One seller is NRI, one is resident. The buyer's TDS splits in two. Here's how.
TL;DR
The buyer can't apply one TDS rule to a mixed sale. The NRI co-owner's share takes Section 195 on the full share, roughly 13% to 15%. The resident's share takes 1% under Section 194-IA. Different rates, different forms, different thresholds. Here's the split, and the classic mistakes buyers make.
By Vipul Sharma, Founder
Reviewed by Preetesh Maloo, Chartered Accountant, NRI Tax Partner
The short answer
When a jointly owned property is sold and one owner is an NRI while the other is a resident, the buyer doesn't pick one TDS rule. They run two, one per seller:
Most buyers, and plenty of their lawyers, have never seen a mixed sale. They apply one rule to the whole price, and someone ends up with the wrong TDS. Sorting the split before the sale deed is signed is far cheaper than unwinding it after.
The split follows the real owners, not just the deed
Before you split the TDS, split the ownership. And that's about money, not just names.
Indian tax follows beneficial ownership. If the flat is in two names but one person paid the entire price, tribunals have taxed the whole gain in the payer's hands and treated the other name as convenience; ITAT benches have ruled this way in spouse cases repeatedly. So a deed that says husband and wife doesn't automatically mean 50:50.
Work out each owner's real share from the purchase funding: who paid what, from which account, and whether any share came by gift or inheritance. Then apply Section 195 to the NRI's real share and Section 194-IA to the resident's real share. Where the deed and the funding tell different stories, settle and document the position before the sale, because the buyer's TDS filings will hard-code whatever split you give them.
Selling jointly with a resident co-owner?
Send us the deed and who paid what. We'll map the exact TDS split for your buyer, and tell you whether a lower-TDS certificate on the NRI share is worth it.
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The buyer runs two parallel tracks
For the same sale, the buyer does two separate compliances:
Two challans, two forms, two certificates. Ideally the payments are also split, each owner paid their share into their own account, so the money trail matches the deductions.
₹1.2 Cr flat, NRI and resident own 50:50
NRI's ₹60 L share
about ₹8.6 L TDS
Section 195 on the full share, 12.5% plus surcharge and cess.
Resident's ₹60 L share
₹60,000 TDS
Section 194-IA at 1%, deposited on Form 141 (formerly 26QB).
The gap
about 14x
Same property, same price, very different withholding.
Paperwork
Two tracks
TAN plus Form 144 (formerly 27Q) for the NRI's half; PAN plus Form 141 (formerly 26QB) for the resident's.
Illustrative, assuming a 50:50 split. A Form 128 (formerly Form 13) certificate can bring the NRI-side deduction down to the actual gain.
The three classic mistakes
The buyer's mistake becomes your problem
Wrong TDS surfaces months later, as a buyer-side notice or a credit missing from your annual tax statement (Form 168, formerly 26AS), usually right when you're trying to repatriate the money. Put the split in the sale agreement itself: section, rate and share for each owner.
Form 128 for the NRI's share, and what a CA does
The NRI co-owner doesn't have to accept 13% to 15% withheld on their full share. A lower-TDS certificate (Form 128, formerly Form 13) applied for before the sale brings the deduction down to the tax on the actual gain. It's per-seller: the certificate covers only the NRI's share, and the resident's 1% track runs unchanged.
On a mixed sale, a CA typically does the whole map: fixes each owner's real share from the funding trail, computes the NRI's gain and files the Form 128 application, gives the buyer the exact section, rate and share instructions in writing, and checks the challans and TDS filings after registration so both owners' credits actually land in their annual tax statement (Form 168, formerly 26AS). When each owner's return then matches their deduction, the usual mismatch trigger for a notice is gone.
Put the split in writing before the deed
A one-page annexure stating each owner's share, residency status, the section and rate for each, and the account each share is paid into saves the buyer from guessing. Buyers follow clear instructions; they improvise badly.
Frequently asked questions
Q: The buyer wants to deduct 1% on the whole price. Is that right?
A: No. The 1% (Section 194-IA) covers only the resident co-owner's share. The NRI's share falls under Section 195: deduction on that full share at 12.5% plus surcharge and cess, roughly 13% to 15% all-in, with no minimum threshold.
Q: My co-owner is resident and their share is under ₹50 lakh. Is their share TDS-free?
A: Usually not anymore. Since 1 October 2024 the ₹50 lakh test uses the property's total consideration, aggregated across all buyers and sellers, not each person's slice. If the property's price, or its stamp duty value if higher, is ₹50 lakh or more, the 1% applies to the resident's share.
Q: The deed has my spouse's name but I paid for everything. Is the split 50:50?
A: Not necessarily. Tax follows beneficial ownership, who actually funded the purchase. Tribunals have taxed the whole gain in the paying spouse's hands where the other name was for convenience. Fix the real shares from the funding trail before the sale.
Q: Can the NRI co-owner reduce the 13% to 15% deduction?
A: Yes. A lower-TDS certificate (Form 128, formerly Form 13) applied for before the sale brings the deduction on the NRI's share down to the tax on the actual gain. The resident's 1% track runs unchanged.
Q: Does the buyer need a TAN?
A: For the NRI's share, yes for a payment up to 30 September 2026, with Form 144 (formerly 27Q). From 1 October 2026 a resident individual or HUF buyer uses Form 141, Schedule E, with no TAN. The resident's share runs on the PAN-based Form 141 (formerly 26QB) route.
Q: The buyer already deducted it wrong. What now?
A: If they put 1% on the NRI's share, switch that share to Section 195 with a TAN and Form 144 (formerly 27Q), and the NRI pays any balance through the return. If they put Section 195 on the resident's share, the resident reclaims the excess through their return. Then correct the filings so each credit lands against the right PAN.
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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 (Form 141 from 1 April 2026) was for s.194-IA resident sellers. Until 30 September 2026 an NRI-seller purchase needed a TAN and Form 27Q (Form 144 from 1 April 2026). From 1 October 2026 a resident individual or HUF buyer uses Form 141's new Schedule E against their PAN, but still deducts at the s.195 / s.393(2) rate, not 1%.Buying from an NRI, you deduct at the full capital-gains rate, not 1%. If you pay on or after 1 October 2026 and you are a resident individual or HUF, you report it on Form 141 Schedule E against your PAN and give the seller Form 132; no TAN is needed. Payments before that date needed a TAN and Form 27Q or Form 144.
How a resident individual buyer deposits TDS on an NRI's property
Right now: No TAN needed: a resident individual or HUF buyer deposits and reports the TDS on Form 141 Schedule E against their PAN and issues Form 132 to the seller
Where it works differently
- The buyer is a company, firm, trust or an NRI
- Still needs a TAN and files Form 144.
- s.397(1)(c) as amended by the Finance Act 2026 (and the Fifth Amendment Rules that follow it) covers only resident individual and HUF buyers.
- The payment is rent or interest to a non-resident
- Not covered. The payer still needs a TAN.
- The amendment is limited to consideration for transfer of immovable property.
- The seller has no PAN
- Schedule E asks for the seller's foreign contact details, Tax Residency Certificate details and foreign Tax Identification Number.
- Used to decide the applicable rate.
- Instalments straddle 1 October 2026
- The route follows the date of each payment: instalments paid on or before 30 September 2026 go through TAN and Form 27Q / Form 144, later ones through Form 141 Schedule E.
- Both the s.397(1)(c) amendment and the Fifth Amendment Rules take effect on 1 October 2026; neither source we read carves out agreements already signed, so treat the payment date as decisive and confirm on the portal.
Commonly got wrong
- The TAN rule is gone, so the buyer deducts 1% like a resident sale. Only the reporting route changed. The rate is still the s.195 / s.393(2) rate on the whole consideration unless there is a lower-deduction certificate.From 1 October 2026 you do not need a TAN, but you still deduct at the full capital-gains rate for a non-resident seller and report it on Form 141 Schedule E.
- Every buyer from an NRI can now skip the TAN. Only resident individuals and HUFs are covered.If the buyer is a company, firm, trust or itself a non-resident, it still needs a TAN and files Form 144.