Buying Property from an NRI in 2026: TDS, TAN, Form 144 and Lower-Deduction Route

The rule in one minute

When the seller is a non-resident, the buyer should not use the resident-seller mechanism merely because the asset is a flat, plot or house in India. The Income Tax Department’s e-Pay Tax FAQ distinguishes a resident deductee (old Form 26QB) from a non-resident one (old Form 27Q). For payments or credits on or after 1 April 2026, the Income-tax Rules, 2026 renumber these: the PAN-based challan-cum-statement for property, rent, contractor and VDA deductions is Form 141, and the quarterly statement for payments to non-residents is Form 144 (earlier Form 27Q). In practice, a buyer paying a non-resident seller has generally needed a TAN, a tax-payment trail and a Form 144 reporting process rather than the PAN-based Form 141 route used for a resident property seller — subject to the 1 October 2026 relief for resident individual and HUF buyers explained below.

For transfers governed by the Income-tax Act, 1961, the familiar charging/withholding reference is section 195. From 1 April 2026, payments or credits are governed by the corresponding Income-tax Act, 2025 provisions: the Department explains that non-salary TDS has been consolidated into section 393 and that transactions on or after 1 April 2026 should quote the relevant section 393 table item rather than old section numbers. Section 393(2), Table serial 17 covers interest or another sum chargeable under the Act paid to a non-resident or foreign company at the “rates in force”.

What rate should a buyer work with?

The Department’s non-resident FAQ gives a practical capital-gain reference. If immovable property is held for more than 24 months, it is long-term. For transfers on or after 23 July 2024, the long-term capital-gains rate stated in the FAQ is 12.5%; for transfers before that date, it was 20%. For a short-term gain, the FAQ states 30% for an individual/firm and 35% for a foreign company. Surcharge and 4% Health and Education Cess can increase the effective withholding rate.

That does not mean a buyer should casually apply 12.5% to the entire sale price. The non-resident payment rule is concerned with the sum chargeable to tax. The difficulty at closing is that a buyer may not safely know the seller’s cost, improvement cost, exemptions, treaty position or final taxable gain. This is exactly why the law provides a route for determination/lower deduction rather than inviting the buyer to invent the taxable component.

2026 change: Form 129 replaces the old payer-side Form 15E route

The Income-tax Rules, 2026 introduced Form 129 for a payer who wants the Assessing Officer to determine the portion of a non-resident payment chargeable to tax. The Department’s Form 129 note maps it to old Form 15E and old section 195(2)/(7), and identifies the new statutory references as sections 395(2) and 400(3). The form is event-based, has no prescribed annual filing cap and must be sought before the remittance for which the determination is required.

This is useful in a property transaction where the consideration can be far larger than the actual taxable gain. A seller may separately use the applicable payee-side lower/nil certificate process. Whichever route is used, the closing team should not treat an email calculation by the seller or broker as if it were a certificate issued under the Act.

Documents that make the determination workable

• registered/expected sale agreement and payment schedule;
• seller PAN, passport/overseas address and evidence supporting non-resident status;
• original purchase deed and cost records;
• capital improvement invoices where relied upon;
• computation of capital gain and any exemption/reinvestment claim;
• prior-payment details, because TDS timing follows credit/payment rather than only registration day;
• certificate/application acknowledgement and validity details where lower deduction is sought.

Worked closing example: why a certificate can matter

Instalment trap

If ₹20 lakh is paid as an advance months before registration, do not assume TDS can wait until the deed is signed. The non-resident withholding rule generally operates at credit or payment, whichever is earlier. The tax plan therefore has to be ready before the first taxable payment event.

TAN, payment and Form 144 (earlier Form 27Q) — the buyer’s file

The Department’s TDS material places non-salary payments to non-residents in Form 27Q up to the quarter ended 31 March 2026 and in Form 144 for payments from 1 April 2026 (first quarter of tax year 2026-27 due 31 July 2026). It also lists quarterly statement due dates of 31 July, 31 October, 31 January and 31 May for quarters ending June, September, December and March respectively, with the TDS certificate (Form 16A under the old rules; use the certificate form shown on the portal for 2026-27) generally due 15 days after the statement due date. The legacy material also explains the normal challan deposit timeline: seven days from the end of the month of deduction, with March deductions payable by 30 April. For a 2026 transaction, use the current portal/rules and section codes because the new Act changed form numbering and section references even where policy remains similar.

1. Obtain TAN early enough to make the first required deposit.
2. Validate seller PAN/name and non-resident status.
3. Map each instalment to the applicable withholding event.
4. Apply the rate/determination actually supported by law or certificate.
5. Deposit tax and preserve the CIN/challan.
6. Report the transaction in the prescribed non-resident TDS statement.
7. Issue/download the TDS certificate and reconcile it with Form 26AS/AIS where applicable.

TAN or PAN? The 1 October 2026 relief for resident individual and HUF buyers

Budget 2026 proposed, and the Finance Act 2026 amendment to section 397(1)(c) of the Income-tax Act, 2025 provides, that a resident individual or HUF deducting tax under section 393(2) on the consideration for immovable property bought from a non-resident is not required to obtain a TAN. The buyer deducts on the buyer’s own PAN and reports the deduction, quoting the seller’s PAN, in a PAN-based challan-cum-statement. The amendment takes effect on 1 October 2026.

What this means at a closing in September or October 2026: a payment or credit before 1 October 2026 follows the TAN and Form 144 route; a buyer who is a company, LLP or firm continues to need a TAN in any case; and an individual or HUF buyer whose payment falls on or after 1 October 2026 should check the portal’s current PAN-based workflow before relying on the relief. The relief removes the TAN step only — it does not change the withholding rate, the need for a lower-deduction determination where the taxable gain is far below the sale price, or the deposit deadline.

Defaults can become the buyer’s liability

A property buyer is a deductor, not merely a conduit. The Department’s TDS guidance describes interest for non-deduction/short deduction and for delayed deposit, late-statement fees and additional penalty exposure. Under the legacy framework, interest is stated at 1% per month or part for non/late deduction and 1.5% per month or part after deduction but before deposit; late filing fee under section 234E is ₹200 per day subject to the statutory cap. For a post-1 April 2026 transaction, use the equivalent provisions and current portal calculation rather than copying old section labels into the return.

The safest purchase agreement therefore contains a tax-withholding clause, requires the seller to cooperate with certificate applications, allows the buyer to retain statutory tax and defines what happens if the seller’s status or certificate changes before a later instalment.

Closing-day checklist

• Seller’s tax residency confirmed for the relevant tax year.
• PAN and identity match across deed, certificate and portal.
• Holding period and acquisition date documented.
• TAN/portal access ready before first taxable instalment.
• Lower-deduction/determination certificate, if any, checked for payer, payee, amount, rate and validity.
• Payment schedule reconciled to TDS deposit dates.
• Sale deed states gross consideration and statutory withholding clearly.
• Challan and quarterly statement responsibilities assigned to a named person.
• Seller receives TDS certificate and payment reconciliation after filing.

Sale agreement drafting: build the withholding into the cash-flow

A non-resident property deal can become unnecessarily contentious when the agreement mentions only a net amount payable to the seller. The drafting should instead separate the gross consideration, the amount to be deposited as tax, and the net remittance to the seller. If a lower-deduction or determination certificate is expected, the agreement should state what happens if the certificate arrives after an advance is due, is issued for only part of the consideration, or names only one of several buyers.

Consider a ₹1.50 crore purchase with two scheduled instalments of ₹30 lakh and ₹1.20 crore. If the seller is applying for a determination that would support lower withholding, the first ₹30 lakh cannot simply be paid gross on the assumption that the certificate will eventually arrive. The withholding event is linked to credit/payment. The parties can either obtain the certificate before the relevant instalment or structure the agreement so that the buyer retains the statutory amount until the legally supportable rate is clear. This is a commercial drafting issue as much as a tax issue.

Three edge cases that change the file

Multiple buyers: every buyer should understand who is deducting, depositing and reporting tax against the portion paid or credited by that buyer. A certificate or challan should not be assumed to cover another payer unless its terms do so. Multiple sellers: residency and tax treatment can differ seller by seller even when the property is sold through one deed. The payment allocation in the deed should therefore be clear. Power of attorney: payment to an attorney or Indian bank account does not by itself convert a non-resident seller into a resident payee; the underlying seller and chargeability still drive the analysis.

Also separate the buyer's withholding problem from the seller's repatriation problem. The seller may later need banking/FEMA documentation to remit the sale proceeds. That downstream process does not remove the buyer's TDS obligations at closing. Keeping the tax challan, Form 144 (or, for pre-April 2026 payments, Form 27Q) acknowledgement, TDS certificate, deed, certificate/order and bank trail in one permanent folder helps both sides when the bank, tax portal or assessment team asks for the transaction history years later.

Frequently asked questions

Primary sources

Use the cited instrument or regulator guidance for the proposition described above; check later amendments and transaction-date rules before acting.

1. Income Tax Department — NRI property-sale TDS FAQ
2. Income Tax Department — e-Pay Tax FAQ: resident vs non-resident deductee forms
3. Income Tax Department — Section 393, Income-tax Act, 2025
4. Income Tax Department — Form 129: payer application for non-resident payment
5. Income Tax Department — Tax payments / transition to Income-tax Act, 2025
6. Income Tax Department — TDS/TCS statement forms and due dates