In short (2026)
From 1 October 2026, a resident individual or HUF buying immovable property from a non-resident seller should not treat the old TAN-based process as the only route for TDS compliance. CBDT Notification No. 121/2026 brings these transactions into the Form 141 reporting framework through a new Schedule E, with the related certificate in Form 132. The change is procedural, but it affects closing checklists because the buyer, seller, property, stamp value, instalment and tax details now have to be captured in the prescribed form. It does not remove the need to compute the correct TDS rate, check the seller’s residential status, or verify whether a lower deduction certificate applies.
What exactly changed for a resident buyer purchasing from an NRI seller?
The practical change is that the compliance route for certain non-resident property sales is being aligned with a challan-cum-statement style filing. The notification amends the Income-tax Rules, 2026 and expands Form 141 so that it can report tax deducted on consideration for transfer of immovable property by a non-resident to a resident individual or Hindu undivided family.
For a buyer, this means the TDS step should no longer be treated as a side conversation to be settled after the sale deed is signed. It becomes part of the transaction documentation itself. The buyer must identify the seller’s non-resident status, obtain the seller’s PAN and overseas details where required, capture the property particulars, mention the sale consideration and stamp duty value, and report the deduction in the correct schedule.
The related certificate is Form 132. That certificate is important because sellers often need proof of tax deduction for credit in their Indian tax records. If the buyer makes the payment but fails to file the correct statement or issue the certificate, the seller may still chase the buyer after registration even though the purchase price has been paid.
For banks and lenders, the change matters because the file should show a clean tax deduction path before disbursement. A property loan file involving a non-resident seller should not be cleared merely because the draft sale deed is ready. The lender should ask whether the buyer has been told how TDS will be deducted, which form will be filed, and whether any certificate fixes a lower rate.
Does this mean I never need a TAN when buying from an NRI?
For the specific class covered by the new rule, the direction is toward a PAN-based Form 141 route from 1 October 2026. That is the point that will matter to most one-time resident individual buyers who are purchasing a house, flat, plot or other immovable property from a non-resident seller.
But do not turn this into a universal sentence without checking the facts. The buyer must first confirm that the buyer is a resident individual or HUF and that the transaction falls within the new reporting category. If the buyer is a company, LLP, partnership firm, trust, bank, developer or another entity, the compliance route may be different. If the payment is not simply consideration for transfer of immovable property, other tax provisions may also need attention.
The seller’s status must also be checked for the relevant financial year. “NRI” is a common phrase, but tax law works with residential status. A person who lives abroad may not always be non-resident for the particular year. A person who has recently returned to India may need a proper residential status calculation. The passport, visa and foreign address are evidence, but they do not replace the tax status analysis.
The safest answer is this: for a resident individual or HUF buying property from a non-resident seller on or after 1 October 2026, ask your tax adviser to use the new Form 141 Schedule E route if the transaction falls within the notified category. Do not obtain or use TAN merely because an older checklist says so. Do not skip TDS merely because the new route looks simpler.
What should I check before paying the seller?
Before paying any amount to a non-resident seller, check five things.
First, check who the seller is for tax purposes. Take the seller’s PAN, passport identity page, overseas address proof, Indian address if any, and a written declaration of residential status for the year. If there are multiple sellers, do this for each seller. One co-owner may be resident and another may be non-resident.
Second, check the title documents. The tax change does not prove title. You still need the mother deed chain, latest sale deed or conveyance, encumbrance certificate or search report, mutation or revenue record, property tax record, sanctioned layout or building approval where relevant, RERA record for a project unit, and litigation search. If the seller is abroad and acts through a power of attorney holder, verify the power of attorney, its authentication, its registration or adjudication where required, and whether the attorney can receive money and sign the deed.
Third, check the tax computation. TDS on purchase from a non-resident seller is not the same as the simpler resident-seller one percent situation. The rate may depend on the nature of capital gains, surcharge, cess, treaty position, lower deduction certificate and other facts. If a lower deduction certificate is produced, read the certificate carefully. It should match the seller, buyer or transaction, property, amount, tax year and period of validity.
Fourth, check the payment mechanics. The sale deed should record gross consideration, the amount paid to the seller, the amount deducted as tax, the instalment schedule if any, and who will file the TDS statement. If there is a bank loan, the bank’s disbursement note should match the tax deduction plan. A mismatch between the sale deed amount, bank disbursement and Form 141 reporting can create later notices or disputes.
Fifth, check registration timing. Do not wait until the sub-registrar appointment to discover that the seller expected the full gross amount in the bank account. A non-resident seller may be abroad, may have a power of attorney holder present, and may need proof of TDS before signing final confirmations. Put the TDS clause into the agreement for sale and not only into WhatsApp messages.
What is the concrete record that settles whether my TDS compliance was done?
The concrete record is the filed Form 141 with the correct schedule, the tax payment acknowledgement, and the Form 132 certificate issued to the non-resident seller. These should be kept with the registered sale deed and the bank’s loan file.
Read these records against the sale deed. The buyer name, seller name, PAN, property description, consideration, stamp duty value and deduction amount should reconcile. If the sale deed describes Flat No. 804 in one project, the TDS record should not carry a vague or different property description. If there are two sellers, the record should not show the entire amount against only one seller unless the legal and tax facts support that.
Also check the date of deduction and the month for which the statement was filed. Property transactions often involve advance, part payment, loan disbursement and final payment. TDS may be triggered when money is paid or credited, depending on the applicable rule. If there are instalments, the reporting should not pretend that the entire transaction happened on one date unless that is correct.
For a lender, the disbursement checklist should include a copy of the filed challan-cum-statement and the seller certificate, or at least a condition that they be produced within the applicable timeline. For a buyer, these papers are not optional tax paperwork. They are part of the acquisition file, just like stamp duty challan, registration receipt and encumbrance certificate.
What can quietly go wrong if I follow an old checklist?
The most common failure is using the wrong process because the transaction is copied from an older resident-seller template. Older templates may say Form 26QB, Form 16B or TAN without distinguishing the seller’s residential status and the effective date of the new rules. That can produce defective reporting even when the buyer deducted money in good faith.
The second failure is deducting at the wrong rate. Buyers are used to hearing that property TDS is one percent. That statement is often true for resident sellers under the separate resident-seller regime, but it is dangerous for a non-resident seller. A buyer who deducts too little may be treated as having failed to deduct the correct tax, even if the seller has gone abroad with the balance consideration.
The third failure is ignoring co-ownership. If a property is owned by spouses, siblings or heirs, each seller’s share and residential status must be checked. One seller may provide a lower deduction certificate and another may not. One seller may be resident and another may be non-resident. The sale deed, payment schedule and TDS filing should reflect that split.
The fourth failure is relying on a power of attorney holder for tax answers. A power of attorney holder may have authority to sign and admit execution before the sub-registrar, but that does not mean the attorney can certify the seller’s tax residency, capital gains computation or lower deduction eligibility. Get the seller’s declarations and tax advice in writing.
The fifth failure is assuming registration cures tax defects. The sub-registrar registers instruments if stamp duty, registration procedure and execution requirements are met. The sub-registrar does not give the buyer a clean income-tax indemnity. A registered sale deed with defective TDS can still cause tax notices, indemnity disputes and delays in future resale.
Should the sale agreement have a special TDS clause for an NRI seller?
Yes. The agreement should say that the seller is non-resident or has declared the relevant residential status, that the buyer will deduct tax as required by law, that the deduction will be from the gross consideration, and that the seller will provide documents needed for correct computation and filing.
If a lower deduction certificate exists, the agreement should identify it and say that deduction will follow it only to the extent it applies. If the certificate is delayed, the agreement should say what happens to the closing date. If the seller disputes the deduction, the agreement should state that statutory deduction prevails over any demand for gross payment.
The clause should also cover evidence. The buyer should undertake to file the required statement and issue the certificate within the applicable timeline. The seller should undertake to acknowledge receipt of the net amount and credit for tax deducted. If a bank is disbursing the purchase price, the clause should allow the bank to split disbursement between seller payment and tax deposit.
This is not only a tax drafting point. It prevents a registration-day fight. Many property closings fail because the seller expects the amount mentioned in the sale deed to arrive in full, while the buyer says TDS must be withheld. In an NRI sale, that fight can be larger because the TDS amount may be substantial.
What should a bank or NBFC change in its title and disbursement checklist?
A lender should add a separate non-resident seller block to the legal and disbursement checklist.
The legal team should first flag non-resident status from the parties clause, KYC, power of attorney, address and payment instructions. The credit or operations team should not discover this only while disbursing. The valuer’s report and title report will not solve the TDS question by themselves.
The checklist should ask for seller PAN, residential status declaration, lower deduction certificate if any, computation note from the borrower’s or seller’s tax adviser, draft TDS clause, and confirmation of the Form 141 Schedule E process for payments on or after 1 October 2026. If the bank pays the seller directly, the bank should confirm whether the borrower has funded the TDS component or whether the disbursement structure deducts it before remittance.
For risk teams, the concern is not only statutory default. If TDS is mishandled, the seller may refuse to complete registration, may delay handing over originals, or may dispute net payment after execution. In an NRI transaction, physical coordination is already harder. A clean tax checklist reduces the chance that the title file is complete but the closing still fails.
Does this change anything about stamp duty or registration?
The notification is about income-tax reporting and TDS. It does not change the state stamp duty payable on the instrument. It also does not change the basic registration requirement for a sale deed or conveyance.
That distinction matters. Stamp duty is paid to the state registration or stamps authority. TDS is deducted and deposited under income-tax law. A buyer needs proof of both. A stamp duty challan does not prove TDS compliance. A TDS challan does not prove stamp duty payment. A registered deed does not automatically prove that TDS was correctly deducted.
In a purchase file, keep the records in separate folders: title documents, stamp and registration records, tax deduction records, payment records and possession records. When the buyer later sells or mortgages the property, this separation helps a lawyer or lender verify the chain quickly.
What is settled and what still needs advice?
What is settled is the procedural direction from 1 October 2026 for the notified class of transactions: Form 141 will include the new Schedule E for immovable property transfers by non-residents to resident individuals or HUFs, and Form 132 is the related certificate framework. It is also settled that a buyer should not treat NRI property TDS as a casual post-registration formality.
What is not settled by the notification is the correct tax rate for every seller. That depends on facts. The seller’s holding period, cost, indexation or other computation mechanism, surcharge, cess, treaty position, lower deduction certificate and capital gains details may all matter. A title lawyer should identify the issue, but a tax adviser should compute the deduction.
It is also not settled by the notification that every buyer in every structure can avoid TAN. The new route is framed for resident individuals or HUFs in the covered transaction. Different buyers or mixed transaction structures need separate advice.
Frequently asked questions
If I am buying from an NRI after 1 October 2026, can I just deduct one percent TDS?
No. Do not assume the resident-seller one percent rule applies to a non-resident seller. The correct deduction depends on the applicable non-resident property transfer rules, the seller’s facts and any lower deduction certificate. Use the new filing route if applicable, but get the rate checked before payment.
What proof should I give the NRI seller after deducting TDS?
You should provide the tax payment acknowledgement, the filed Form 141 details for the transaction, and the Form 132 certificate when generated. The seller needs these records to claim credit and to reconcile the sale proceeds in Indian tax filings.
Does Form 141 prove that the seller had good title?
No. Form 141 is a tax reporting document. It does not prove ownership, marketable title, absence of encumbrances, possession, building approval, RERA compliance or the validity of a power of attorney. You still need a full title search and document review.
What if the NRI seller has a lower deduction certificate?
Read the certificate before relying on it. It should match the seller, transaction, property, amount, tax year and validity period. If it covers only part of the consideration or only one co-owner, deduct tax accordingly for the balance or other sellers.
Should the bank verify TDS before loan disbursement?
Yes. If the bank is funding the purchase price, the disbursement file should show how TDS will be deducted and deposited. A lender should not release the full gross amount to a non-resident seller unless the transaction structure separately protects the buyer’s TDS obligation.