Last reviewed: 30 September 2026. From 1 October 2026, a resident individual or HUF buyer no longer needs a TAN to pay TDS on a property purchased from an NRI. Two limits matter: the relief applies only to resident individual and HUF buyers, and only to property purchases, not to rent or any other payment to a non-resident. This note sets out what the notification says, how the new process runs, what stays the same, and how an NRI seller can legitimately reduce the cash locked up in TDS.
What CBDT has actually notified
The change comes from Notification No. 121/2026 (G.S.R. 830(E)) dated 22 September 2026, the Income-tax (Fifth Amendment) Rules, 2026, in force from 1 October 2026. It amends Rules 215, 218 and 219 and Forms 132 and 141 of the Income-tax Rules, 2026. The operative points, read from the gazette text, are these:
- A new Schedule E is added to Form 141 for tax deducted under Section 393(2) [Table: Sl. No. 17] on consideration for transfer of immovable property, where the person paying or crediting is a resident individual or HUF.
- Form 141 and Form 132 now list "transfer of immovable property by a non-resident to a resident individual or HUF" as a transaction type.
- Schedule E collects buyer details with PAN and percentage share, seller details, property address and type, agreement and registration dates, stamp duty value, consideration, instalment status, type of capital gain, rate, tax deducted, and certificate numbers under Section 395(1) (seller) and Section 395(2) (buyer).
- Contact number, e-mail and overseas address of the non-resident seller are mandatory whether or not the seller has a PAN. If there is no PAN, the tax residency certificate number and tax identification number are to be furnished so that tax is not deducted at a higher rate.
- Where there is more than one buyer, each buyer files a separate form.
The gazette does not use the word "TAN" in its text. The TAN relief follows from the mechanism it uses: the new Rule 215(1) entry, made under Section 397, which places this category of deduction in the PAN-based route, and Section 397(1), which excuses resident individuals and HUFs from applying for a TAN for this deduction. We recommend that professionals read the notification on the Income Tax Department website before advising a buyer.
Who needs a TAN and who does not
| Buyer | Seller | TAN? | How the TDS is reported |
|---|---|---|---|
| Resident individual or HUF | Resident (price ₹50 lakh or more) | No | Form 141 (old 26QB), 1% under Section 393(1) Table Sl. 3(i), old 194-IA |
| Resident individual or HUF | Non-resident, from 1 October 2026 | No | Form 141, Schedule E, Section 393(2) Table Sl. 17 |
| Resident individual or HUF | Non-resident, payments before 1 October 2026 | Yes | TAN route and the quarterly non-resident statement |
| Company, firm, LLP, trust or any other buyer | Non-resident | Yes | TAN, deposit, and Form 144 (old 27Q) |
| Non-resident or foreign buyer | Non-resident | Yes | As above |
One point the notification does not spell out is the position of a resident individual buyer who already holds a TAN for another purpose. Nothing in the text requires such a buyer to surrender it, but which form the portal will route the deduction to should be confirmed before the first deposit.
Is it the same as the 1% route for resident sellers?
The filing mechanics are alike, since both use Form 141 on a PAN basis and both produce a certificate for the seller from the portal. The tax itself is very different.
| Point | Resident seller (old 194-IA) | NRI seller (Section 393(2), old 195) |
|---|---|---|
| Threshold | ₹50 lakh or more on either consideration or stamp duty value | None: applies from the first rupee |
| Rate | 1% | 12.5% for long-term gains on property (held over 24 months), normal rates for short-term gains, plus surcharge as applicable and 4% cess |
| Base | Consideration, or stamp duty value if higher | Amount paid or credited, unless a Section 395 certificate fixes a lower base or rate |
| Schedule in Form 141 | Schedule B | Schedule E |
| Seller's certificate | Form 132 (old 16B) | Form 132 |
| Lower deduction certificate | Rarely relevant | Central to the deal: Section 395(1), Form 128 |
The "no return" point is also correct in substance. For resident-seller deals the buyer does not file a quarterly TDS return; the challan-cum-statement is the statement. Schedule E follows the same design, so an individual buyer is not expected to file a separate Form 144 for the deal. Much of the form is pre-filled from portal data.
The new process, step by step
- Confirm the seller's status and PAN. Take a written residential-status declaration, PAN, passport copy and overseas address. Where the seller has no PAN, collect the tax residency certificate and foreign tax identification number.
- Decide whether a lower deduction certificate exists. If the seller has a Section 395(1) certificate, note the number and the rate and amount it covers. If not, plan to deduct at the default rate.
- Fix the deduction base and rate in the agreement. State who bears the tax, the rate, surcharge and cess, and what happens if a certificate is issued between instalments.
- Deduct at the time of payment or credit, whichever is earlier, for each instalment.
- Log in to the e-filing portal with the buyer's PAN and open Form 141. Choose the transaction type "transfer of immovable property by a non-resident to a resident individual or HUF" and complete Schedule E.
- Pay the tax through the challan generated with the form and submit the statement. Under the Form 141 instructions currently published, the filing is due within 30 days from the end of the month of deduction; confirm the due date on the portal for this schedule.
- Handle instalments. For a subsequent or last instalment, quote the earlier acknowledgement number and, for the last instalment, the total consideration paid.
- Issue the certificate. Download Form 132 from the portal after the statement is processed and give it to the seller, who needs it to claim credit in the Indian return.
- If the buyer remits funds abroad directly, the remittance needs Form 145 (and Form 146 where a CA certificate is required). The schedule has a field for the Form 145 acknowledgement number.
Worked example: default deduction and lower certificate
A resident individual buys a flat in Thane from an NRI for ₹80,00,000. The property was held for more than 24 months. The figures below are illustrative and assume the stated surcharge applies to the seller.
| Scenario | Base | Rate | TDS |
|---|---|---|---|
| No certificate, 10% surcharge and 4% cess | ₹80,00,000 | 12.5% × 1.10 × 1.04 = 14.3% | ₹11,44,000 |
| No certificate, no surcharge, 4% cess | ₹80,00,000 | 12.5% × 1.04 = 13.0% | ₹10,40,000 |
| Section 395(1) certificate on an actual gain of ₹20,00,000 (no surcharge) | ₹20,00,000 | 13.0% | ₹2,60,000 |
In the third case the certificate releases roughly ₹7.8 to ₹8.8 lakh that would otherwise be blocked until the seller's return is processed. The seller still pays the actual tax in the return, but the cash is not held by the department in the interim.
Rent paid to an NRI: what has not changed
Nothing in Notification 121/2026 touches rent. A tenant paying rent to a non-resident landlord continues to follow the non-resident rules under Section 393(2):
| Point | Position |
|---|---|
| TAN | Required. The PAN-only route for rent (old 194-IB, Section 393(1) Table Sl. 2(i)) is for payments to resident landlords. |
| Rate and threshold | Rates in force, generally 30% plus surcharge and cess on each rupee of rent, with no ₹50,000-a-month threshold |
| Statement and certificate | Quarterly Form 144 (old 27Q); certificate in Form 131 (old 16A) |
| Remittance | Form 145, and Form 146 where a CA certificate is required |
| Relief | Section 395 certificate in Form 128; DTAA benefit with a tax residency certificate and Form 41 |
Our detailed note is at TDS on rent: 194-I vs 194-IB. Because the notification creates a PAN route only for property consideration, a tenant should not assume it extends to rent.
Lower or nil TDS certificate: how it works under the 2025 Act
Under Section 395(1) of the Income-tax Act, 2025 (old Section 197), the seller applies in Form 128 (earlier Form 13) on TRACES (www.tdscpc.gov.in) under Rule 213. The Assessing Officer examines the estimate of the seller's income and tax and issues a certificate fixing the rate or amount at which the buyer may deduct. Two features decide how useful it is.
- Timing. It cannot be processed after the transaction, and it is issued by an officer, so it should be applied for 30 to 45 days before the agreement or first payment. An enquiry received days before a closing date cannot realistically be solved by this route.
- Coverage. The certificate governs payments made after it is issued. For a deal paid in instalments, an application can still be worthwhile for the balance, and the buyer enters the certificate number in Schedule E for those instalments.
What to put in the application: PAN; the sale agreement or draft; the capital gain computation with cost of acquisition, holding period, improvements and expenses; evidence of the previous owner's cost and date where the property was inherited or gifted; the estimated total income and tax for the year; and the last returns filed. Section 395(2) separately lets the buyer apply for an order on the proportion of the payment that is chargeable, which is useful where part of the payment is not income of the seller.
Ways an NRI seller can legitimately reduce the tax
| Route | What it does | Watch-outs |
|---|---|---|
| Lower or nil certificate (Form 128) | Reduces the amount deducted to the estimated tax on the real gain | Must be obtained before payment; depends on the quality of the computation |
| Reinvestment: Section 54 or 54F | Exemption on long-term gain when sale proceeds or gain are invested in a residential house in India within the prescribed window | NRIs are eligible; conditions, lock-in and the cap apply. See our Section 54 vs 54F guide |
| Section 54EC bonds | Exemption on land or building gains by investing in specified bonds within six months, up to the prescribed limit | Five-year lock-in; the limit applies per year |
| Correct cost and holding period | For inherited property, cost and holding period of the previous owner are used | Indexation at 20% is an option only for resident individuals and HUFs on pre-23 July 2024 acquisitions; an NRI computes at 12.5% without indexation |
| Refund through ITR | Excess TDS is recovered when the return is processed | An NRI must file a return with the correct PAN and bank details; refunds to foreign accounts are subject to the rules in our refund note |
A DTAA does not generally reduce India's right to tax gains on Indian immovable property, so treaty relief should not be assumed for a property sale. Credit for Indian tax against the seller's home-country liability is a separate question for the seller's foreign adviser.
Doubts that keep coming up
| Question we hear | Position and practical answer |
|---|---|
| "Can the buyer deduct only on the gain?" | Not by default. The buyer does not know the gain. Only a certificate fixes a lower base or rate. |
| "The seller is an OCI card holder and a US citizen." | Residential status decides, not citizenship. Take a declaration and evidence and keep them on file. |
| "Two co-owners are selling." | Each seller is a separate deductee in Schedule E with a percentage share, and the deduction is worked out seller-wise on each share. |
| "Stamp duty value is higher than the price." | The seller's capital gain may be computed on the stamp duty value under the deemed-value rule, which can make the default deduction on the paid amount fall short. This is a point for a Section 395 application or written advice before closing. |
| "The seller has never filed an Indian return." | The seller needs a PAN before the sale and a return after it, so that the TDS credit in Form 132 is set against the gain and any excess is refunded. |
| "Payment is partly before and partly after 1 October." | Deductions made before that date follow the old route. The instalment fields in Schedule E are designed for multi-stage payments; confirm the treatment of earlier instalments on the portal. |
| "Who bears the TDS?" | The seller economically. Draft the clause, including gross-up if the parties agree on a net price. |
Closing checklist: buyer and seller
- Buyer type confirmed (resident individual or HUF, or another category that still needs a TAN).
- Seller's PAN, residential-status declaration and overseas contact details collected.
- Decision taken on a Form 128 application, with a realistic view of timing.
- Agreement records rate, who bears the TDS and certificate handover.
- Deduction made at payment or credit; Form 141 Schedule E filed and tax deposited within the due date.
- Form 132 downloaded and delivered to the seller.
- Seller files the Indian return, reconciles the TDS credit and plans repatriation documents. See NRI repatriation and Forms 145 and 146.
Assumptions and limits of this note
This note reflects Notification 121/2026 as published on 22 September 2026 and the Income-tax Rules, 2026 as last amended on 17 September 2026. The deduction base, surcharge treatment and the due date for Schedule E are matters on which portal instructions and CBDT clarifications may follow, so they should be confirmed at the time of deduction. The earlier position, including the TAN requirement for deductions before 1 October 2026, is explained in our notes on NRI property sale and lower TDS and TDS on property purchase.
Frequently asked questions
Is a TAN really not required when buying property from an NRI from 1 October 2026?
For a resident individual or HUF buyer, that is the position. CBDT Notification No. 121/2026 (G.S.R. 830(E), 22 September 2026) brings the deduction on consideration for transfer of immovable property by a non-resident into the PAN-based challan-cum-statement, Form 141, through a new Schedule E. The relief is limited to resident individuals and HUFs. Companies, firms, LLPs and other buyers continue to need a TAN.
Does the buyer still deduct TDS on the full sale price?
Yes, by default. The notification changes the compliance route, not the substance of the deduction. The buyer deducts at the rate applicable to the seller's capital gain (12.5% for long-term gains on property, normal rates for short-term gains) plus surcharge and cess, on the amount paid or credited, unless the seller produces a lower or nil deduction certificate under Section 395 or the buyer obtains an order under Section 395(2).
Is there a separate quarterly TDS return for this deal?
Not in the way a company buyer files Form 144 (the successor of Form 27Q). Form 141 is a challan-cum-statement: the details go in Schedule E, the tax is deposited, and the certificate to the seller is issued from the portal. Confirm the label and the flow on the portal for your transaction, because portal screens may lag the rules.
Does the new relief apply to rent paid to an NRI landlord?
No. The notification is confined to consideration for transfer of immovable property. A tenant paying rent to a non-resident landlord continues to deduct under Section 393(2), needs a TAN, files the quarterly statement in Form 144 and issues the certificate in Form 131. The PAN-only route for rent (old 194-IB) is for payments to resident landlords.
What if the seller has no PAN?
The buyer must not ignore it. A deduction without PAN attracts the higher rate under Section 397(2). Schedule E asks for the seller's tax residency certificate number and foreign tax identification number where PAN is not available, so that tax is not deducted at a higher rate. The practical advice is that the seller should obtain a PAN before the agreement is signed.
Is an OCI card holder or US citizen treated as an NRI for this purpose?
The test is residential status under the Income-tax Act, not citizenship or OCI status. A person who is non-resident for the year is a non-resident for TDS purposes, even if an Indian-origin foreign passport holder. The buyer should take a written residential-status declaration from the seller and keep supporting documents such as passport and visa or residence evidence.
Can a lower TDS certificate be obtained after the sale is completed?
No. The certificate works prospectively: it fixes the rate for payments made after it is issued. Applications under Section 395(1) in Form 128 should be filed well before the agreement or the payment date. Tax already deducted at the default rate is recovered through the seller's income-tax return.
Who bears the TDS, the buyer or the seller?
Economically the seller, because TDS is an advance tax on the seller's income. The buyer deducts it from the consideration and deposits it. The agreement should say so in plain words and should state the rate, the deposit timeline, the certificate to be handed over and what happens if a lower deduction certificate arrives after the first instalment.
We can prepare the Form 128 application, the buyer's TDS note and the capital gain computation before the agreement is signed.
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This article is for general information and does not constitute advice on any specific transaction. Rules, notifications and portal processes change; confirm the current position before acting. CA Somesh Chandak & Associates, Unit 119, 1st Floor, Centura Square IT Park, SG Barve Road, Wagle Estate, Thane West 400604. FRN 158694W.