TDS Deducted But Not Showing in 26AS: The NRI Recovery Path
TL;DR
The bank, AMC, or property buyer deducted TDS. It never appeared in your 26AS. The fix runs through Form 27Q quarterly cycles, Form 16A as parallel proof, and Section 154 rectification at the AO. Here is the sequence.
By Vipul Sharma, Founder
Reviewed by Preetesh Maloo, Chartered Accountant, NRI Tax Partner
Form 27Q is the quarterly bridge the deductor must cross
Every TDS deduction on an NRI payment under Section 195, interest, dividends, capital gains on property sale, professional fees, flows to 26AS through Form 27Q, not Form 26Q (which is the resident-payee form). The deductor files Form 27Q quarterly on TRACES, the system maps the challan-to-PAN linkage, and 26AS populates within 7-15 days of filing.
The deductor's failure to file Form 27Q for the quarter is the single largest cause of missing 26AS entries on NRI returns. Buyers of property frequently file Form 26QB (the resident-seller form) by mistake, which deposits the challan but never links to the NRI's PAN. Banks switching CBS systems sometimes miss a quarter. AMCs occasionally classify NRI redemptions under Form 26Q for resident investors.
The quarterly cycle: 31 July for Q1 (April-June), 31 October for Q2 (July-September), 31 January for Q3 (October-December), 31 May for Q4 (January-March). Until the deductor files for the relevant quarter, 26AS shows nothing.
Upload your 26AS now and identify which quarters are missing TDS entries that should be there.
Property sale: Section 195 buyer Form 27Q failure is the classic case
The buyer of an NRI's Indian property must withhold under Section 195 at 12.5% on long-term capital gains (post-Budget 2024) or 30% on short-term gains, and deposit via challan within 7 days of the next month. The buyer then files Form 27Q for the quarter to link the challan to the seller's PAN. The Form 27Q filing is the step that lands the entry in the seller's 26AS.
Residential buyers frequently file Form 26QB instead. The form designed for resident-seller transactions under Section 194-IA. Form 26QB deposits the TDS challan but classifies the seller as resident. The seller's 26AS shows nothing because the form did not target an NRI-PAN linkage.
The buyer's correction route is to file Form 27Q for the relevant quarter, request TRACES to delete the erroneous Form 26QB, and reconcile the challan against the new Form 27Q. CBDT's TRACES challan correction directive permits this for up to two years from end of FY.
For the seller, parallel actions: collect Form 16A from the buyer (the buyer's TDS certificate generated post-Form-27Q), retain the buyer's challan deposit acknowledgement (the BSR code, challan serial, and deposit date are the unique identifiers TRACES uses for any rectification), and apply for Section 197 Form 13 before the next property transaction.
The three property-sale TDS reporting failures
Each one disconnects the buyer's challan from the seller's 26AS.
Buyer filed resident form by mistake
Section 194-IA Form 26QB is for resident sellers. NRI sales require Section 195 Form 27Q. Filed wrong, the challan never reaches the NRI's PAN.
Buyer missed the quarterly Form 27Q cycle
Challan deposited, Form 27Q never filed. 26AS stays empty until the buyer files for the quarter.
Buyer used incorrect TAN or no TAN at all
Non-corporate buyers often deduct without a TAN. The challan deposits but TRACES cannot link it to a deductor record.
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Form 16A from the deductor is parallel proof, not a substitute
Form 16A is the TDS certificate the deductor issues to the deductee, bank to FD holder, buyer to property seller, AMC to redeemer. It contains the BSR code of the challan, the deposit date, the challan serial number, and the gross / TDS amounts. Section 203 of the Income-tax Act obliges the deductor to issue Form 16A within 15 days of the Form 27Q quarterly filing.
Where Form 16A exists but 26AS does not show the entry, the deductor has likely deposited the challan but not filed Form 27Q. Form 16A is then proof of deduction but not proof of credit. ITR-2 cannot rely on Form 16A alone, CPC matches the TDS claim against 26AS at processing and any unmatched portion triggers a Section 143(1)(a) intimation reducing the claim.
The seller's recovery path: chase the deductor to file Form 27Q for the quarter, and where the deductor refuses, file Section 154 rectification with the Jurisdictional Assessing Officer attaching Form 16A plus the challan deposit acknowledgement. The AO has the power to manually update 26AS via TRACES.
Where Form 16A also does not exist. The deductor never issued it, Section 200A allows the deductor's jurisdictional AO to issue a notice compelling the filing of Form 27Q and the issuance of Form 16A.
CBDT directive on TRACES challan correction
The CBDT's TRACES challan correction framework permits the deductor to revise Form 27Q for up to two years from the end of the financial year of deduction. The revision corrects PAN linkage, quarter classification, deductee details, or amount. The revised return reflects in 26AS within 15 days.
Where the deductor refuses to revise, the deductee files Form 26A reconciliation request on TRACES citing the deductor's challan as deposited but unlinked. CPC routes the request to the deductor's TAN-jurisdiction AO who is empowered under Section 200A to compel the correction.
Beyond the two-year window, correction requires a CBDT special order under the residual powers of Section 119. The petition is filed with the PCIT or CCIT supported by documentary proof. CBDT typically grants where the deductor's failure is documented and the deductee can show no contributory fault.
For NRIs whose 26AS is missing entries from FY 2020-21 onwards, the 5-year Section 119(2)(b) condonation window also overlaps. The recovery can proceed via ITR-2 condonation petition rather than 26AS correction.
Section 154 rectification with the Jurisdictional AO
Section 154 grants the AO the power to rectify any apparent error in an order or intimation. Where ITR-2 has been processed under Section 143(1) and the TDS claim was reduced because 26AS did not reflect the deduction, Section 154 is the rectification route.
The petition is filed online at incometax.gov.in under the e-Proceedings tab. The grounds: (a) the TDS was actually deducted, evidenced by Form 16A and the deductor's challan acknowledgement; (b) the omission from 26AS is the deductor's reporting failure, not a fact dispute; (c) the rectification is sought under Section 154 to credit the full TDS.
The AO has the power to manually update 26AS via TRACES on the basis of the documentary proof, then re-process the Section 143(1) intimation with the corrected TDS credit. The refund issues to the NRO account (or foreign account if Schedule TR specifies) typically within 90-120 days of the rectification order.
Section 244A interest at 6% accrues from 1 April of the AY to the refund date. The delay caused by the deductor's reporting failure does not reduce the interest entitlement.
If the deductor cannot be reached: the Section 244A interest still accrues
Where the property buyer has emigrated, the bank has merged, or the AMC has wound up the relevant fund, the deductor-side correction is impractical. The recovery routes are then: Section 154 rectification with documentary proof, and Section 119(2)(b) condonation where the FY has closed and ITR-2 was not filed.
For the rectification route, the documentary stack: Form 16A (if issued), challan deposit acknowledgement showing BSR code and serial, the property sale deed or bank statement showing the gross-of-TDS payment, and a chronology of attempts to contact the deductor. The AO can issue the rectification on substantive proof even where the deductor's TAN record is dormant.
For the Section 119(2)(b) route, the petition runs through the PCIT supported by the same documentary stack plus an explanation of why ITR-2 was not filed in the original year. The 5-Assessment-Year window is the outer limit.
Throughout the delay, Section 244A interest accrues at 6% simple. On a ₹15 lakh TDS deduction recovered 3 years late, the interest component alone is ₹2,70,000, material enough to offset the delay cost on its own.
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The exceptions that change the answer
Where the general rule stops applying to you
Every rule below has a carve-out, a cut-off date or a condition that flips the answer. These are the ones that decide real cases.
TDS rate when buying property from an NRI
Right now: 12.5% plus surcharge and cess on LTCG
Where it works differently
- The gain is short-term
- TDS is at the applicable slab rate, effectively 30% plus surcharge and cess for most NRI sellers.
- s.195 requires deduction at 'rates in force' for the actual character of the income.
- No lower-deduction certificate is obtained
- TDS applies to the ENTIRE SALE CONSIDERATION, not to the gain.
- s.195 operates on the sum paid unless the AO determines otherwise. This is the whole commercial case for Form 13 / Form 128.
- There are joint NRI sellers
- TDS is deducted separately against each seller's PAN in their ownership proportion.
- Rule 37BA. Deducting entirely against one PAN strands the other's credit.
- The buyer deducts 1% under s.194-IA
- Wrong section. The buyer becomes an assessee-in-default under s.201 for the shortfall plus 1% per month interest and penalty under s.271C.
- s.194-IA applies only where the seller is a RESIDENT.
Commonly got wrong
- TDS on property purchase is 1% over Rs 50 lakh. That is s.194-IA, for RESIDENT sellers only. For a non-resident seller it is s.195 at the full capital-gains rate, with no threshold.1% applies only if the seller is a resident. NRI seller means s.195 at 12.5% plus surcharge and cess on the whole consideration unless a certificate is obtained.
- The buyer files Form 26QB. 26QB (now Form 141) is for s.194-IA. An NRI-seller purchase needs a TAN and Form 27Q (now Form 144).Buying from an NRI, you need a TAN, you deduct under section 195, and you file Form 27Q (Form 144 from 1 April 2026). Form 26QB is only for resident sellers.
LTCG rate: assets other than STT-paid listed equity (includes property)
Right now: 12.5% without indexation
Where it works differently
- A RESIDENT individual or HUF sells land or a building acquired before 23 July 2024
- May elect the lower of 12.5% without indexation or 20% with indexation.
- Grandfathering proviso inserted by Finance (No. 2) Act 2024.
- A NON-RESIDENT sells the same property
- 12.5% without indexation only. The election is NOT available.
- The grandfathering proviso is expressly limited to resident individuals and HUFs. This is the highest-value NRI distinction on the site.
- Shares or debentures of an Indian company were bought in convertible foreign exchange by a non-resident
- The first proviso to s.48 computes the gain in that foreign currency, neutralising rupee depreciation. This is separate from, and not lost with, indexation.
- First proviso to s.48 survives the 2024 changes.
- Adding surcharge and cess
- Surcharge on capital gains under s.111A/112/112A is capped at 15%, plus 4% health and education cess.
- The cap applies to gains under s.111A, s.112 and s.112A.
Commonly got wrong
- NRIs can choose 20% with indexation on property bought before July 2024. The election is resident-only. Stating otherwise understates an NRI's tax, which is the worst direction to be wrong in.Residents may elect 20% with indexation for pre-23-July-2024 land and buildings. Non-residents get 12.5% without indexation, full stop.
- LTCG on property is 20%. Stale since 23 July 2024 unless the transfer predates it.12.5% for transfers on or after 23 July 2024.
Time to respond to a s.143(1) intimation
Right now: 30 days from the intimation to respond before the adjustment is confirmed
Where it works differently
- The 30 days lapse with no reply
- The proposed adjustment is made and a demand follows. The remedy shifts to rectification under s.154 or a first appeal.
- First proviso to s.143(1)(a).
- The taxpayer is abroad
- Intimations arrive by email and on the portal only. A stale email on the PAN record is the single commonest reason an NRI misses this window.
- Electronic service under s.282.
Commonly got wrong
- An intimation is just information, nothing to do. It carries a 30-day window; ignoring it converts a proposal into a demand.A section 143(1) intimation gives you 30 days to respond. After that the adjustment stands and you are into rectification or appeal.
Rectification window under s.154
Right now: 4 years from the end of the financial year in which the order was passed
Where it works differently
- The error is a missing TDS credit or a mis-picked figure
- Rectification is faster and cheaper than an appeal, and there is no fee.
- s.154 covers a mistake apparent from the record.
- The point needs argument or fresh evidence
- s.154 will not carry it. That is an appeal under s.246A.
- 'Apparent from the record' excludes debatable questions.
Commonly got wrong
- Any wrong assessment can be rectified. Only a mistake apparent on the face of the record. A debatable issue needs an appeal.Rectification fixes obvious errors within four years. Anything arguable goes to the Commissioner (Appeals) within 30 days.