NRI Owner Selling to You? How Much TDS to Cut and When
When the flat or plot a buyer likes belongs to someone living overseas, the tax paperwork changes. The department holds the purchaser responsible for the deduction, and it will pursue the purchaser, not the absent seller, for any shortfall. What follows covers October 2026 practice for Bangalore deals.
Quick Sequence for the Buyer
Most mistakes come from doing things in the wrong order, so the order comes first. Begin the moment a price is agreed:
- Collect a signed note on whether the seller is resident.
- Ask if a reduced-withholding certificate has been issued or applied for.
- Let an accountant compute the TDS from the real figures.
- Write that amount, and each side's filing tasks, into the agreement.
- Retain the tax out of every payment, bank disbursements too.
- Deposit the tax, submit the statement, then hand the seller proof.
- Store the challan, statement, proof and status note with the registered deed.
All of this runs in parallel with the title search, the EC and khata transfer. The sections below explain each step.
Who Is Non-Resident
Tax residence is worked out by counting the days a person physically spends within India in a given year. Passports do not enter into it. A person holding an Indian PAN, a local bank account and parents in Bangalore can still be non-resident for the year in which the sale happens.
For this reason the status note is collected before haggling over price. It decides which rulebook the whole transaction follows.
Two Rulebooks Side by Side
The comparison below shows the split in a glance. A non-resident sale has no floor, so even a small plot falls within it.
| Seller | Deduction | Starts at |
|---|---|---|
| Resident in India | 1% of the payment | Price or stamp duty value of Rs. 50 Lakhs |
| Non-resident | Capital gains rate plus surcharge and cess | Any value |
New Statute, Same Duty
With effect from 1 April 2026, the 2025 income tax statute governs, in place of the 1961 law. Section 393 absorbed the earlier Sections 194-IA and 195, and some forms were renumbered. Whoever pays must still deduct.
Agreements and advisers continue to cite the old numbers, which is understood by all. The procedure current on the payment date is the one to follow.
Working Out the Figure
Holding the property beyond 24 months makes the profit a long-term gain, and anything shorter is a short-term gain. The rates as they stand:
- Long-term: 12.5%, a surcharge of either 10% or 15% in line with the size of the gain, and 4% cess
- Short-term: 30%, with surcharge and cess where due
- Base amount: the entire consideration unless a reduced-withholding certificate is produced
Take a flat that the NRI has owned for years and sells at Rs. 120 Lakhs. The blended rate comes to roughly 14.95%, so roughly 17.94 Lakhs of rupees is held back. A resident seller would have faced Rs. 1.2 Lakhs.
Getting the Deduction Cut Down
The full-price method often takes far more than the tax the NRI really owes, since the real liability rests on profit alone. To fix that, the seller applies online to the tax office for a certificate setting a smaller rate. The form asks for acquisition cost, agreed price and anticipated profit.
It names the purchaser, states the rate, and must be issued ahead of payment. Where one exists, the buyer follows its figure to the rupee and files a copy. Where none exists, the whole price is the base.
Registration and Due Dates
Through September 2026 a purchaser who paid an NRI needed a TAN and a quarterly filing. After that, individuals and Hindu undivided families who are resident can pay and report using a PAN and Form 141 only. Companies, firms and limited liability partnerships keep the TAN requirement.
- Deadline: thirty days after the month of deduction ends
- Seller's certificate: Form 132, issued after processing
- Particulars: both PANs, addresses, valuation, price and shares
- Extra for NRIs: overseas address, plus a residency certificate if one is held
Consequences of Under-Deducting
The statutory obligation lies with the payer, so the department collects any gap from the payer. It may label the purchaser an assessee in default, charge interest from the date the money was paid, and levy a penalty. Full payment to the seller offers no protection.
Pursuing a seller who has sent the proceeds overseas takes ages and seldom succeeds. A written TDS figure, agreed before the first rupee moves, avoids the problem.
Co-Owners and Home Loans
Where owners differ in status, treat each separately: 1% on the resident's share, the capital gains rate on the NRI's, and a separate report for each. Borrowing does not move the obligation. The lender pays the seller for the buyer, so TDS must be retained from every disbursement and deposited promptly. Proceeds normally reach an NRO account, and remittance abroad is that bank's job.
