Buying Property from an NRI Seller? The TDS Is Your Problem — Here's the Full Drill

You've found the flat. The price is agreed — ₹1.5 crore for a twelve-year-old 3BHK in a society you like — and the broker is talking token money. Then, somewhere between the draft agreement and the first cheque, a detail surfaces: the seller lives in Toronto. Or Dubai, or Singapore — it doesn't matter which. What matters is that Indian tax law has just changed your role in this transaction. Until that moment you were a buyer with a minor withholding formality. Now you are, in the department's eyes, a tax deductor with a registration to obtain, a schedule of deposit deadlines, quarterly returns to file — and personal liability if you get any of it wrong. None of this makes the deal a bad one. NRI resales are routine, often well-priced, and the sellers are usually motivated. But the compliance is genuinely yours, it cannot be delegated to the seller, and the time to set it up is before the token money moves — not at registration.

The fork in the road: why "1% and a simple form" doesn't apply here

Every property buyer in India has heard the resident-seller version of TDS, and its gentleness is exactly what misleads people. Buying from a resident, you deduct a flat 1% under Section 194-IA — and only when the consideration is ₹50 lakh or more. You file a single challan-cum-statement, Form 26QB, online; you don't need any special registration; the whole exercise takes an evening.

Buying from an NRI, none of that survives. The transaction moves to Section 195 — the provision governing payments of any sum chargeable to tax made to a non-resident — and the differences are structural, not cosmetic.

	Resident seller (194-IA)	NRI seller (195)
Threshold	₹50 lakh	None — applies from the first rupee
TDS base	Sale consideration	The entire sale consideration, not the gain
Rate	1%	Capital-gains rates: 12.5% + surcharge + cess long-term; slab rates short-term
Registration	None	You must obtain a TAN
Filing	One Form 26QB	Quarterly Form 27Q returns, Form 16A to the seller

Read the second row again, because it's the one that shocks people: the default deduction is computed on the full price you're paying, not on the seller's profit. The logic is crude but deliberate — the department can't easily chase a seller who lives abroad, so it takes its tax at the border of the transaction, from the person it can reach: you. (One naming note for 2026: the Income-tax Act, 2025 took effect this April and consolidated the TDS provisions under Section 393, but the rates carried over intact and everyone — banks, CAs, the portal's own help pages — still speaks in the old section numbers. This article does too.)

What you actually have to do, in order

The mechanics run on a fixed calendar, and each step is yours.

Get a TAN. A Tax Deduction and Collection Account Number — the same registration an employer holds — applied for online via Form 49B, typically allotted within days. Without it you cannot deposit the TDS or file the return, so this is step one, started as soon as the deal terms firm up.

Deduct at the right rate. The rate follows the seller's holding period. Held for more than 24 months, the gain is long-term: you deduct at 12.5%, plus surcharge that scales with the consideration, plus 4% cess — an effective ~14.95% at the higher surcharge slabs that a ₹1 crore-plus deal sits in. Held for 24 months or less — common in under-construction resales — the gain is short-term and taxed at the seller's slab rates, which means deducting at 30%-plus. Deduct 12.5% on what turns out to be a short hold and the shortfall is recoverable from you.

Deposit on time. The deducted tax goes to the government by the 7th of the month following the month of deduction — with one exception: March deductions get until 30 April. Miss the deposit and interest runs at 1.5% per month; fail to deduct at all and it's 1% per month from the date the tax was deductible, plus exposure to penalty up to the TDS amount itself.

File and certify. Each quarter in which you've deducted, you file Form 27Q — the non-resident TDS return — and then issue Form 16A to the seller so the credit shows against their PAN. The seller needs that certificate badly: it's what lets them claim the deduction in their return and, eventually, move the sale proceeds out of India, so a buyer who files sloppily creates months of downstream pain for both sides.

One more mechanical point: the payment itself goes into the seller's NRO account — an NRI's India-sourced sale proceeds belong there, and any seller directing money elsewhere should be a conversation with the CAs, not an accommodation.

The ₹1.5 crore worked example — and the certificate that changes everything

Put numbers on the default. Your ₹1.5 crore flat, seller resident in Canada, held since 2016 — comfortably long-term. Without any intervention, you must deduct 12.5% plus 15% surcharge plus 4% cess on the entire ₹1.5 crore: roughly ₹22.4 lakh withheld and deposited against a purchase where the seller's actual tax bill looks nothing like that. Say they bought at ₹90 lakh — the gain is ₹60 lakh and the tax on it, at 12.5% plus surcharge and cess, lands somewhere near ₹8 lakh. The other ₹14 lakh-odd is the seller's money, locked with the government until they file a return and wait out a refund cycle — in rupees, into an NRO account, a year or more later.

The law provides the escape valve, and it's the single highest-value piece of paperwork in an NRI resale: the seller applies to their Assessing Officer — the Form 13 application, in the numbering everyone still uses — for a lower or nil tax-deduction certificate computed on the actual expected gain. The officer's certificate names the transaction and the rate; you then deduct at the certificate rate instead of the default, and the seller receives something close to their true after-tax proceeds at the table rather than eighteen months later. The catch is time: the certificate takes anywhere from a few weeks to a couple of months, so it has to be initiated when the price is agreed, not when the registration date is booked. Push your seller to start it — it costs you nothing, it removes their incentive to propose creative structures, and a seller who's read the seller's side of this transaction will usually already be moving on it. If the certificate isn't in hand by completion, you deduct the full default rate. That is not negotiable, whatever the seller's CA suggests — the liability for a shortfall is yours alone.

The three traps that catch careful buyers

Trap one: taking residential status on faith. "He has an Aadhaar and a Mumbai address" proves nothing — residential status under the Income-tax Act turns on days of physical presence in India, and a seller can hold every Indian document while being firmly non-resident, or sit in the RNOR grey zone that trips up both sides. If you deduct 1% because the seller seemed resident and they turn out to be an NRI, the entire shortfall — potentially ₹20 lakh-plus on our example — lands on you, with interest and penalty. Get a written declaration of residential status with the supporting basis (passport stamps, days-in-India computation), and put a CA on your side of the file before token money moves. On a ₹1.5 crore deal, the fee is a rounding error against the exposure.

Trap two: joint parties. TDS compliance runs per deductor-deductee pair. Two joint buyers purchasing from two joint NRI sellers means four combinations — each buyer needs a TAN, each deducts on their share of the payment to each seller, and the lower-deduction certificate must cover each seller separately. A husband-wife purchase from a husband-wife NRI seller pair is four Form 27Q filings a quarter, not one. Tedious, but mechanical once set up correctly — and a mess to unscramble if discovered at the last instalment.

Trap three: the home loan. Your bank disburses directly to the seller, but the TDS obligation never leaves you — the lender is paying on your behalf, not deducting on your behalf. Coordinate early: the bank disburses the consideration net of TDS on instruction, you deposit the deducted amount against your TAN, and the disbursement schedule has to respect the 7th-of-next-month deposit clock. Banks that handle NRI resales do this routinely, but only if told; a disbursement request that ignores TDS is how buyers end up depositing ₹22 lakh out of pocket while the full price sits with the seller.

Before the token money moves

Run the sequence, in prose but in order. First, establish the seller's residential status in writing, with the day-count basis, and price in professional help the moment the answer is anything but a plain resident. Second, apply for your TAN — it's free, fast, and useless to you only if you never needed it. Third, push the seller to file for the lower-deduction certificate immediately, and build the certificate's processing time into the agreement's timeline rather than pretending registration can happen in three weeks. Fourth, map every buyer-seller combination and every payment date — token, instalments, loan disbursements — against the deposit calendar, with your bank in the loop on netting TDS from disbursement. Fifth, after each deduction: deposit by the 7th, file the quarter's Form 27Q, issue Form 16A, and keep every challan. Do these five things in this order and the NRI-seller flat is just a flat — bought at a fair price, with a clean paper trail, from a seller who got their money's worth. Skip them, and you've volunteered to underwrite someone else's capital-gains tax.