Buying Property from an NRI — Resident Buyer’s Step-by-Step Compliance Guide
A complete walkthrough of TAN application, TDS deduction under Section 393(2) using Code 1057, deposit timelines, and quarterly Form 144 filing — fully aligned with the Income Tax Act 2025 and the TAN-to-PAN transition on 30 September 2026.
Buying Property from an NRI — Why the Compliance Is Different
When a resident individual buys an immovable property from a Non-Resident Indian (NRI) seller, the entire compliance burden shifts onto the buyer. Under the new Income Tax Act, 2025 (effective 1 April 2026), this obligation is governed by Section 393(2) [Table: Sl. No. 17] — the direct successor of the well-known Section 195 of the old 1961 Act.
This is materially different from buying property from a resident Indian, where the buyer simply deducts 1% TDS above ₹50 lakh using a simplified PAN-based challan (Form No. 141). When the seller is an NRI, there is no minimum threshold, the rates are far higher, and — until a key transition date — the buyer must also obtain a TAN (Tax Deduction Account Number).
This guide walks the resident buyer through the entire process step-by-step: TAN application, computing and depositing TDS under Section 393(2) using TDS Code 1057, and filing the quarterly Form 144 return — including the critical TAN-to-PAN transition effective 1 October 2026.
The simplified PAN-based Challan-cum-Statement, Form No. 141 (successor to old Form 26QB), is explicitly restricted to resident transferors only under the Income Tax Rules 2026. A buyer purchasing property from an NRI cannot use Form 141. Instead, the obligation falls under the general non-resident payment provisions — TAN-based deduction, deposit via challan, and quarterly Form 144 (successor to old Form 27Q) filing.
Step 1 — Apply for TAN Before You Deduct Any TDS
As clarified by tax practitioners and confirmed in recent guidance, the TAN-based TDS mechanism for NRI property purchases remains mandatory until 30 September 2026. The PAN-based simplified mechanism applies only from 1 October 2026 onwards. If your transaction completes before that date, you — the resident buyer — must obtain a TAN.
If the agreement to purchase is signed, or any payment is made to the NRI seller, on or before 30 September 2026, you must apply for a TAN before deducting TDS. If the transaction occurs entirely on or after 1 October 2026, you can skip this step and use the new PAN-based mechanism directly.
File Form 49B online at the Protean (NSDL) TIN portal or through any TIN Facilitation Centre. Required: PAN of buyer, address proof, and details of the property transaction. Processing typically takes 7–10 working days.
Once approved, you receive a 10-character alphanumeric TAN (e.g., HYDD12345E). This TAN must be quoted on every TDS challan, certificate, and quarterly return related to this transaction.
A TAN once obtained is valid indefinitely — you do not need a fresh TAN for future property purchases. Many resident buyers planning to acquire property from NRIs apply for TAN well in advance of finalising the deal.
Do not make even an advance/token payment to the NRI seller before your TAN is allotted. TDS deduction without a valid TAN cannot be properly deposited or reported, exposing you to penalty under Section 405 (failure to apply for TAN) and interest for delayed/improper TDS compliance.
Step 2 — Compute TDS Under Section 393(2) Using Code 1057
Under the new return forms notified for Tax Year 2026-27, every TDS payment type carries a specific numeric code instead of relying solely on the section reference. For payments to an NRI on purchase of immovable property, the applicable code is 1057, reported within the framework of Section 393(2) in Form 144.
Code 1057 is not a separate section — it is the payment-type identifier used under Section 393(2) when filing Form 144 (and Form 140, for similar resident-side reporting categories). It tells the TDS return utility and CBDT systems that this specific deduction relates to purchase of immovable property from a non-resident, distinguishing it from other Section 393(2) categories like NRI rent, NRI interest, or NRI professional fees.
Using the wrong code (or an old discontinued section number) in your quarterly return will make the filing defective and trigger a notice from the TDS-CPC.
| Holding Period (by NRI Seller) | Gain Type | Base TDS Rate | Effective Rate (with surcharge + 4% cess) |
|---|---|---|---|
| More than 24 months | LTCG | 12.5% | Up to ~14.95% |
| 24 months or less | STCG | Slab rates | Up to ~34.32% |
| No PAN furnished by NRI seller | Higher Rate | 20% (Section 206AA equivalent) | 20% or higher |
Resident sellers enjoy a ₹50 lakh threshold before TDS applies (Section 393(1)). There is no such threshold for NRI sellers. TDS under Section 393(2) [Code 1057] applies on the entire sale consideration from the very first rupee — regardless of property value.
Mr. Anil (Pune) buys a flat from Mr. Suresh Reddy (NRI – Canada) — held for 5 years (LTCG)
Step 3 — Deposit TDS Within the Prescribed Timeline
Once deducted, the TDS amount must be deposited to the Central Government within strict timelines under Rule 218 of the Income Tax Rules, 2026.
1. Log in to the Income Tax e-filing portal → e-Pay Tax
2. Select the relevant TDS payment category (non-salary, non-resident) and enter your TAN
3. Enter the TDS amount, surcharge, and cess separately as computed
4. Complete payment via net banking / debit card
5. Download and retain the Challan Identification Number (CIN) receipt — required for Form 144 filing
Step 4 — File Form 144 After Each Quarter End
Form 144 is the renumbered successor of the old Form 27Q — the quarterly TDS return specifically for payments made to non-residents. It must be filed by every buyer who has deducted TDS under Section 393(2), including for NRI property purchases under Code 1057.
Many buyers and even some CAs mistakenly search for Form 144 on the income tax e-filing portal and find nothing — leading to panic. Form 144 is filed through the TIN-Protean TDS return utility (RPU/FVU), the exact same filing pipeline previously used for Form 27Q. It was never on the e-filing portal, and this hasn’t changed under the new Act — only the form number and section references have been updated.
Form 144 — Quarterly Due Dates
Information Required in Form 144
- TAN (or PAN, post 1 Oct 2026) of the buyer
- PAN of the NRI seller (mandatory for correct credit)
- Section code and payment code (393(2) · 1057)
- Date of payment/credit and amount paid
- TDS amount deducted, surcharge & cess breakup
- Challan Identification Number (CIN) of deposit
- File generates an acknowledgement / token number
- Generate TDS Certificate (functional equivalent of old Form 16B) via TRACES
- Issue certificate to NRI seller — Section 395(4) requirement
- Seller uses certificate to claim TDS credit in their ITR-2
- File Form 145 (old 15CA) + Form 146 (old 15CB) before remitting money abroad if NRI wants repatriation
Helping Your NRI Seller — Lower/Nil TDS Certificate (Form 128)
Buyers often deduct TDS conservatively on the entire sale consideration, since they typically don’t know the seller’s actual capital gains. This leads to excess TDS that the NRI seller must later claim as a refund. To avoid this, the NRI seller can apply before the sale for a Lower/Nil Deduction Certificate.
Under the Income Tax Act 2025 and IT Rules 2026, the old Form 13 application for a Lower/Nil TDS Certificate has been renumbered as Form 128. The NRI seller files this with the jurisdictional Assessing Officer (International Taxation) before the sale, providing: computation of actual capital gains, purchase documents, and sale agreement draft. If approved, the certificate specifies a reduced TDS rate — which the buyer must then apply instead of the standard rate.
If your NRI seller presents a valid Form 128 certificate, deduct TDS strictly at the rate specified in it, and retain a copy for your records — it is your defence against any future “under-deduction” allegation.
What Happens If You Get This Wrong
Complete Compliance Checklist for the Resident Buyer
- Get written declaration of NRI residential status from seller
- Apply for TAN via Form 49B (if transacting before 30.09.2026)
- Obtain seller’s PAN — mandatory to avoid 20% higher rate
- Check if seller holds a Form 128 lower deduction certificate
- Determine LTCG (12.5%) vs STCG (slab) based on holding period
- Deduct TDS under Section 393(2), Code 1057, at applicable rate
- Deposit TDS within 7 days of month end (TAN or PAN based)
- File Form 144 within 31 days of quarter end
- Generate & issue TDS certificate to NRI seller via TRACES
- Help seller with Form 145/146 if remitting sale proceeds abroad
2. Income Tax Act, 2025 — Section 393(2) [Table: Sl. No. 17] (TDS on payments to non-residents; successor to Section 195, ITA 1961)
3. Income Tax Act, 2025 — Section 395(4) (TDS certificate issuance), Section 405 (TAN penalty)
4. Income Tax Rules, 2026 — Rule 218 (TDS deposit timelines), Rule 220 (Form 145/146 remittance requirements), Rule 132 (TDS certificate)
5. Form 144 — Renumbered successor of old Form 27Q (quarterly TDS return for non-resident payments); filed via TIN-Protean RPU/FVU utility, not the e-filing portal
6. Form 141 — Renumbered successor of old Form 26QB; restricted to resident transferors only — cannot be used for NRI sellers
7. Form 128 — Renumbered successor of old Form 13 (Lower/Nil TDS Deduction Certificate application)
8. Forms 145 & 146 — Renumbered successors of old Forms 15CA & 15CB (remittance declaration and CA certificate)
9. TAN-to-PAN Transition — Resident individual/HUF buyers of NRI property exempted from TAN requirement effective 1 October 2026 per Budget 2026 announcement