Buying Property from NRIs? No TAN Required for TDS#
Buying a dream home is stressful enough, but if the seller happens to be a Non-Resident Indian (NRI), the tax compliance involved used to be a nightmare for the buyer. The New Income Tax Act (ITA) 2025 changes that completely, introducing a massive relief for domestic buyers purchasing real estate from NRIs.
The Old Rule: The TAN Nightmare#
Under the Income Tax Act, 1961 (Section 195), if a resident Indian bought property from an NRI, the buyer was required to deduct TDS at a hefty rate (usually 20% plus surcharge and cess on long-term capital gains, or 30% for short-term).
However, the biggest hurdle wasn't the deduction itself, but the compliance required:
- Mandatory TAN: The domestic buyer, who might be a salaried employee with no business background, was legally required to apply for and obtain a TAN (Tax Deduction and Collection Account Number).
- Complex Filings: After obtaining the TAN, the buyer had to deduct the tax, deposit it in the bank, file quarterly TDS returns, and issue a TDS certificate to the NRI seller.
Failing to do this resulted in heavy penalties, making many buyers hesitant to deal with NRI sellers altogether.
The New Rule under ITA 2025: PAN-Based TDS#
Recognizing the undue hardship placed on ordinary home buyers, the ITA 2025 has entirely scrapped the TAN requirement for these specific transactions.
Under the new rules, if you purchase immovable property from an NRI, you no longer need to apply for a TAN.
How it works now:#
- PAN is Sufficient: The buyer can now deduct the TDS and deposit it directly with the government using only their PAN (Permanent Account Number) and the seller's PAN.
- Simple Challan-cum-Statement: Similar to the process of buying property from a resident Indian (where a simple Form 26QB is used), the government will introduce a unified, simplified challan-cum-statement for NRI transactions.
- Instant Compliance: You simply log into the tax portal, fill out the challan with the transaction details, pay the TDS amount online using your PAN, and generate the receipt.
Why This is a Game-Changer#
- Boosts NRI Real Estate Market: By removing the compliance friction for the buyer, NRI properties become much easier to sell, potentially boosting liquidity in the real estate sector.
- Saves Time and Money: Buyers no longer need to hire CAs just to apply for a TAN and file complex quarterly returns for a one-off property purchase.
- Removes Penalty Fears: The simplified PAN-based system significantly reduces the chances of ordinary citizens facing harsh penalties for procedural lapses.
Crucial Caveat: The TDS Rate Remains#
While the process of paying the TDS has been simplified (No TAN required), the rate of TDS has not changed. Buyers must still ensure they deduct the correct percentage based on whether the NRI seller's capital gains are Short-Term or Long-Term. It is always highly recommended that the NRI seller obtains a "Lower Deduction Certificate" from the Income Tax Department before the transaction to ensure the buyer only deducts tax on the actual capital gain rather than the total sale value.
If you are planning a high-value real estate transaction involving an NRI, consulting a tax professional is still vital to calculate the exact tax liability, even if the actual payment process is now a breeze.