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Dealing with an NRI

A loan or a court case surfaced after you bought from an NRI: what it means and the fix

You did not get the encumbrance check done. The seller's duty to clear what you were not told about still stands.

The deed is registered and the NRI seller is back abroad. Now a bank letter, a notice or a court summons shows the property was mortgaged, or that a suit over it was already pending when you bought.
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Last reviewed: 27 September 20265 min readReviewed by Preetesh Maloo, CA

The short answer

A mortgage the seller did not clear stays on the property, but unless you agreed to buy subject to it, the seller must discharge it (Transfer of Property Act, Section 55(1)(g)). A suit that was pending when you bought binds you to its result (Section 52). In both cases your claim for loss is against the seller, who is taken to promise good title (Section 55(2)).

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Related situations

Loan or court case found after buying from an NRI: what each means

Both are serious, because neither goes away on its own, and neither can be fixed by you alone.

What surfacedWhat it means for youThe fixWho acts
Seller's home loan or mortgageIt stays on the property until repaidSeller repays the lender (steps below)The seller and the lender
A suit over the property, pending when you boughtYou are bound by the resultYour advocate considers applying to join the suitYou, through your advocate
A suit filed after you boughtNot bound by the pending-suit ruleDefend it with your titleYou
Unpaid society dues or property taxOften recovered from whoever owns the flat nowPay, and claim it back from the sellerYou, then the seller

In Maharashtra and Gujarat a notice of a pending suit is registered; your advocate checks how your state's version affects you.

How to clear a loan the NRI seller left on the property

Put the duty back on the seller, in writing, and collect the proof when it is paid.

1. Get the lender's statement of the outstanding amount, in writing. 2. Write to the seller, citing the duty to discharge encumbrances, with a date to repay. 3. When the seller repays, collect the lender's closure letter and the original title deeds, and where the mortgage was registered, a registered release. 4. If the seller will not repay, your advocate advises on a claim against the seller. You can pay the lender yourself to protect the property and recover it from the seller. 5. Take a fresh encumbrance certificate once it is cleared.

If you still owe the seller part of the price and pay it to the seller's lender instead, it is still a payment for the seller, so the deduction under Section 393(2), formerly Section 195, applies to it.

A worked example: Sanjay in Ahmedabad

Sanjay bought an Ahmedabad flat for Rs 70 lakh from Farida, an NRI in Muscat who had owned it since 2012, and deducted 14.3% on the price. Four months later a bank writes: Rs 18 lakh is outstanding on a loan Farida took against the flat, and the bank holds the original title deeds.

ItemAmount
Price Sanjay paidRs 70 lakh
Loan still charged on the flatRs 18 lakh
Sanjay's further taxNil, if Farida repays

Farida repays from her own funds, and the bank returns the deeds and issues its closure letter.

What's involved

What the CA actually does

  1. 1

    Check the tax side of what surfaced

    We read the bank letter or notice against your payment and TDS record, and where money moves to the seller's lender for the seller, we compute the deduction on it and file the statement. Your advocate reads it for title.

  2. 2

    Work with your advocate

    We give your advocate the payment and tax record for the claim against the seller or the suit.

What to have ready

Documents you'll typically need

  • Registered sale deed and agreement
  • The bank letter, notice or summons
  • Encumbrance certificate, if taken
  • Payment proofs and TDS challans
  • Seller's contact details

References on this page

  • Transfer of Property Act 1882, Section 55(1)(a) and (g): disclosure and discharge of encumbrances
  • Transfer of Property Act 1882, Section 55(2): implied covenant for title
  • Transfer of Property Act 1882, Section 52: transfer while a suit is pending
  • Section 195, 1961 / Section 393(2), 2025 Act: deduction on any payment for the seller

Frequently asked questions

Common questions

No. The TDS is the seller's tax credit and cannot be set against the seller's loan.

As a rule, yes: the buyer's knowledge does not decide it, which is why the check is done before buying.

Yes. The duty to clear encumbrances and the promise of title go with the seller wherever they live; enforcing them abroad is slower, so start early.

Take an encumbrance certificate from the sub-registrar for the property and period, and ask the housing society for its dues and any lender's no-objection it holds.

No. A mutation entry records who pays the property tax; it does not decide ownership.

Related

If this matched your situation, these go further

Bought property from an NRI and missed a step: how to fix each oneBuying property from an NRI seller: the buyer's due-diligence checklistSelling your share of a disputed or jointly-owned propertyPre-purchase tax review for buyersProperty sale TDS calculator

A loan on the flat surfaced after I bought. What do I do?

Send the deed, your payment records and challans, the seller's documents and the bank letter or notice for a fix-it review. We will check the tax side and line up the next step with your advocate. Free call, no obligation.

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