Buying property from an NRI seller: the TDS rules buyers must follow (2026)

The short answer: when you buy property from a seller who is a non-resident, you must deduct tax (TDS) from the full price, not just the seller's profit, at the rate that applies to their capital gains. For a property held over two years that is 12.5%, plus surcharge and cess, which can take it to about 15% or more. There's no ₹50 lakh threshold. The only way to deduct less is a lower-deduction certificate the seller gets from the Income Tax Department before the sale. Since 1 October 2026, resident individual and HUF buyers can deposit this TDS using their PAN instead of a TAN.

This catches buyers out more often than almost anything else in a resale purchase, because the obligation and the liability sit with the buyer. If you deduct too little, the tax department can recover the shortfall, with interest, from you.

Resident seller vs NRI seller

How to tell if the seller is an NRI

Residency for tax depends on how many days the seller spent in India, not their passport. A seller who lives abroad, or has an overseas address on their bank account, may well be non-resident for tax. Ask the seller in writing for their residential status for the year of the sale, and put it in the sale agreement. If they are non-resident, plan for TDS from the start.

The rate, and why it's on the full price

The buyer doesn't know the seller's actual gain, so the law makes the buyer deduct on the whole amount paid. For long-term property (held over 24 months), the tax rate is 12.5%. Surcharge is added on top depending on the seller's income including this gain (for individuals, 10% above ₹50 lakh and 15% above ₹1 crore, capped at 15% on these gains), and then a 4% health and education cess. On a ₹2 crore flat, that's roughly ₹30 lakh withheld from the price, even if the seller's real gain is small.

That's why most NRI sellers apply for a lower-deduction certificate.

A worked example

An NRI sells a flat they have owned for six years for ₹2 crore. Their actual gain is about ₹40 lakh.

The figures are illustrative; the certificate states the exact rate or amount to deduct. The difference shows why sellers apply, and why buyers should never deduct less than the full rate without one.

The lower-deduction certificate

The seller can apply to the Income Tax Department for a certificate that lets the buyer deduct tax only on the actual gain, or at a lower rate. Under the Income-tax Act, 2025 (in force since 1 April 2026), the application is made on Form 128, which replaced the old Form 13. It takes time, so it should be in hand before registration. As the buyer:

• Ask for a copy of the certificate, check it names you as the buyer and covers this property, and deduct exactly what it says.
• Without a certificate, deduct at the full rate. Don't accept a seller's own calculation of their gain.

How to deduct and pay

1. Deduct TDS when you pay, on each instalment, including the advance.
2. Deposit it with the government. From 1 October 2026, a resident individual or HUF buyer can do this using their PAN, through Form 141 on the income tax e-filing portal, instead of first getting a TAN. Companies, firms and other buyers still need a TAN and must file quarterly TDS returns.
3. Give the seller a TDS certificate so they can claim the credit.
4. Keep the records with your sale deed.

The forms and deadlines changed twice in 2026, first with the new Income-tax Act in April and then with the PAN-based route in October. Have a chartered accountant handle the filing, and check the current rules on the income tax e-filing portal.

What happens if you get it wrong

If you don't deduct, or deduct too little, you can be treated as "in default": liable for the tax you should have deducted, plus interest for each month of delay, plus late-filing fees and possible penalties. These fall on the buyer, not the seller, and they can surface years later.

What we recommend

• Confirm the seller's residential status in writing before you agree a price.
• Ask early whether the seller has applied for a lower-deduction certificate.
• Put the TDS mechanics in the sale agreement: the rate, who files what, and by when.
• Use a chartered accountant for the filing.

Buying from abroad yourself? Our NRI buying guide covers the other side of the table.