Buying From an NRI? Know the TDS Rules Before You Pay
Buying a resale home from an NRI seller? Learn how TDS is determined, which form applies, when tax must be deducted and deposited, and what buyers should verify before releasing each payment.
WRITTEN BY
Tanmay Shekhar
Content Writer Specialist
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Why NRI Property TDS Needs Extra Care
Buying from a non-resident seller changes the TDS process in important ways. The familiar 1% rule used for qualifying resident-seller transactions does not apply in the same way. Buyers need to confirm the seller's tax status, understand the correct withholding route, and plan each payment before money moves. Getting this wrong can lead to avoidable tax, filing, and documentation issues.
The relevant current provision is Section 393(2) of the Income-tax Act, 2025. Buyers may still encounter references to Section 195 because that was the familiar framework under the earlier Income-tax Act for payments to non-residents.
Unlike the resident-seller property TDS route, the same ₹50 lakh threshold does not determine whether tax must be deducted from a payment to a non-resident seller.
What Decides the TDS on an NRI Sale
The sale price alone does not decide the TDS. The seller's holding period, taxable capital gain, surcharge, cess, PAN status, and any valid lower or nil deduction certificate can all change the amount. Long-term gains on qualifying transfers may attract a 12.5% base rate, while short-term gains follow different rates. The buyer should confirm the applicable position before paying.
Long-Term Capital Gain
If the property has been held for more than 24 months, the gain is generally treated as long-term. For qualifying transfers on or after 23 July 2024, the applicable base tax rate is 12.5%, with surcharge and health and education cess added where relevant.Short-Term Capital Gain
Where the property has been held for 24 months or less, the gain is generally treated as short-term. For an individual non-resident seller, official guidance currently specifies a 30% rate before applicable surcharge and cess.Surcharge and Cess
Surcharge should not be calculated simply because the property value crosses ₹50 lakh or ₹1 crore. For an individual seller, it depends on the applicable total-income thresholds. A 4% health and education cess is then applied to tax plus surcharge.Lower TDS Certificate
A non-resident seller may apply for a lower or nil deduction certificate under Section 395. Form 128 is the application, not the certificate itself. The buyer should follow the certificate actually issued by the tax authority when one applies.
How the Filing Process Works for Buyers
From 1 October 2026, an eligible resident individual or HUF buying property from a non-resident seller can use Form 141 Schedule E through PAN, without obtaining a separate TAN. The process is simpler, but the buyer still needs to confirm the seller's status, check any certificate, deduct at the right stage, file on time, deposit the tax, and keep the records.
Confirm Seller Status
Start by confirming whether the seller is a non-resident for Indian income-tax purposes. Living or working abroad alone should not be treated as the test. Collect the PAN, ownership share, and relevant transaction information before fixing the payment schedule.Verify the TDS Rate
Do not rely on a headline percentage taken from a property listing or general article. Confirm the applicable treatment for the seller and transaction before releasing money, particularly where a lower deduction certificate may apply.Deduct and File
Where payments are made in instalments, consider the TDS obligation at each relevant payment stage. Eligible resident individual and HUF buyers can report the transaction through Form 141 Schedule E using PAN.Keep the Records
Retain the filed statement, tax-payment details, issued lower deduction certificate where applicable, and the relevant sale records. The seller may also need the available TDS credit when filing the applicable Indian income-tax return.
What to Verify Before Releasing Funds
Before paying an NRI seller, confirm the seller's tax status, verify any lower deduction certificate, check the applicable TDS rate, and match every payment with the correct filing deadline. These checks reduce the risk of applying the wrong resident-seller rule, using an outdated form, or relying on a headline rate that does not reflect the seller's actual tax position.
One common source of confusion is Form 26QB. It is widely associated with the earlier resident-seller property TDS process, but buyers should not automatically treat it as the filing route for an NRI seller.
For eligible resident individual and HUF buyers purchasing from a non-resident seller from 1 October 2026, the relevant current route is Form 141 Schedule E.
Four Checks Before You Release Payment
Before paying an NRI seller, work through four checks in order: confirm tax status, review any lower deduction certificate, verify the applicable TDS rate, and map each payment to its filing deadline.
Confirm Tax Status
Verify the seller's Indian tax residency before choosing the correct TDS route.
Check Certificate
Ask for the issued certificate, not only the seller's Form 128 application.
Verify the TDS Rate
Confirm the deduction before payment instead of using a headline percentage.
Track Filing Dates
Plan tax payment and reporting deadlines alongside the property's payment plan.
Resident vs NRI Seller: What Changes
Resident and non-resident sellers do not follow the same property-TDS route. The applicable provision, threshold, filing process, and rate checks can differ. Comparing the two before payment prevents a common buyer mistake: applying the resident-seller process to an NRI transaction. Use the table below to see what changes and what should be checked before funds are released.
Resident Seller
NRI Seller
What the Buyer Should Do
TDS framework
Resident property-TDS provision
TDS framework
Non-resident withholding framework
TDS framework
Confirm seller status first
₹50 lakh threshold
Applies where prescribed
₹50 lakh threshold
Same exemption threshold does not apply
₹50 lakh threshold
Do not use resident rules automatically
TDS rate
Prescribed 1% where conditions are met
TDS rate
Depends on taxable income and gain treatment
TDS rate
Verify the applicable deduction
Filing route
Applicable resident-property route
Filing route
Form 141 Schedule E for eligible buyers
Filing route
Select the correct schedule
Lower deduction
Standard resident route
Lower deduction
Certificate can alter deduction
Lower deduction
Check certificate before payment
The Buyer Takeaway on NRI Property TDS
Treat NRI property TDS as part of the payment plan, not a registration-day formality. Confirm the seller's status, verify the deduction before each payment, and keep the filed forms with the sale documents.
For wider property planning, buyers can refer to our Bangalore Real Estate Guide for Buyers and Investors.
During registration, keep the TDS records aligned with the applicable stamp duty and registration costs. Where relevant after the sale, buyers can also review the E-Khata update.
Plan Your NRI Property Purchase With Greater Clarity
Pattem Estates helps organise the property side of an NRI resale while your tax and legal professionals confirm TDS, documents, and compliance.
Frequently Asked Questions
Clear answers to common buyer questions about NRI property TDS, filing forms, tax rates, lower deduction certificates, and payment planning.
When a resident buyer makes a taxable payment to a non-resident seller for immovable property, the buyer may need to deduct tax at source and deposit it with the government. The applicable deduction depends on the amount chargeable to tax and the relevant provisions.
No. The 12.5% rate applies to qualifying long-term capital gains on relevant transfers. The final deduction can also depend on the taxable amount, holding period, surcharge, cess, seller status, and any valid lower or nil deduction certificate.
Form 26QB is associated with the earlier resident-seller property TDS process. For eligible resident individual and HUF buyers purchasing from a non-resident seller from 1 October 2026, Form 141 Schedule E is the relevant current route.
The seller can apply through Form 128 for a lower or nil deduction certificate under Section 395. If approved, the buyer should follow the rate or amount specified in the certificate issued by the tax authority.
The ₹50 lakh threshold associated with qualifying resident-seller property TDS does not operate in the same manner for a non-resident seller. The NRI transaction follows the separate non-resident withholding framework.
Confirm the seller's tax status, check whether a valid lower deduction certificate exists, verify the applicable TDS rate, plan the deduction around each payment, and keep the filed tax records with the property documents.