Buying property from an NRI? TAN is mandatory until September 30, 2026; Know TDS rules and what changes from October 1

The requirement for resident individuals and HUFs buying immovable property from an NRI to obtain a Tax Deduction Account Number (TAN) will end from October 1, 2026. However, the tax obligation itself will not change. Buyers will still have to deduct and deposit TDS, but they will be able to use their PAN for the process instead of first obtaining a TAN.

According to Amit Prakash, CBO, Urban Money, from October 1, resident buyers purchasing property from NRI sellers will be able to deposit TDS through a PAN-based challan, similar to the mechanism already used for resident-to-resident property transactions. The obligation to deduct tax remains with the buyer; what changes is the account number used for reporting.

CA Parag Jain, Tax Head at 1 Finance, said the Finance Bill 2026 amends Section 397(1)(c) of the Income Tax Act, 2025 to exempt resident individuals and HUF buyers from obtaining a TAN when purchasing immovable property from a non-resident seller. The relief, however, does not extend to companies, firms or LLPs buying property from an NRI, which will continue to require a TAN.

TAN remains mandatory until September 30, 2026

Until September 30, 2026, obtaining a TAN is mandatory for resident individuals buying property from an NRI. Jain said the applicable route is Form 144, the renumbered Form 27Q, which is a quarterly return filed through the TIN-Protean utility and cannot be filed without a TAN.

The difficulty, according to Jain, is that the compliance structure was designed for regular tax deductors such as employers and businesses. A buyer purchasing a house may have only a one-time TDS obligation, yet still has to apply for a TAN, wait for its allotment and file the required quarterly return.

Prakash said that for a one-time property purchase, this can involve several additional compliance steps, including filing forms, waiting for processing and obtaining an account number that the buyer may never need again.

From October 1, 2026, that additional registration requirement will be removed for eligible resident individual and HUF buyers. The tax rates and liability, however, will remain unchanged.

No ₹50 lakh threshold for property bought from an NRI

There is no ₹50 lakh threshold for TDS when a resident buyer purchases property from an NRI seller.

Jain said this is one of the biggest differences between transactions involving resident and non-resident sellers. For a resident seller, TDS generally applies where the consideration or stamp duty value is ₹50 lakh or more, at 1% of the consideration.

For a non-resident seller, however, TDS applies from the first rupee. Jain said that a ₹30 lakh property bought from an NRI attracts deduction, whereas the same property bought from a resident seller would not attract TDS if it remains below the applicable ₹50 lakh threshold.

The rate and amount of deduction are also different. In an NRI transaction, the tax is linked to the seller's capital gain, but the buyer cannot simply assume the amount of capital gain. In the absence of a lower deduction certificate, Jain said the deduction is made on the entire sale consideration at 12.5% where the property was held beyond 24 months, or at slab rates where it was held for less, along with surcharge and cess.

For example, on a ₹2 crore sale, this could mean ₹25 lakh being withheld even if the seller's actual capital gain is much lower. This is why a lower deduction certificate can be particularly important for an NRI seller.

Lower TDS certificate does not remove TAN requirement before October 1

An NRI seller who obtains a lower or nil TDS certificate does not eliminate the buyer's TAN requirement before October 1, 2026.

Prakash said the certificate determines the rate at which TDS is deducted, while the TAN continues to determine how the deduction is reported and deposited.

Jain said the certificate is issued in respect of a named deductor and the seller's application has to quote the buyer's TAN. Therefore, the buyer has to obtain the TAN first, after which the seller can apply for the lower deduction certificate.

This sequencing can delay transactions. Jain said the buyer should apply for the TAN first and the seller should then apply for the certificate. Since the certificate can take several weeks, starting the process only a fortnight before registration may leave insufficient time.

NRIs selling before October 1 should plan the transaction early

NRIs planning to sell Indian property before October 1, 2026, should factor the existing TAN-based TDS process into their transaction timeline.

Prakash said that if the sale is flexible, completing it after October 1 could simplify compliance for the buyer because TDS reporting will shift to a PAN-based process for eligible resident individuals and HUFs.

For sales before October 1, Prakash recommended considering the TDS rate and documentation alongside the transaction timeline. NRIs eligible for a lower deduction certificate under Section 197 should consider applying before the sale rather than waiting until the transaction is already underway.

Jain said NRIs should disclose their residential status when listing the property rather than waiting until the agreement is being drafted. A buyer discovering the NRI status late in the process may respond by renegotiating the price.

For transactions involving a lower deduction certificate, Jain recommended starting the process six to eight weeks before the target registration date. NRIs should also explain the compliance mechanics to buyers, particularly because many resident buyers may be familiar with Form 141 but not Form 144.

Jain also said NRIs should keep repatriation documentation moving in parallel. Sale proceeds can leave an NRO account within the annual limit of USD 1 million per financial year, supported by Form 145 and Form 146 under the Income Tax Rules, 2026.

Where the transaction timeline is flexible, Jain said sellers should consider the practical benefit of completing the transaction after October 1, when the TAN step will no longer apply to eligible resident individual and HUF buyers.