New TDS Compliance Change for NRI Property Sellers

Under the Union Budget 2026-27, an important procedural change has been proposed. This change directly impacts Non-Resident Indians (NRIs) selling immovable property in India. Although the change mainly simplifies the compliance burden for resident buyers, it also has a beneficial and meaningful impact on NRI sellers. Keep reading further to know what changed in TDS compliance for property sales.

What Was the Rule for TDS on the Property Sale by NRIs?

As per the Income Tax Act, when an NRI sells an immovable property in India, the resident buyer needs to deduct TDS (Tax Deducted at Source) before paying to the seller. Generally, the TDS is deducted at higher rates, based on whether the gain is short-term or long-term, unlike transactions that involve resident sellers.

Even for a one-time property purchase, the resident buyer was mandatorily required to do the following compliance requirements until now:

• Deposit TDS using TAN
• File quarterly TDS returns
• Obtain a Tax Deduction and Collection Account Number (TAN)

This additional compliance often leads to transaction delays, follow-ups, and even practical issues that NRIs often experience during property sales. However, under the Union Budget 2026-27, a new change has been proposed by the Finance Minister. We will learn what this new change is.

What Change Has Been Introduced in the Union Budget 2026-27?

In the Union Budget 2026-26, the Finance Minister proposed that resident buyers purchasing property from non-residents can now use their PAN to deduct TDS, removing the need to obtain a TAN. Under this framework, it was stated that:

• The buyer's PAN can be used to deduct and deposit TDS on the sale of an immovable property by an NRI.
• The buyer no longer needs to obtain a TAN only for this transaction.
• The reporting mechanisms will adopt the same PAN-based challan system that already applies to resident aliens.

This change will come into effect from the 1st of October, 2026. Now, we will understand how this change impacts NRI sellers.

What Does This Change Impact NRI Sellers?

For resident buyers, the TDS obligations continue to remain, but this change offers several indirect benefits to the NRI seller. Here are some of the benefits:

• Increase Confidence in Buyer: When compliance becomes easy, buyers will be encouraged to confidently transact more with NRI sellers. It will help them mainly in secondary market property sales.
• Easy and Fast Property Transactions: With the removal of the TAN requirement, a procedural step was eliminated for buyers. It helps the buyers to avoid the paperwork delays that slow down payments to NRI sellers.
• Reduce Non-Compliance Risk for Buyers: The risk of delays or errors increased as many buyers were not familiar with the TAN registration and TDS filing process. This issue is addressed by introducing a PAN-based process. It is simpler and more widely understood.
• Enhanced Certainty in TDS Deduction: NRIs can expect more timely TDS deduction and deposit with the streamlined process. It is important for:
  • Claiming TDS credits in Indian tax returns
  • If applicable, applying for refunds
  • Smooth repatriation of sale proceeds

These changes might seem very small, but they can be very meaningful for NRIs. However, there are some points that NRIs must keep in mind and some requirements that they must continue. Let's discuss what these are.

What are the Key Points NRI Sellers Must Remember?

As an NRI seller, you must note the following points:

• Under this proposal, the TDS rates applicable to NRIs remain unchanged.
• Only the reporting mechanism has changed, and the buyer still has to continue deducting TDS.

Moreover, an NRI must also continue to:

• Get Form 16A from the buyer
• To claim credits/refund, they must file Indian income-tax returns
• Adhere to the repatriation rules stated by FEMA and RBI
• The change is just about how things are processed; it doesn't change how much tax you pay.

To Conclude

In short, resident buyers can now use their PAN to deduct and deposit TDS while buying property from non-residents. It eliminated the need to obtain a TAN and offered some meaningful benefits to NRIs. It reduced non-compliance risk for buyers as the PAN registration process is simpler than the TAN registration process. Additionally, it also encouraged buyers to transact more with NRI sellers.

Moreover, if you need help with obtaining a PAN, contact an expert at Savetaxs. We have a team of experts offering a fully digital, end-to-end managed service for NRI PAN applications. Our experts review and organize your documents to avoid any rejections and ensure an error-free application with no third-party involvement. Contact us right away and get your PAN card delivered at your doorstep, regardless of which country you reside in.