Deducted 1% TDS on 26QB for an NRI seller: how serious is it
It is serious but fixable: the 1% is on the wrong route, and the gap to the non-resident rate is a short deduction you now owe.
The 1% route applies only where the seller is resident. For an NRI there is no Rs 50 lakh threshold, and the rate is the capital gains rate: for a property held more than 24 months, 12.5% plus surcharge and 4% cess, which is 14.3% on a price between Rs 50 lakh and Rs 1 crore.
| What happened | What it means for you |
|---|---|
| 1% deposited on Form 26QB | Paid, but under the resident section |
| The rest never deducted | Short deduction, with interest at 1% a month |
| Penalty | Possible, equal to the tax not deducted, unless you show reasonable cause, which a seller's written declaration of residence may support |
How to fix 1% TDS deducted instead of the NRI rate, step by step
Check the seller's return first, then deposit, file and certify.
1. Ask whether the seller has filed a return for the year of sale that includes it, and paid the tax. If so, a chartered accountant's certificate (Form 26A, now Form 149) ends the tax claim against you, and interest runs only to the date the seller filed. 2. Take a TAN if your payment was before 1 October 2026, or if you are not a resident individual or HUF. Whether a late fix made after 1 October can use the no-TAN route for an earlier payment is not settled, so the TAN route is the safe one. 3. If the seller has not claimed the 1% in a return, ask for its refund on the TRACES portal (Form 139, formerly Form 26B). It may be refused, and once the seller has been allowed that credit, it is closed. 4. Deposit under Section 393(2), formerly Section 195: the full non-resident deduction if the 1% comes back to you, or the shortfall if it does not, with interest. 5. File Form 27Q for a payment up to 31 March 2026, or Form 144 from 1 April 2026, for the quarter you paid in, paying any late fee first. 6. Send the seller Form 16A or Form 131 once the statement is processed.
From 1 October 2026 a resident individual or HUF reports a purchase from a non-resident on Form 141, Schedule E, instead of steps 2 and 5, and gives the seller Form 132.
When 1% was the right deduction after all
The 1% was right if the seller was resident in the year of sale. Residence for tax turns on days in India in that financial year, not on a passport, an OCI card or where the seller usually lives. A seller who lives abroad but was resident that year, including one who was resident but not ordinarily resident (RNOR), was correctly on the 1% route, where the price or the stamp value was Rs 50 lakh or more.
So before depositing anything, get the seller's status for that year in writing, with the day count behind it. If it shows resident, the 1% stands and there is nothing to fix.
A worked example: Neha in Pune
Neha paid Rs 80 lakh on 15 November 2025 for a Pune flat Arjun, an NRI in London, had owned since 2015. She deducted 1%, Rs 80,000, on Form 26QB. In October 2026 a practising CA spots it; Arjun has not yet filed for the year of sale.
| Item | Amount |
|---|---|
| Correct deduction: 12.5% x 1.10 x 1.04 = 14.3% | Rs 11,44,000 |
| Already deducted on Form 26QB | Rs 80,000 |
| Shortfall | Rs 10,64,000 |
| Interest at 1% a month on the shortfall, November 2025 to October 2026 (12 months) | Rs 1,27,680 |
She asks for the Rs 80,000 back on Form 139 and, on 20 October 2026, deposits the full Rs 11,44,000 against her new TAN. Whether interest then runs on the shortfall or on the full re-deposit is not settled, so the CA works out both before she pays. A late fee on her Form 27Q for October to December 2025 can come on top.