New Change for TDS on Property purchased from NRI from 1st April 2026

New Change for TDS on Property purchased from NRI from 1st April 2026

Under the new Income-tax Act, 2025 and Income Tax Rules, 2026 (effective April 1, 2026), the provisions for deducting TDS on the purchase of property from a Non-Resident Indian (NRI) are significantly different from those applying to resident sellers.

Here are the key provisions and compliance steps:

1. Applicable TDS Rate and Section

• When purchasing property from an NRI, the buyer must deduct tax at source under Section 393(2) [Table: Sl. No. 17] of the new Act, which governs any sum chargeable to tax paid to a non-resident.
• The TDS must be deducted at the “Rates in force” (which generally correspond to the applicable capital gains tax rate on the property), rather than a flat percentage of the sale value.

2. Form 141 is Not Applicable

• For property purchased from a resident, buyers use the simplified challan-cum-statement Form 141 (specifically Schedule B) to report and pay a flat 1% TDS.
• However, Form 141 cannot be used for NRI sellers, as Schedule B of the form is explicitly restricted to payments made to a resident transferor.

3. Lower or Nil Withholding Certificate

• Because deducting tax at the “rates in force” on the entire sale consideration can lead to excess TDS, the NRI seller or the payer can apply to the Assessing Officer for a lower or nil withholding certificate.
• This application is governed by Section 395(1) of the new Act and must be filed using the new Form No. 128 (which replaces the old Form 13).
• Once the Assessing Officer issues this certificate, the buyer can deduct the tax exactly at the lower rate specified in the certificate.

4. Mandatory PAN Requirement

• The NRI seller must furnish their valid Permanent Account Number (PAN) to the buyer.
• If the NRI fails to provide a valid PAN, the buyer is legally obligated to deduct tax at the higher of the rate in force, the specified rate, or 20%.

5. Foreign Remittance Compliance (Forms 145 and 146)

• Because the payment is being made to a non-resident, the buyer must comply with the foreign remittance reporting requirements under Section 397(3)(d) of the new Act.
• The buyer must furnish a declaration detailing the remittance and applicable TDS using the new Form No. 145 (which completely replaces the old Form 15CA).
• If the remittance is taxable in India and exceeds the prescribed threshold (₹5 lakh), the buyer must also obtain a Chartered Accountant’s certificate in the new Form No. 146 (replacing the old Form 15CB) before making the payment.
• Exception: If the buyer or seller has successfully obtained a lower/nil deduction certificate from the Assessing Officer (via Form 128), they only need to fill out Part B of Form 145, and the CA certificate in Form 146 is no longer required.