Skip to content
Got a notice? Emergency response

Property: Purchase

NRI buyer, resident seller: you deduct 1%, not Section 195

You are an NRI buying a resale flat and unsure whether your own status means the heavier NRI-seller TDS applies. It does not.

You are an NRI buying a resale flat, and you have read about the heavy TDS on Indian property involving NRIs. The worry is whether your own NRI status pulls you into the Section 195 regime, with a TAN, Form 27Q and a much bigger deduction. It does not. The section that applies is set by who is selling, not who is buying, and when you buy from a resident seller the rule is the simple 1%. But the mirror of that, buying from a seller who is quietly an NRI, is a real trap that lands on you, so it is worth knowing both sides.
Request a free CA call
Last reviewed: 26 July 20266 min readReviewed by Preetesh Maloo, CA

The short answer

Which TDS applies depends on the seller's residency, not yours. Buying a resale flat of ₹50 lakh or more from a resident seller, you deduct 1% under Section 194-IA, file a Form 26QB and need no TAN, even though you are an NRI. It is only when the seller is an NRI that Section 195 kicks in, with a TAN, Form 27Q and a deduction on the gain. The trap is the reverse: if you deduct only 1% and the seller turns out to be an NRI, you, the buyer, are treated as in default for the shortfall, so verify the seller's residency before you deduct.

Is this your situation? Get a senior CA on it.

Free 15-minute call. We tell you what applies to you and what it costs, then you decide. You stay abroad.

Senior CA who specialises in NRI tax · we deal with the tax officer, you don't

Chat with a CA on WhatsApp

Related situations

The seller's residency picks the section

The confusion comes from thinking the heavy NRI-property TDS follows you. It does not. Section 194-IA applies where the buyer pays a resident transferor, and it says nothing about the buyer's own residency, so your being an NRI does not change it.

So when you buy a resale flat worth ₹50 lakh or more from a resident seller, you deduct 1% under Section 194-IA, on the price or the stamp-duty value, whichever is higher, file a Form 26QB and do not need a TAN, exactly as a resident buyer would. It is only Section 195, which governs payments to a non-resident, that carries the heavier treatment, a TAN, a quarterly Form 27Q and a deduction on the gain rather than a flat 1%. And that applies only when the seller is an NRI. As an NRI buying from a resident, you are firmly in the 1% world.

The trap: a seller who is actually an NRI

The real risk runs the other way. If you buy assuming the seller is a resident, deduct only 1% under Section 194-IA, and the seller is in fact an NRI, you have under-deducted, because their sale needed Section 195. And the liability for that shortfall sits on you, the buyer: you are treated as an assessee in default for the tax that should have been deducted, plus interest and penalty, and the department recovers it from you, not the seller.

So the seller's residency is not a detail to take on trust. Residency here means income-tax residency for the relevant year, based on days in India, which is not the same as FEMA residency, so a person with an Indian passport can still be a tax non-resident. Before you deduct, get the seller's PAN and a written residency declaration, and look at the real signals, an address abroad, a power-of-attorney holder signing, money asked to an NRE or NRO account. If it is genuinely unclear, the safe course is to treat the seller as non-resident and deduct under Section 195, or have them get a lower-deduction certificate, because under-deducting is your exposure, not theirs.

What's involved

What the CA actually does

  1. 1

    We confirm the right section

    We check the seller's tax residency so you deduct under the correct rule, 1% Section 194-IA for a resident seller, Section 195 for an NRI seller.

  2. 2

    We file your Form 26QB

    For a resident seller, we compute the 1% on the higher of price and stamp value, file the Form 26QB on time and issue the Form 16B, without any TAN.

  3. 3

    We protect you from the shortfall trap

    Where the seller's residency is unclear, we take the safe route, so you are never left an assessee in default for an under-deduction.

  4. 4

    We set up Section 195 if needed

    If the seller is an NRI, we get you a TAN, compute the deduction on the gain, coordinate a lower-TDS certificate and file the Form 27Q.

What to have ready

Documents you'll typically need

  • The sale agreement and the price
  • The seller's PAN and a written residency declaration
  • Any signals of the seller's residency (address, POA, bank account)
  • Your PAN and residency details

Your destination country can change the details

Requirements differ from one consulate, university and visa route to the next, how recent the figures must be, how long funds must have been held, and which certificates are mandatory. We assemble the documents around the exact checklist you're applying under. To see how India's tax treaty with your country of residence affects related filings, set your country below or compare all 46 countries.

References on this page

  • Section 194-IA applies to a buyer paying a resident transferor; the buyer's own residency is irrelevant
  • Resident seller: buyer deducts 1%, Form 26QB, no TAN, ₹50 lakh threshold
  • NRI seller: buyer deducts under Section 195, needs a TAN and files Form 27Q, no threshold
  • Under-deducting under 194-IA when the seller is an NRI makes the buyer an assessee in default

Frequently asked questions

Common questions

It depends on the seller, not you. Buying from a resident seller, you deduct 1% under Section 194-IA with a Form 26QB and no TAN, even though you are an NRI. Your own status does not pull you into Section 195.

Only when the seller is an NRI. Then the buyer needs a TAN, deducts under Section 195 on the gain, and files a quarterly Form 27Q. There is no ₹50 lakh threshold in that case.

Then deducting only 1% leaves you, the buyer, an assessee in default for the shortfall, plus interest and penalty, recovered from you. So verify the seller's tax residency, PAN and days in India, before you deduct, and if unclear, deduct under Section 195 to be safe.

Get their PAN and a written residency declaration, and look at real signals like an address abroad, a POA-holder signing, or money asked to an NRE or NRO account. Tax residency depends on days in India, not the passport, so an Indian passport holder can still be a non-resident.

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.

Primary residence test: days in India

Right now: 182 days

Where it works differently

The person is an Indian citizen leaving India for employment abroad, or as a crew member of an Indian ship
Only the 182-day test applies. The 60-day secondary test is disabled.
Explanation 1(a) to s.6(1)
Counting days
The day of arrival AND the day of departure both count as days in India.
Settled administrative practice; partial days count as whole days.
The financial year straddles a move
Residence is decided for the WHOLE financial year, not from the date of the move. India has no split-year concept, unlike the UK.
s.6 is a full-year test.

Commonly got wrong

  • You become an NRI the day you leave India. True for FEMA, false for income tax. Under FEMA residence changes on departure with intent; under the Income-tax Act it is a full-year day count.Name which law you mean. Say 'non-resident under FEMA from the day you leave' or 'non-resident for income tax if you are in India under 182 days in that financial year'.
  • India has split-year treatment. It does not. Only the treaty tie-breaker resolves a dual-residence year.Point to Article 4 of the relevant DTAA.

Related

If this matched your situation, these go further

Buying property from an NRI seller. The TDS the buyer has to get rightBuying an under-construction flat as an NRI: the TDS, the GST and the clockBuying an Indian property jointly with a resident, and who really owns itNRI ITR filing (we file for you)Form 13 lower-TDS certificate (property sale)DTAA TDS recoveryCapital gains calculatorRental income TDS calculator

Buying a resale flat from a resident?

Tell us the price and the seller. A practising CA will confirm the right TDS and file it on a free call, no obligation.

Request a free CA call

No card, no obligation. All certification and filing work is handled by ICAI-registered practising Chartered Accountants.