NRI Property Sale TDS Rules 2026: What Actually Changed, What Didn’t
NRI Property Sale TDS Rules 2026: What Actually Changed, What Didn’t
By C. Thiruvenkatam | Daily Hind News | 04 July 2026
If you are an NRI selling property in India, the tax you owe has not changed this year. What changed is who fills out which form. From 1 October 2026, the resident buyer will deposit your TDS using their PAN instead of applying for a TAN. Until then, the older TAN-based process still applies. Neither version changes how much tax you owe. Both still deduct TDS from your entire sale price, not your profit – unless you apply for a lower-deduction certificate before you register the sale. Most guides bury that last part. It’s the part that actually costs people money.
Here is what the Budget 2026 change means, and what stayed exactly the same. One step decides whether you get most of your money at the time of sale, or wait six months for a refund.
What Budget 2026 actually changed
On 1 February 2026, the Finance Minister presented the Union Budget. In it, she proposed dropping a requirement that forced resident buyers to get a Tax Deduction and Collection Account Number just to deduct TDS on a one-time property purchase from an NRI seller. Until now, even someone buying a single flat from an NRI had to register for a TAN. That process serves businesses that deduct tax regularly, not individuals doing a one-off transaction. That mismatch caused real delays – registrations held up, payments stuck, buyers hesitant to even consider NRI-owned property.
Under the new rule, an individual or Hindu Undivided Family buying property from an NRI can deduct and deposit TDS using their own PAN instead. They’ll use a challan-cum-statement mechanism – the same one residents already use when buying from other residents. This takes effect from 1 October 2026. Until 30 September 2026, the older process, involving TAN registration and a quarterly TDS return, remains mandatory.
Two things this change does not do: lower the tax rate, or apply to every buyer. Companies, partnership firms, and other entities buying property from an NRI still need a TAN regardless of the date. The relief is specifically for individual and HUF buyers.
New Act, new form numbers – what to check before you file
Separately from the Budget, the Income-tax Act, 2025 came into force on 1 April 2026, replacing the 1961 Act. This is a renumbering and consolidation, not a change in what you owe. But say you’re working from an old checklist, a CA’s notes from last year, or a form you downloaded in 2025. The section numbers on it now point to repealed provisions.
The old Section 195, which made the buyer responsible for deducting TDS on payments to an NRI, is now Section 393(2). The TAN provisions that Budget 2026 amends sit in Section 397. Several NRI tax advisory sources report that the familiar forms have new numbers too. Form 15CA, the online declaration for repatriating money abroad, becomes Form 145. Form 15CB, the CA certificate confirming taxes are paid, becomes Form 146. Form 13, the application for a lower or nil TDS certificate, becomes Form 128.
If you haven’t filed an Indian return before as an NRI, start with our NRI Income Tax Return Guide for FY 2025-26. It covers the forms, TDS credit, and DTAA claims in more depth than fits here.
How much TDS you’ll actually pay
The rate depends on how long you’ve held the property. Count from your original purchase date, not from when you became an NRI.
| Holding period | Classification | Base rate |
|---|---|---|
| More than 24 months | Long-term capital asset | 12.5%, without indexation |
| 24 months or less | Short-term capital asset | Taxed at your applicable slab rate |
On top of the base rate, a surcharge kicks in once your total income crosses certain thresholds: 10% for income between Rs 50 lakh and Rs 1 crore, 15% above Rs 1 crore. Add a 4% health and education cess on top of that. Stack the highest surcharge slab onto the 12.5% long-term rate, and the effective deduction can run close to 15%. That’s well above what most sellers expect.
One correction worth making here: Finance (No. 2) Act 2024 restored a 20 percent long-term capital gains rate with indexation, but only as an option for resident sellers of older property. That relief does not extend to NRI sellers. If you bought property before 2001 and have seen headlines about indexation relief – that relief targets residents, not NRIs. NRIs remain on the 12.5% without-indexation rate.
The certificate that decides whether you wait for a refund
This is the part that catches people out. Unless you intervene, the buyer deducts TDS from your entire sale consideration, not your actual profit. Say you sell a property for Rs 80 lakh that you originally bought for Rs 60 lakh. A buyer who hasn’t seen a certificate will deduct TDS on the full Rs 80 lakh, not the Rs 20 lakh gain. You do get that overpaid amount back eventually – as a refund when you file your return. But that can mean waiting many months for money that should have stayed in your pocket at the time of sale.
The fix is a Lower or Nil TDS Certificate – Form 13 under the old numbering, Form 128 under the new one. You file it with the Income Tax Department under Section 197 (Section 395(1) in the new Act). You submit your capital gains working, proof of the original purchase price, and details of the proposed sale. Once the department approves it, the buyer can deduct TDS only on the calculated gain, not the full price.
Processing typically takes four to eight weeks. The mistake almost everyone makes: applying for this after registering the sale deed, once the buyer has already deducted at the full rate. At that point, the certificate can’t undo what’s already withheld. You’re back to claiming a refund through your return. Start the application as soon as you have a buyer and a draft agreement, not after registration.
Getting the money out of India afterward
Selling the property is one step. Moving the proceeds to wherever you actually live is a separate compliance exercise. The TAN-to-PAN change doesn’t touch it.
To repatriate sale proceeds from your NRO account, you still need two forms: Form 15CA, the online declaration, and Form 15CB, a chartered accountant’s certificate confirming you’ve paid the applicable taxes. The bank verifies both before releasing an outward transfer. The overall repatriation limit remains USD 1 million per financial year from NRO account balances, under the RBI’s Master Direction on Remittance of Assets. Nothing in this year’s Budget changes that. If you funded the original purchase with foreign inward remittance, this rule generally covers up to two residential properties.
What nobody explains well
Buyers, not sellers, carry the legal duty to deduct correctly. A buyer who skips asking for your non-residency proof, or who assumes NRI sellers are taxed the same way as residents, can under-deduct. That creates a compliance problem that lands on them, not you. Hand your buyer a clear, written note on your NRI status and the correct TDS section early in the transaction. Don’t assume their lawyer will get it right without prompting.
[Editor: if you’ve handled an NRI property sale during this transition, and can confirm whether buyers or their lawyers already knew about the Budget 2026 change by mid-2026, that detail would strengthen this section well beyond generic coverage.]
Common questions
Does the TAN-to-PAN change mean I get more money at the time of sale?
No. It only changes how the buyer deposits the tax they withhold. Your net proceeds after TDS are identical either way. The Lower/Nil TDS Certificate, not the TAN change, is what affects how much you receive upfront.
I inherited this property. Does my holding period start from when I inherited it?
No. For inherited property, count the holding period from the original owner’s purchase date, not the date you inherited it. This is why many inherited properties qualify as long-term assets even if you have owned them only briefly.
Can I still sell to another NRI, or does the buyer have to be a resident?
You can sell to anyone. The TDS obligation and rate depend on your status as the seller, not the buyer’s residency. A non-resident buyer would still need to deduct TDS as the law requires.
I co-own the property with a resident family member. How does TDS work then?
TDS applies proportionately. Buyers typically deduct the resident co-owner’s share at resident rates, and your share at NRI rates. Agree this apportionment with the buyer and get it documented before registration, not after.
Is the 1 October 2026 date fixed, or could it slip?
As of this writing, the Budget 2026 proposals set 1 October 2026 as the effective date. Government implementation dates for procedural changes have shifted before. If your sale is close to that date, confirm the current position with your CA before assuming which mechanism applies.
Sources and disclaimer:
This article draws on the Union Budget 2026-27 proposals that Business Standard reported, and on analysis that NRI tax advisory practices have published about the Income-tax Act, 2025. Tax rules affecting NRIs change frequently. They depend on individual circumstances, including your double taxation treaty position with your country of residence. This is not tax advice. Confirm your specific liability and current form numbers with a qualified chartered accountant, and verify procedural details against incometax.gov.in before you sell.
About the author: C. Thiruvenkatam is the founder and editor of Daily Hind News, where he covers NRI banking, taxation, and government schemes for readers in India and abroad.
