Jigar M. Patel
International Tax Attorney
Buying a property is usually about location, price and paperwork. But for high value property transactions, tax compliance becomes an important part of the deal. And if the seller happens to be a non-resident, the tax treatment can be quite different. With the new rules coming into effect in 2026, the compliance mechanism has also been revamped, making the process simpler for buyers.
When does TDS apply?
Section 194-IA of the Income-tax Act, 1961 (corresponding to Section 393 of Income-tax, 2025) requires a buyer to deduct TDS when purchasing an immovable property, other than an ‘agricultural land’ as defined for the purpose, from a resident seller, where the consideration is Rs. 50 lakh or more. From October 1, 2024, the law was amended to provide that in case of multiple buyers or sellers, the consideration is to be taken on an aggregate basis.
The TDS rate is 1% and importantly, it applies to the entire consideration and not merely to the amount exceeding Rs. 50 lakh. TDS is required to be deducted at the time of payment or credit, whichever is earlier. Thus, in a case where the consideration is paid in instalments, TDS is required to be deducted on each instalment.
It is pertinent to note that where the stamp duty value (Jantri Value) of the property is higher than the actual consideration, TDS is required to be deducted on such higher value.
What if the Seller is an NRI?
The aforesaid provisions of Section 194-IA are applicable only where the seller of an immovable property is a resident. In case of payment to a non-resident, TDS is governed by Section 195, as per which the buyer is required to deduct tax without any threshold limit of sale consideration.
However, it needs to be noted that keeping in view the ratio laid down by the Supreme Court in GE India Technology Centre Pvt. Ltd., the obligation under Section 195 extends to deduction of tax only from the ‘sum chargeable under the provisions of the Act’ and not the entire amount of sale consideration. Thus, the liability on the buyer would be to deduct tax on the amount of capital gain arising in the hands of the seller, at the applicable rate, whether short-term or long-term.
Form 26QB to Form 141
Under the Income-tax Rules, 2026, the earlier Form 26QB has been replaced by Form 141, a consolidated challan-cum-statement. Form 141 is PAN-based and the buyer does not need to obtain a separate TAN for complying with the TDS provisions relating to the purchase of property from a resident seller. The form captures details of the buyer, seller and immovable property, amount of sale consideration, stamp duty value and the TDS being deducted.
The TDS amount and Form 141 is required to be furnished by the deductor electronically to the Income Tax Department via the official e-filing portal to the credit of the Central Government. TDS Certificate in Form 132 (erstwhile Form 16B) is required to be issued by downloading it from the TRACES Portal of the Department. Non-compliance or delay in discharging the above obligations can attract interest, late fee and penalty.
Buying from an NRI? Compliance Gets Easier
A welcome relief has just been announced for buyers purchasing properties from NRIs. Under the amended Income-tax Rules, effective from October 1, 2026, a resident individual or HUF purchasing any immovable property from a non-resident will no longer be required to obtain a separate TAN merely to comply with the TDS obligation.
The CBDT has introduced a PAN-based mechanism through Form 141, with a new ‘Schedule E’, specifically for purchase of immovable property from a non-resident seller. Alongwith the regular information, it also captures key tax-residency details of the non-resident seller, including his overseas address and, where applicable, the Tax Residency Certificate (TRC) and foreign Tax Identification Number (TIN).
