Buying a flat from a resident seller, you deduct 1% TDS and move on. Buying the same flat from an NRI seller, that 1% habit becomes one of the costliest mistakes in Indian property transactions – because the law shifts from the property-TDS provision to Section 195 (payments to non-residents), the rate jumps to 12.5%-plus on the full sale price, and the shortfall, interest and penalty all land on you, the buyer. Here is the complete FY 2026-27 playbook.
Resident vs NRI seller – two different worlds
| Particular | Resident seller | NRI seller |
|---|---|---|
| Provision | Sec 393(1), Income-tax Act 2025 (old 194-IA) | Section 195 framework |
| Rate | 1% of the higher of price / stamp duty value | LTCG 12.5% + surcharge + cess; STCG at slab rates |
| Threshold | None if price and SDV both below Rs. 50 lakh | No threshold at all |
| TDS base | Full consideration | Full consideration, unless a lower-deduction certificate says otherwise |
| Buyer needs TAN? | No – PAN-based Form 141 (old 26QB) | Historically yes, with quarterly TDS statement (Form 27Q regime) |
The actual TDS rates on an NRI purchase – FY 2026-27
For property held by the NRI for more than 24 months, the gain is long-term and TDS is deducted at 12.5% (the post-23 July 2024 LTCG rate, without indexation) plus surcharge plus 4% cess:
| Sale consideration | Surcharge | Effective TDS rate (LTCG) |
|---|---|---|
| Up to Rs. 50 lakh | Nil | 13.00% |
| Rs. 50 lakh – 1 crore | 10% | 14.30% |
| Above Rs. 1 crore | 15% (capped for LTCG) | 14.95% |
If the NRI held the property for 24 months or less, the gain is short-term and TDS follows slab rates – in practice 30%-plus with surcharge and cess (about 31.2% to 39% effective). Either way the deduction is on the gross sale price, not the gain – unless a certificate changes that.
Buyer’s compliance checklist
- Establish the seller’s residential status in writing – days of stay under the Income-tax Act decide it, not citizenship or OCI cards. Take a declaration plus passport/stay evidence. If in doubt, treat as NRI.
- Obtain the Section 197 certificate copy (if any) before agreeing to deduct at a lower rate – verify it on TRACES.
- Deduct at every payment – advance, instalments, bank disbursements alike.
- Deposit by the 7th of the following month and file the quarterly NRI TDS statement; issue Form 16A to the seller. (Under the 2025 Act’s consolidated forms, check the portal for the current filing schedule.)
- Repatriation paperwork – the seller’s bank will typically ask for Form 15CA/15CB to remit proceeds abroad; factor the timeline in.
Compute the exact TDS – resident or NRI seller
Both routes in one tool: 1% with the Rs. 50 lakh test, or Section 195 with surcharge, cess and certificate rates.
Open TDS on Property CalculatorFrequently Asked Questions
The property costs only Rs. 30 lakh – surely no TDS for an NRI seller?
TDS applies from the first rupee. The Rs. 50 lakh threshold belongs to the resident-seller provision only.
Can I deduct on the capital gain if the seller shows me his purchase deed?
No. Only a Section 197 certificate (or an AO order) authorises deduction on the gain. Your protection is the certificate, not the seller’s computation.
Two NRI sellers (joint owners) – how is TDS done?
Deduct proportionately against each seller’s PAN per their ownership share, and report each separately in the TDS statement.
What if the seller became an NRI after buying the property?
What matters is the seller’s residential status in the year of sale. Holding period (for LTCG vs STCG) still counts from the original purchase date.