Now Reading: NRI property sales: higher TDS, TAN rules explained
-
01
NRI property sales: higher TDS, TAN rules explained
NRIs selling property in India face different tax rules from resident sellers. Unlike residents, who have a Rs 50 lakh limit before TDS applies at 1% under Section 194-IA, NRIs have no…
NRIs selling property in India face different tax rules from resident sellers. Unlike residents, who have a Rs 50 lakh limit before TDS applies at 1% under Section 194-IA, NRIs have no minimum amount for TDS deduction. The rate depends on whether the gain is long-term or short-term.
Long-term capital gains (sale after two years) attract TDS at 12.5% plus surcharge and cess, as per Section 393(2) of the Income-tax Act, 2025. Short-term gains (sale within two years) are taxed at the NRI's income-tax slab rate plus surcharge and cess. Buyers must calculate and deduct the correct amount.
Buyers also need to obtain a Tax Deduction and Collection Account Number (TAN) for property purchased before 1 October 2026. After that date, Budget 2026 allows eligible resident individuals and HUFs to use their PAN instead. State sub-registrar offices may ask for TDS payment proof, such as a TDS certificate or challan, to complete registration.
Indian Opinion Analysis
The TDS rules for NRIs have long been a compliance headache for buyers, who risk registration delays or penalties if they miscalculate the rate or miss the TAN requirement. Under Section 397(1)(c) of the Income-tax Act, 2025, the government has removed the TAN requirement for resident individuals and HUFs buying from NRIs, but the relief kicks in only from 1 October 2026. For transactions before that date, buyers must still apply for a TAN, which can take weeks. The higher TDS rate on long-term gains, 12.5% plus surcharge and cess versus 1% for residents, often surprises buyers who assume the same rules apply. With property registration linked to proof of TDS payment, a mismatch can stall the deal. The next practical milestone is 1 October 2026, when the PAN-based option begins, simplifying compliance for residential property buyers.
Source: livemint.com
This brief was synthesised by AI from the source linked above.
