If you buy property from a seller who is non-resident for income tax, you deduct tax from your payment and deposit it with the government. This is not the 1% rule for resident sellers. Since 1 October 2026, a resident individual or HUF buyer needs no TAN and can pay and report through Form 141, Schedule E. Every other buyer still needs a TAN and files Form 144.
Earlier section and form numbers sit beside the new ones where an official page shows both. This is not tax advice. Confirm with a chartered accountant or your bank before you pay or file. If you are the seller, see the guide to TDS on property sale by an NRI.
Why the buyer deducts tax when the seller is non-resident
The Income-tax Act, 2025 has applied since 1 April 2026. Its section 393(2), Table serial 17, covers a sum paid to a non-resident who is not a company, or to a foreign company. The payer is “any person”, and Note 3 says the duty applies whether or not the non-resident has any presence in India. Tax is deducted when the sum is credited or paid, whichever is earlier. The department’s section table shows this was section 195 of the 1961 Act.
So you hold back part of the price, pay it to the government against the seller’s PAN, and give the seller a certificate. A resident seller is a different case:
| Point | Resident seller | Non-resident seller (not a company) |
|---|---|---|
| Provision | Section 393(1), Table serial 3(i), formerly section 194-IA | Section 393(2), Table serial 17, formerly section 195 |
| Rate | 1% of the consideration or the stamp duty value, whichever is higher | “Rates in force” under the Finance Act, 2026 |
| Threshold | Rs 50 lakh or more (Note 3, as corrected by section 84 of the Finance Act 2026) | None shown in the 393(2) table |
| TAN | Not needed | Not needed for a resident individual or HUF buyer since 1 October 2026. Others need one |
| Form | Form 141, Schedule B, formerly Form 26QB | Form 141, Schedule E (resident individual or HUF buyer). Form 144, formerly Form 27Q (others) |
| Deposit | 30 days from the end of the month of deduction | Same on the Form 141 route. Others: 7 days from month end, 30 April for March |
How to find out whether the seller is an NRI
A passport or visa does not decide it. Section 6 of the Income-tax Act, 2025 tests an individual’s stay in the tax year, 1 April to 31 March. The department’s non-resident FAQ says an individual is resident with 182 days or more in India in the year, or 60 days or more plus 365 days or more in the four years before. Other counts apply to some citizens and people of Indian origin, and an Indian citizen with Indian-source income above Rs 15 lakh who is taxed nowhere else is deemed resident (section 6(7)).
The RBI labels NRI and OCI decide who may buy property under FEMA, a separate question covered in Can an NRI buy property in Navi Mumbai. The tax test covers a whole year, so status can depend on days not yet spent in India. Ask your accountant to record a view before the first payment.
Ask the seller for what Schedule E asks for (see Notification 121/2026): PAN if any, name and status; phone number, email and overseas address, even with a PAN; and the tax residency certificate number and tax identification number, where the country issues them. If there is no PAN, rule 217 lets a non-resident who is not a company supply those details instead. Without them, section 397(2) requires deduction at the higher of the normal rate and 20%.
Which rate applies, and on what amount
Section 393(2) says “rates in force”. For 2026-27 these are in Part II of the First Schedule to the Finance Act, 2026. The rate depends on whether the gain is long-term or short-term. Section 2(101) of the Income-tax Act, 2025 makes a gain short-term if the asset was held 24 months or less.
| Seller held the property | Rate: non-resident individual | Rate: foreign company |
|---|---|---|
| More than 24 months (long-term) | 12.5% | 12.5% |
| 24 months or less (short-term) | 30% | 35% |
The department’s FAQ on this rate still cites section 195, but its figures match, and so does section 197(1). The comparison with 20% and indexation for property bought before 23 July 2024 is open only to a resident individual or HUF (section 197(3)).
Surcharge and cess. Surcharge under Part II of the Finance Act depends on the income subject to deduction. For a non-resident individual on the default regime of section 202: 10% above Rs 50 lakh up to Rs 1 crore, 15% above Rs 1 crore, and 25% above Rs 2 crore on income other than gains. Surcharge on tax on gains under sections 196, 197 and 198 is capped at 15%; the property long-term rate is in section 197. An individual who opted out of section 202 faces 25% from Rs 2 crore to Rs 5 crore and 37% above, on income other than gains. Foreign company: 2% above Rs 1 crore up to Rs 10 crore, 5% above that. Cess is 4% of tax plus surcharge (Finance Act 2026, section 3(16)).
On what amount is the tax deducted
The Court and the department point to the gain, but a buyer who deducts too little carries the risk. Table serial 17 covers “any other sum chargeable under the provisions of this Act”. In PILCOM v CIT (Supreme Court, 29 April 2020), the Court set out its 2010 GE India Technology Centre ruling on the old section 195: on a composite payment, the duty to deduct is limited to the appropriate proportion of income chargeable under the Act. The department’s rate FAQ says tax is deducted “from the gains”. Its 2012 FAQ for foreign investors says the payer may work out a capital gain itself or take an accountant’s help, should go to the Assessing Officer under section 195(2) in complex cases, and stays liable for the right amount.
Section 395(2) of the 2025 Act keeps that route, and Schedule E has separate fields for “total sale consideration” and “amount on which tax is liable to be deducted”. The 2025 Act keeps the “sum chargeable” words, but ask your accountant how the old rulings apply. You may not know the seller’s cost, and under section 398 a buyer who fails to deduct the whole or any part of the tax is an assessee in default, so agree the amount in writing or seek a certificate before the first payment. Illustration: on a Rs 90,00,000 sale with a Rs 20,00,000 gain, 12.5% is Rs 2,50,000 of the gain, against Rs 11,25,000 of the full price.
How to get a TAN, and when you do not need one
TAN is the Tax Deduction and Collection Account Number. The department says PAN cannot be quoted where a TAN is required (see the Form 134 and 135 FAQ).
- Resident individual or HUF buyer: no TAN for this transaction from 1 October 2026 (section 397(1)(c)(iii), added by section 87 of the Finance Act 2026). The Finance Bill memorandum called a TAN for one transaction a burden. You use your PAN.
- Any other buyer (company, firm, LLP, trust, or a buyer who is non-resident): you need a TAN. Schedule E is open only to a resident individual or HUF.
- How to apply: Form 135, formerly Form 49B, before you deduct tax or within 30 days from the end of the month of deduction (rule 216), with proof of identity, address and date of birth or incorporation. Protean takes applications online or at a TIN Facilitation Centre and forwards them to the department, which issues the TAN. The fee is Rs 77 including GST. Track the acknowledgment number after three days, or SMS PTNTAN to 57575.
How and when to deposit, report and certify
Resident individual or HUF: Form 141, Schedule E
- Deduct the tax when you credit or pay the seller, whichever is first.
- Log in to the e-Filing portal with your PAN, which must be active (the Form 141 manual recommends Aadhaar linking for individuals). Go to e-File, e-Pay Tax, Income Tax Act 2025, New Payment, then Form 141. Select the schedule as the nature of transaction (the FAQ names Schedule E). Pick Corporate deductee only if the seller’s PAN has C as its fourth character. Each buyer files a separate form for their own share.
- Enter the property, buyers and shares, seller’s details, dates, stamp duty value, consideration, lumpsum or instalment, type of gain, rate, tax and any certificate numbers.
- Pay and furnish the form within 30 days from the end of the month in which you deducted the tax (rules 218(3) and 219(5)). Tax deducted on 12 October 2026 is due by 30 November 2026.
- You get an SMS and an email, and the form shows under Payment History. Corrections go through TRACES. Download Form 132 from TRACES and give it to the seller within 15 days from the Form 141 due date (rule 215).
Any other buyer: the TAN route
- Deduct the tax when you credit or pay the seller, whichever is first.
- Deposit it within 7 days from the end of the month, or by 30 April for tax deducted in March (rule 218(2)), on challan ITNS 281N under the Income Tax Act 2025 (see the portal’s challan FAQ). After TAN login: e-File, e-Pay Tax, Income Tax Act 2025, New Payment, Pay TDS/TCS. Use separate challans for resident and non-resident deductees.
- File Form 144 each quarter, due 31 July, 31 October, 31 January and 31 May (rule 219(4) and the Form 144 FAQ).
- Issue Form 131 to the seller within 15 days from the statement due date (15 August, 15 November, 15 February, 15 June). The Form 131 FAQ says to download it from TRACES after Form 144 is processed. Any other certificate is not valid.
The Form 141 manual predates Schedule E and says Form 141 is for resident sellers only. The Form 141 FAQ and CBDT Notification 121/2026 (G.S.R. 830(E), 22 September 2026, in force from 1 October 2026) add Schedule E.
Credit or payment, whichever is first, decides the Act: the 1961 Act on or before 31 March 2026, the 2025 Act from 1 April 2026 (see the TDS compliance FAQ). Current and former references:
| What | Now | Earlier |
|---|---|---|
| Deduction from a non-resident | Section 393(2), Table serial 17 | Section 195 |
| Challan-cum-statement | Form 141 | Form 26QB |
| Quarterly statement | Form 144 | Form 27Q |
| Seller’s lower or nil certificate | Section 395(1), Form 128 | Section 197, Form 13 |
| Buyer’s application on the chargeable part | Section 395(2), Form 129 | Section 195(2), Form 15E |
| TAN application | Section 397, Form 135 | Section 203A, Form 49B |
| Certificate to the seller | Forms 131 and 132 | Forms 16A, 16B to 16E |
| Default and interest | Section 398 | Section 201 |
Sources: the FAQs for Form 128, 129, 132, 134 and 135, 144 and 145 (the form filed before money goes abroad, earlier 15CA), and the form mapping guide.
What a lower deduction certificate means for you
Under section 395(1) the seller can apply to the Assessing Officer, on Form 128 through TRACES, for a certificate setting a lower rate or no deduction. Once issued, you must deduct at that rate, or nothing, until it expires. The Form 128 FAQ says to apply well before the transaction, since an application cannot be processed once it is complete. Section 395(6), added by the Finance Act 2026, also lets the application go to “the prescribed income-tax authority”, who may issue the certificate after electronic verification. You can apply yourself under section 395(2) on Form 129.
Check the certificate number, the seller’s name and PAN, the rate or amount, and that the validity covers each payment. An old section 197 certificate stays valid from 1 April 2026 only if it covers receipts for tax year 2026-27 (the department’s tax payments FAQ).
Penalty and interest if you do not deduct or deposit
- Default and interest. Section 398 treats a person who does not deduct, or deducts and does not pay, as an assessee in default. Simple interest runs at 1% for every month or part of a month from the date tax was deductible to the date it is deducted, then 1.5% from deduction to payment.
- Relief. No default if the seller filed a return and paid the tax and you hold an accountant’s certificate. Interest still applies.
- Late statement. Section 427, as substituted by section 96 of the Finance Act 2026, sets a fee of Rs 200 a day, capped at the tax involved.
- Penalty and prosecution. The TDS compliance FAQ says a deductor may face a penalty for non-deduction, and prosecution for tax deducted but not deposited by the due date. Under section 398(7), a section 412 penalty needs a failure without good and sufficient reason.
What to put in the agreement for sale
Points to raise with your lawyer:
- The seller’s declaration of tax residency for the year, with PAN, overseas address and residency details, and a promise to tell you of any change.
- Your right and duty to deduct tax from each payment under the Act in force on the payment date, and that the seller receives the price net of that tax.
- A payment schedule with a tax step for each instalment, since Schedule E reports instalments one by one, and the rate you will use if a lower deduction certificate is expected.
- Who pays the accountant’s fee, who supplies each document and when, and who handles any later claim for excess tax.
Navi Mumbai buyer checklist
| Step | What to check | Guide |
|---|---|---|
| Agreement for sale and registration | Stamp duty, registration charges, the registered consideration and the stamp duty value Schedule E asks for | stamp duty and registration guide and ready reckoner guide |
| Index II | Registered record of earlier sales. It is not a title check | Index II guide |
| Society NOC and papers | Share certificate, dues and approvals, before non-refundable money | flat buying checklist |
| CIDCO flats | Transfer charges, NOC and lease conditions | CIDCO flat transfer guide |
| Civic dues | Property tax and other dues. Check which civic body bills the address | NMMC property tax guide, NMMC online services guide and areas in Navi Mumbai guide |
| Home loan | How the lender disburses when tax is held back | home loans guide |
| After purchase | Name change in civic records | property mutation guide |
What to ask your chartered accountant or bank
| Question | Why it matters |
|---|---|
| Is the seller non-resident for tax in the year of this payment, and what proof do I keep? | The test covers the whole tax year |
| Do I use Schedule E or the TAN route with Form 144? | Only a resident individual or HUF can use Schedule E |
| On what amount do I deduct, and should a certificate be sought? | The department points to the gain, and the buyer stays liable if the amount is wrong |
| Does a token or advance payment trigger a deduction? | Tax is due at the earlier of credit or payment |
| Does the seller’s bank need Form 145 from me? | It concerns money sent abroad |
Frequently Asked Questions
Do I deduct 1% TDS when I buy from an NRI?
No. The 1% rule is for resident sellers. For a non-resident seller you deduct under section 393(2), Table serial 17, at the rates in force: 12.5% on long-term gains and 30% on short-term gains of a non-resident individual, plus surcharge and cess.
How do I know if the seller is an NRI for TDS?
By days of stay in India in the tax year: 182 days or more, or 60 days plus 365 days in the four years before, with other counts for some citizens. Collect the seller’s PAN, overseas address and residency details, and ask your accountant to record a view before the first payment.
Do I need a TAN to buy property from an NRI?
Not if you are a resident individual or HUF, from 1 October 2026. You use your PAN with Form 141, Schedule E. Others need a TAN, applied for on Form 135.
Sources checked on 10 October 2026: the Income Tax Department pages, the Finance Act, 2026 and the CBDT notification linked above. Rules change, so confirm them with a chartered accountant. NaviMumbai.com is an independent site, not affiliated with any government body.
