Buying property from an NRI: there is no Rs 50 lakh threshold, and deducting 1% can cost you a third of the purchase price
Buy from a resident and it is 1% TDS above Rs 50 lakh. Buy from an NRI and the whole picture changes — no threshold, deduction on gross consideration, and an error can expose you to a third of the value of the house you just bought. And it is the buyer who pays, not the seller.
Prabhakar Kumar
Chartered Accountant (ICAI, Nov 2019)
📅 16 Aug 2026
⏱ 6 min read
1,233 words
You have bought property before. You know the drill — 1% TDS above ₹50 lakh, file 26QB, done.
Now you are buying a flat whose owner lives in Dubai.
12.5% (LTCG) / 30% (STCG) base, plus surcharge and cess
Applied to
Consideration or stamp duty value, whichever is higher
Gross consideration, not the gain
TAN
Not required
Required (until 30 Sept 2026 — see below)
Form
26QB → Form 141
27Q → Form 144
Three of these deserve separate attention.
One — there is no threshold. Full TDS applies even on a small ₹25 lakh flat. The ₹50 lakh line belongs to the resident-seller provision, not this one.
Two — TDS is deducted on the full sale value, not on the gain. The seller's actual capital gain might be ₹15 lakh with tax of ₹2 lakh on it — but you must still deduct 13% of ₹1 crore, that is ₹13 lakh, unless they produce a lower deduction certificate.
Three — all of this is the buyer's responsibility. The seller takes the money and leaves. The department comes to you.
Long-term (property held more than 24 months) carries a base rate of 12.5%. Short-term carries 30%. On top of that comes surcharge — nil below ₹50 lakh, 10% from ₹50 lakh to ₹1 crore, and 15% above ₹1 crore (surcharge on capital gains is capped at 15%). Then 4% cess.
Take a ₹2 crore property, NRI seller, long-term. The required deduction was 14.95%, that is ₹29,90,000. The buyer deducted 1% — ₹2,00,000.
Shortfall: ₹27,90,000.
On top of that:
Interest — 1% per month from the date deduction was due until the date of deduction, then 1.5% per month until payment. On ₹27.9 lakh, 1.5% is roughly ₹41,850 a month, that is ₹5 lakh a year. And these cases usually surface two to three years later.
Penalty — can equal the tax not deducted, that is another ₹27,90,000 (levied by the Joint Commissioner, with a reasonable cause defence available).
Late Form 144 — ₹200 per day, capped at the TDS amount.
Prosecution — available where tax deducted has not been deposited.
Total realistic exposure: ₹55-70 lakh on a ₹2 crore purchase. That is a quarter to a third of the house you just bought.
There is one real defence — if the seller has filed their return and paid the tax, relief may be available under that proviso, supported by a CA certificate. But interest still runs up to the date of the seller's return.
Until 30 September 2026: the buyer must obtain a TAN (Form 49B). A PAN will not do. This is where most people come unstuck, because the resident-seller 26QB route needs only a PAN, and buyers assume the same applies here.
From 1 October 2026: the Finance Act 2026 has removed the TAN requirement for resident individuals and HUFs where deduction is under Section 393(2) on the transfer of immovable property.
And one thing to state plainly: what replaces the TAN is not confirmed. The requirement has been removed, but we could not find a confirmed form number or CBDT procedural notification for the PAN-based challan-cum-statement that takes its place. The resident route uses Form 141, so something similar is likely — but that is our expectation, not a confirmed position. If your registration falls around September or October, confirm the latest position first.
# The lower deduction certificate — the most important document here
The seller applies (previously Form 13, now Form 128), and the Assessing Officer certifies that TDS should be deducted on the actual capital gain rather than on gross consideration.
Look at the difference. A ₹1 crore property where the seller's actual gain is ₹15 lakh:
Without the certificate: ₹13,00,000 of TDS
With the certificate: TDS on the gain, roughly ₹1,95,000
The seller's ₹11 lakh stays locked up for a year until they file a return and claim a refund. So the seller has the most to gain from it — but the buyer should take an interest too, because a seller willing to do the work of obtaining the certificate generally gets the rest of their compliance right as well.
Get the seller's residential status in writing — passport, visa, foreign address. "He is Indian" is not enough. Put a declaration in the agreement.
Confirm the holding period — under 24 months means a 30% base rate, which changes the whole arithmetic of the deal.
Lower deduction certificate — ask the seller to obtain it, and tie registration to it.
TAN — obtain one if you are a company or firm, or if registration falls before 30 September.
Deduct before paying — deduct before releasing money to the seller. Do not attempt to "adjust" it afterwards.
File Form 144 on time and issue Form 131 to the seller.
15CA/15CB — if money is going abroad (Form 145 / Form 146).
Want this done automatically?
Skip the manual work. File your ITR with full CA review.
VittSphere ONE handles ITR-1 and ITR-2 filing FREE for annual subscribers, with full CA review before submission and FREE notice protection. Pay-as-you-go also available.
Founder of VittSphere Technologies. Practicing CA serving 200+ MSME clients across Pune. 86% win-rate at AO and CIT(A) level tax appeals. Writes on Indian taxation, capital gains, and personal finance.
No, and this is the most expensive misconception in property transactions. The 1% provision applies only where the seller is a resident. Where the seller is an NRI, the non-resident payment provision applies — Section 195 under the old Act, Section 393(2) under the Income-tax Act 2025. The base rate is 12.5% on long-term gains and 30% on short-term, plus surcharge and cess.
Is there no TDS if the property is under Rs 50 lakh?
There is, where the seller is an NRI. The Rs 50 lakh threshold exists only in the resident-seller provision. Buying from an NRI, TDS applies from the first rupee — a Rs 25 lakh flat still requires full deduction. Many buyers do not know this because their previous purchase was from a resident.
Is TDS deducted on the gain or on the full sale value?
On the entire sale consideration, not on the gain, unless the seller obtains a lower deduction certificate. This difference is very large. On a Rs 1 crore property, 13% means Rs 13 lakh, even if the seller's actual capital gain is only Rs 15 lakh with tax of about Rs 2 lakh on it. That is why the lower deduction certificate is the single most important document in this transaction.
Do I need a TAN, or will a PAN do?
A TAN is required until 30 September 2026 — a PAN will not do. From 1 October 2026 the requirement has been removed for resident individuals and HUFs in the case of immovable property, through the Finance Act 2026. But that relief is narrow — companies, firms and LLPs still need a TAN.
Which form applies once TAN is no longer required?
This is not yet clear. The Finance Act 2026 removed the TAN requirement, but we could not find a confirmed form number or CBDT procedural notification for the PAN-based challan-cum-statement that replaces it. The resident-seller route uses Form 141, so something similar is likely — but that is our expectation, not a confirmed position. If your registration is around October, confirm the latest position with your CA.
What happens if the buyer wrongly deducts 1%?
The buyer becomes an assessee-in-default and the entire shortfall becomes their personal liability. On a Rs 2 crore deal where 14.95% was required and 1% was deducted, the shortfall is Rs 27.9 lakh. Interest runs at 1% per month until deduction and 1.5% per month until payment — roughly Rs 41,850 a month. There is also a penalty which can equal the tax not deducted, and Rs 200 per day for filing Form 144 late. Total exposure can reach Rs 55-70 lakh, which is a quarter to a third of the house purchased.
What is a lower deduction certificate and who applies for it?
The seller, the NRI, applies for it — not the buyer. Previously Form 13, now Form 128. Through it the Assessing Officer certifies that TDS should be deducted on the actual capital gain rather than on gross consideration, which can bring effective TDS down sharply from 13%. But it takes time and has to be applied for well before the registration date. Practically it is in the buyer's interest to press the seller to obtain it.
Which forms are involved?
The quarterly TDS statement for non-resident payments was 27Q and is now Form 144. The TDS certificate was 16A and is now Form 131. The lower deduction application was Form 13 and is now Form 128. For remittance, 15CA and 15CB are now Form 145 and Form 146. The resident-seller challan-cum-statement, previously 26QB, is now Form 141 — but that is not used in this case.
Continue reading
More CA-grade analysis to compound your financial knowledge.
File your ITR with full CA review. Track every rupee. Get notice protection. Run forensic stock analysis. All in one app, built by an ICAI Chartered Accountant.
