In a welcome move announced in Budget 2026, the Government of India has simplified the TDS (Tax Deducted at Source) provisions applicable when a resident Indian buys immovable property from a Non-Resident Indian (NRI) seller.
Under the previous system, buyers were required to obtain a TAN (Tax Deduction and Collection Account Number) and deposit TDS using Form 27Q, then file the TDS return separately. This process was more complex than the system applicable for resident-to-resident property purchases.
What’s Changed in Budget 2026?
Starting 01 October 2026, resident buyers purchasing property from NRIs will no longer be required to obtain a separate TAN for TDS compliance. Instead:
✔ The TDS will be deducted and paid using the PAN, just like in resident-to-resident transactions under Form 26QB.
✔ The corresponding TDS return and certificate procedures will mirror the current resident property purchase process.
✔ This aligns NRI seller property transactions with the existing simplified compliance applicable to resident sellers.
How the Current System Works (Until 30 September 2026)
Until the new rule takes effect on 01.10.2026, the current process continues:
- The buyer must apply for a TAN.
- TDS must be deducted at the applicable rate on the sale consideration paid to the NRI seller.
- TDS payment is made using Form 27Q.
- A TDS return must be filed quarterly under 27Q.
- The NRI seller receives Form 16A as the TDS certificate.
This procedure has been more administratively heavy for resident buyers, especially first-time property purchasers dealing with overseas sellers.
What Will Change From 01.10.2026?
From 01 October 2026 onwards:
✔ No TAN is required for TDS compliance when buying property from an NRI.
✔ TDS deduction and payment will be done using the PAN (similar to resident seller transactions).
✔ The TDS certificate format and return procedures will also follow the resident property purchase model.
Why This Amendment Matters
This reform brings several practical benefits:
- Simplified compliance: No separate TAN reduces paperwork and processing time.
- Lower compliance cost: No need for TAN registration and maintenance.
- Uniformity: The process now mirrors resident-to-resident property transactions.
- Ease for residential buyers: Especially beneficial for individual buyers unfamiliar with complex TDS procedures.
Important Notes Before 01.10.2026
Until the new rule becomes effective:
🔹 The existing requirement for TAN and Form 27Q remains valid.
🔹 Buyers must ensure timely TAN registration and correct TDS deposit to avoid notices or interest penalties.
🔹 NRIs receiving the TDS benefit from proper compliance through valid certificates.
Conclusion
The Budget 2026 amendment relating to TDS on property transactions with NRI sellers is a positive step towards simplifying tax compliance for resident buyers. By eliminating the mandatory TAN requirement and aligning the process with existing 26QB systems, taxpayers benefit from reduced regulatory burden and easier compliance.
If you are planning to buy property from an NRI, be mindful of the timeline of applicability — conform to the old process until 30 September 2026, and follow the new simplified route from 01 October 2026.
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