NRI Seller, Sale After 1 October 2026: Is TAN Still Needed for Your TDS?

Overview (2026)

Take a resident individual or HUF that buys immovable property from a non-resident on or after 1 October 2026. The older TAN-based routine is no longer the only way to handle TDS. CBDT Notification No. 121/2026 places such deals under Form 141 through a new Schedule E, and Form 132 is the matching certificate. The shift is one of procedure, yet closing checklists must change, because the parties, property, stamp value, instalments and tax figures all go into the prescribed form. The buyer must still work out the correct TDS rate, confirm the seller's residential status, and see whether a lower deduction certificate applies.

What is different for a resident buyer with an NRI seller?

Reporting for certain non-resident property sales now follows a challan-cum-statement pattern. The notification amends the Income-tax Rules, 2026 and widens Form 141 so that it carries tax withheld on consideration paid by a resident individual or Hindu undivided family to a non-resident for immovable property.

Therefore TDS cannot be left as a topic to sort out once the deed is signed. It belongs to the transaction paperwork. The buyer has to establish that the seller is non-resident, collect the seller's PAN and, where needed, foreign details, record the property particulars, state the sale consideration and the stamp duty value, and report the deduction under the correct schedule.

Form 132 is the associated certificate. Sellers usually need it as proof of tax withheld so they can claim credit in their Indian tax records. A buyer who pays the price but never files the right statement or issues the certificate may find the seller coming after them even after registration.

Lenders are affected too. A loan file involving a non-resident seller should show a clean TDS path before money is released, and a ready draft deed is not enough. The bank should ask how the buyer has been advised to deduct tax, which form will be filed, and whether any certificate allows a lower rate.

So is a TAN never required when I buy from an NRI?

For the class of deals the new rule covers, the direction from 1 October 2026 is a PAN-based Form 141 filing. That is the point most one-time resident individual buyers of a house, flat, plot or other immovable property from a non-resident will care about.

Still, do not stretch it into a blanket rule. First confirm that you are a resident individual or HUF and that your deal sits in the new reporting category. A company, LLP, partnership firm, trust, bank, developer or other entity may follow another route. If the payment is more than plain consideration for transferring immovable property, other tax provisions may also apply.

Also check the seller's status for the relevant financial year. NRI is everyday language, but tax law looks at residential status. Someone living overseas may not be non-resident for that particular year, and someone who recently came back to India may need a proper status calculation. A passport, visa and foreign address are evidence only. They cannot replace the tax analysis.

The safest advice is as follows. If you are a resident individual or HUF and the purchase from a non-resident seller falls on or after 1 October 2026, have your tax adviser use the Form 141 Schedule E route when the deal is within the notified category. Do not apply for or use a TAN just because an old checklist says so, and do not skip TDS because the new route looks easier.

Which five things should I verify before any payment to the seller?

Before you pay a non-resident seller anything, go through five checks.

One, establish the seller's tax identity. Collect the PAN, the passport identity page, proof of the overseas address, any Indian address, and a signed statement of residential status for the year. With several sellers, do this for every one, since a co-owner may be resident while another is non-resident.

Two, examine the title papers. The tax change says nothing about title. Gather the mother deed chain and the most recent conveyance, then add an encumbrance certificate or search report, revenue and mutation entries, the property tax receipts, the approved layout or building plan if relevant, a RERA record if it is a project unit, and a litigation search. If the seller lives abroad and acts through a power of attorney holder, check the power of attorney, how it was authenticated, whether it was registered or adjudicated where required, and whether the holder may receive money and sign the deed.

Three, test the tax computation. TDS on a non-resident's sale differs from the simple one percent applied to resident sellers. The rate can turn on the kind of capital gain, surcharge, cess, treaty position, any lower deduction certificate and other facts. Where a lower deduction certificate is offered, read it closely. It must name the right seller, deal, property, sum, tax year, and be within its validity dates.

Four, plan the payment mechanics. The sale deed should state gross consideration, what goes to the seller, what is withheld as tax, any instalment schedule and who files the TDS statement. When a bank loan is involved, its disbursement note must follow the same deduction plan. If the deed amount, the bank disbursement and the Form 141 report disagree, notices or disputes can follow.

Five, think about registration timing. Do not learn at the sub-registrar's office that the seller expected the whole gross sum in the bank. A seller abroad may rely on a power of attorney holder and may want TDS proof before final confirmations. Write the TDS clause into the agreement for sale. WhatsApp messages are not enough.

Which record proves my TDS compliance is complete?

Three papers prove it: the filed Form 141 with the right schedule, the acknowledgement of tax payment, and the Form 132 certificate given to the non-resident seller. Store them with the registered sale deed and the bank's loan file.

Compare each against the deed. Names of both parties, PAN, how the property is described, price, stamp value and tax withheld must line up. If the deed describes Flat No. 804 in one project, the TDS record must not describe the property vaguely or differently. With two sellers, the record should not put the whole amount against one of them unless the legal and tax facts allow it.

Check the deduction date and the month of the statement as well. Property deals often include an advance, part payments, a loan disbursement and a final payment. Depending on the rule, TDS may arise when money is paid or credited. If payment came in instalments, the reporting should not pretend everything happened on a single date unless that is true.

On the lender side, the disbursement list should call for the filed challan-cum-statement and the certificate issued to the seller, or at least require both to be delivered within the permitted period. For a buyer, they are not optional tax forms. They belong in the acquisition file along with the stamp duty challan, registration receipt and encumbrance certificate.

How can an old checklist cause hidden problems?

The commonest error is following the wrong process because the deal was copied from a resident-seller template. Old templates mention Form 26QB, Form 16B or TAN and never distinguish sellers by residential status, nor mention when the new rules start. Reporting can then be defective even if the buyer withheld money honestly.

Second, applying the wrong rate. The popular line is that property TDS equals one percent. For resident sellers under their own regime that is often correct, but for non-residents it is dangerous. Withholding too little can mean the buyer is held to have failed to deduct correct tax, even though the seller left the country with the balance.

Third, overlooking co-owners. When spouses, siblings or heirs own the property, each person's share and residential status need checking. One may hold a lower deduction certificate while another does not, and one may be resident while another is not. The deed, payment schedule and TDS filing should show that split.

Fourth, trusting the power of attorney holder on tax. Such a person may be authorised to sign and admit execution before the sub-registrar. That does not entitle them to certify the seller's tax residency, capital gains computation or eligibility for a lower deduction. Get the seller's own declarations and tax advice in writing.

Fifth, believing registration fixes tax gaps. A sub-registrar registers an instrument once stamp duty, procedure and execution are in order. No income-tax indemnity comes with it. A registered deed with defective TDS can still bring tax notices, indemnity disputes and delay a later resale.

Does an NRI sale need its own TDS clause in the agreement?

Yes. The agreement should state three things: the seller is a non-resident, or has declared the residential status that applies; the buyer will withhold tax under the law out of the gross price; and the seller must provide every paper needed to compute and file correctly.

If a lower deduction certificate exists, name it in the agreement and make clear it governs only as far as it actually applies. It should also say what happens to the closing date if the certificate is late, and that statutory deduction overrides any demand for the gross amount if the seller objects.

Evidence belongs in the clause too. The buyer should commit to filing the statement and issuing the certificate in the prescribed period, and the seller should promise to acknowledge the net amount received and the credit for tax withheld. If a bank pays the price, the clause should let it divide the disbursement between the seller's payment and the tax deposit.

This is more than tax drafting. It heads off an argument on registration day. Plenty of closings collapse because the seller expects the full deed amount while the buyer says tax must be held back. With an NRI sale the sum withheld can be large, so the argument is bigger.

What should banks and NBFCs add to their checklists?

Banks and NBFCs should create a distinct block for non-resident sellers in both their legal and disbursement lists.

Lawyers should spot non-resident status at the start from the parties clause, KYC, power of attorney, addresses and instructions on where money goes. Credit or operations staff should not find out at the disbursement stage. Neither the valuation report nor the title report answers the TDS question.

The list should call for the seller's PAN, a declaration of residential status, a lower deduction certificate if there is one, a computation note from a tax adviser engaged by the borrower or seller, the draft TDS clause, and confirmation that Form 141 Schedule E will be used for payments from 1 October 2026. Where the bank pays the seller itself, find out if the borrower has put in money for TDS or if the bank will withhold it before sending funds.

Risk teams worry about more than a breach of the statute. Mishandled TDS can lead a seller to refuse completion, hold back original documents, or contest the net payment after execution. NRI deals already involve harder coordination. A tidy tax checklist lowers the odds that a complete title file still ends in a failed closing.

Do stamp duty or registration rules change?

The notification concerns income-tax reporting and TDS only. State stamp duty on the instrument stays as it was, and the basic need to register a sale deed or conveyance is unchanged.

Treat them separately. Stamp duty is paid to the state stamps or registration authority; TDS is withheld and deposited under the tax law. Each needs its own proof. One challan cannot stand for the other, and a registered deed says nothing about whether tax was rightly withheld.

Arrange your purchase file in five folders: title, stamp and registration, tax deduction, payments, possession. At the time of a future sale or mortgage, a lawyer or lender can then trace everything fast.

What is firm, and what needs professional advice?

What is clear: for the notified class, from 1 October 2026, Form 141 adds Schedule E for immovable property moving from non-residents to resident individuals or HUFs, with Form 132 as the linked certificate. Also clear: NRI property TDS should never be handled casually after registration.

What the notification leaves open is the rate for each seller, which turns on facts: how long the property was held, its cost, the computation method, surcharge and cess, any treaty, a lower deduction certificate and capital gains figures. A title lawyer can flag it; a tax adviser should compute the amount.

The notification also does not promise that all buyers can avoid a TAN. The new path is built for resident individuals or HUFs in the covered kind of deal. Other buyers or blended structures should get separate advice.