Deducted TDS from an NRI seller but deposited or filed late: what it costs and the fix

Where it works differently

Total income is below the taxable limit

No fee, even if the return is late.

The fee attaches only where a return was required under s.139(1).

Capital losses are being carried forward

The bigger cost is losing the carry-forward, not the Rs 5,000.

s.80 requires a timely return.

Commonly got wrong

• The late fee can be Rs 10,000. The Rs 10,000 tier was removed from AY 2021-22.The late-filing fee is Rs 5,000, or Rs 1,000 where total income is up to Rs 5 lakh. The larger cost is usually losing the loss carry-forward, not the fee.

Commonly got wrong

• 3% cess. Stale since AY 2019-20.Health and education cess is 4% on tax plus surcharge, from AY 2019-20 onward.

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.

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.