. Manmeet Kaur, Partner at Karanjawala & Co, explained that this change simplifies administrative procedures and reduces paperwork for both buyers and non-resident sellers. For NRIs managing property transactions remotely or through a power of attorney, the revised system may also reduce procedural steps during the sale process.
TDS Rates on Sale of Property by NRI Remain Unchanged
Budget 2026 does not change the TDS rates applicable to property sales involving non-resident sellers. The update focuses only on simplifying the compliance process rather than modifying tax liability. TDS must still be deducted according to the existing provisions under the Income Tax Act. The applicable rate depends on factors such as the property holding period and whether the seller has obtained a lower or nil TDS certificate under Section 197. Buyers are still required to deduct tax at the prescribed rates, including any applicable surcharge and cess.
The rules related to tax exemption for NRIs in India also remain unchanged. When applicable, NRI sellers can submit Form 13 to obtain a certificate allowing reduced TDS deduction based on their actual tax liability.
Understanding TDS on Sale of Property by NRI in NCR
Standard TDS Rate Under Section 195
Section 195 of the Income Tax Act governs TDS on the sale of property by NRI transactions. The applicable rate depends mainly on the holding period of the property before it is sold.
- Short-term capital gains: Properties held for 24 months or less attract 30% TDS.
- Long-term capital gains: Properties held for more than 24 months attract 12.5% TDS under the rules applicable from July 23, 2024.
Additional charges apply to these base rates. Surcharge and cess increase the final deduction amount depending on the value of the capital gain. The effective rates generally follow this structure:
- Capital gains below ₹50 lakh: about 13% effective TDS (12.5% plus 4% cess)
- Capital gains between ₹50 lakh and ₹1 crore: about 14.3% effective TDS after applying a 10% surcharge
- Capital gains above ₹1 crore: about 14.95% effective TDS after applying a 15% surcharge
There is no minimum property value threshold for these transactions. TDS must be deducted whenever a payment is made to a non-resident seller.
When Lower TDS Certificate Applies
NRI sellers may apply for a lower TDS certificate under Section 197 using Form 13. This certificate allows tax deduction based only on the actual capital gain instead of the full sale value. The application must be submitted to the Assessing Officer before the property sale is completed. Once approved, the buyer deducts TDS according to the reduced rate mentioned in the certificate. This prevents excessive tax deductions and reduces the need for large refund claims after the transaction.
Buyer’s Responsibility in TDS Compliance
The buyer is responsible for deducting and depositing TDS in accordance with tax rules. Several steps must be completed during the transaction process:
- Deposit the deducted TDS within 7 days from the end of the month in which the payment is made
- Use Challan 281 when depositing TDS under Section 195
- Issue Form 16A to the NRI seller within 15 days after filing the TDS return
Failure to deduct or deposit TDS can result in penalties and interest. The Income Tax Act specifies the following:
- Section 271C allows penalties equal to the amount of tax that was not deducted
- Section 201 allows interest charges for delayed deduction or late payment
How to Calculate TDS Amount for Your Property Purchase
In practice, TDS is calculated on the total sale consideration, not only on the capital gain portion. This often results in a higher amount being deducted at the time of sale.
For example:
- Sale value: ₹1.5 crore
- Holding period: more than 24 months
- Applicable effective rate: 14.95%
The buyer would deduct approximately ₹22.425 lakh as TDS from the transaction amount.
However, if the seller obtains a lower TDS certificate showing that the actual capital gain is ₹40 lakh, the TDS deduction may reduce to around ₹5.20 lakh. This adjustment helps ensure that tax is deducted closer to the seller’s actual tax liability rather than the full property value.
Tax Exemption for NRI in India and Investment Benefits
Capital Gains Tax Rules for NRI Real Estate
Income earned from NRI real estate sales in India is treated as capital gains under the Income Tax Act. The tax applicable depends mainly on how long the property was held before the sale. Properties held for more than 24 months are treated as long-term capital assets. For properties purchased before July 23, 2024, the seller may choose between 12.5% tax without indexation or 20% tax with indexation, which adjusts the purchase cost for inflation. Properties acquired on or after that date are taxed at a flat 12.5% rate without indexation.
If the property is sold within 24 months of purchase, the gain is treated as short-term. In such cases, the profit is taxed according to the applicable income tax slab rates, which may go up to 30% depending on the seller’s total taxable income.
How New Tax Regime Benefits NRI Sellers
Several provisions under the Income Tax Act allow tax exemption for NRIs in India when capital gains from property sales are reinvested in specific assets. One of the most commonly used provisions is Section 54, which allows exemption on long-term capital gains if the sale proceeds are reinvested in another residential property in India. The new property must be purchased within two years after the sale or constructed within three years. The exemption limit under this provision extends up to ₹10 crore. Another option is available under Section 54EC, which allows capital gains to be invested in specified bonds issued by NHAI or REC within six months of the property sale. The maximum investment allowed under this section is ₹50 lakh, and the bonds remain locked in for five years.
In cases where non-residential assets are sold, Section 54F may apply. Under this provision, sellers can claim full exemption if the entire sale proceeds are reinvested in one residential property in India.
Property Transaction Transparency Requirements
NRIs transferring property sale proceeds outside India must complete certain documentation before funds are remitted abroad. Banks generally require Form 15CA, which declares the remittance details to the Income Tax Department, along with Form 15CB, a certificate issued by a chartered accountant confirming that applicable taxes have been properly addressed. Repatriation of funds through an NRO account is typically limited to USD 1 million per financial year. Before initiating the transfer, all applicable TDS requirements must be completed, since pending tax liabilities can delay or prevent the transfer of funds.
What NCR Property Buyers Need to Do After Budget 2026
Steps to Pay TDS Using Your PAN
After the changes introduced in Budget 2026, buyers can complete TDS compliance using their PAN instead of applying for a separate TAN. The process begins by filing Form 26QB through the income tax portal. Buyers must calculate the TDS amount according to the applicable rate and deduct it at the time of payment to the seller.
The deducted amount must be deposited within 30 days from the end of the month in which the deduction is made. The payment is completed using the buyer’s PAN through the online challan system. After the deposit is processed, the portal generates Form 16B, usually within 10 to 15 days. This certificate must then be provided to the NRI seller within 15 days from the filing due date.
Documentation You Must Keep Ready
Buyers should gather and verify certain documents before completing the transaction. Having these records available helps ensure that the TDS filing process proceeds without delays.
Important documents typically include:
- The seller’s PAN card
- The sale agreement and title deed
- Proof of payment for the property transaction
- The seller’s passport and visa, confirming non-resident status
- Any lower TDS certificate issued under Section 197, if applicable
It is also advisable to keep copies of Form 26QB and Form 16B for future reference or tax documentation.
Common Mistakes to Avoid When Buying from NRIs
Before proceeding with a property purchase, buyers should confirm whether the seller qualifies as a non-resident under tax rules. This status determines whether Section 195 TDS provisions apply. Applying for a TAN is no longer necessary under the updated procedure, so attempting to obtain one may cause unnecessary delays.
Another common issue involves errors in the seller’s PAN details. Incorrect information can prevent the TDS credit from appearing correctly in the seller’s tax records. Buyers should also avoid delays in filing Form 26QB, since late submission attracts a penalty of ₹200 per day until the filing is completed.
How Budget 2026 Makes Your Transaction Faster
The shift to a PAN-based TDS payment system removes several steps that previously slowed property transactions involving NRI sellers. Buyers no longer need to apply for a TAN or wait for tax office approval before deducting and depositing TDS. With fewer procedural steps, payments to NRI sellers can be completed more quickly. As a result, property registration and transaction timelines may move forward with fewer administrative delays..
Conclusion
Budget 2026 introduces a procedural change in how TDS is handled during property purchases from NRI sellers in NCR. Buyers can now deposit TDS using their PAN, removing the earlier requirement to obtain a Tax Deduction and Collection Account Number (TAN). This adjustment simplifies the tax compliance process during property transactions.
The TDS rates themselves remain unchanged, but the process for handling the deduction has become simpler. The key outcomes of this change include:
- TDS can now be deposited using the buyer’s PAN, removing the need to apply for a TAN
- Fewer compliance steps during property transactions involving NRI sellers
- Reduced documentation and administrative delays during the purchase process
These changes affect how buyers complete tax procedures when purchasing property from NRIs in Delhi NCR. Understanding the updated process helps buyers complete property transactions while meeting the required tax compliance steps.
