Selling your property to an NRI buyer: what changes for you

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 holder returns to India permanently

The deposit may run to maturity, then converts to RFC. Interest stays exempt while the holder is RNOR.

Master Direction on Deposits and Accounts.

Premature withdrawal before 12 months

No interest is payable.

Standard RBI condition on FCNR(B).

Commonly got wrong

• FCNR accounts work like a savings account. FCNR(B) is a term deposit only, 1 to 5 years.FCNR(B) is a fixed deposit in foreign currency, one to five years. There is no FCNR savings account.

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.

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.