Property Purchase from NRI in April 2026: TDS Deduction Rules on Rs 25 Lakh

Who is an NRI for this purpose? 

An NRI, or Non-Resident Indian, refers to an individual who does not meet the Income Tax Act’s criteria for being a Resident, generally meaning they have spent less than 182 days in India during the financial year. 

The Key Section: 195 of the Income Tax Act 

When purchasing property from an NRI, TDS is deducted under Section 195, not under Section 194IA (which applies only to resident sellers).

TDS Rate on ₹25 Lakh Property from NRI

Resident vs. NRI Seller Comparison

Calculation Example 

Assuming a Long-Term Capital Gain (LTCG): TDS works out to approximately ₹3.125 lakh (12.5% of ₹25 lakh).  

Cess and surcharge, if applicable, would be added. For instance, if surcharge slabs are not triggered, the total TDS may be around ₹3.25 lakh. 

The net amount payable to the NRI would be ₹25 lakh minus the TDS deducted.

Key Rules You Must Know 

No ₹50 Lakh Threshold Here 

Under Section 194IA (which applies to resident sellers), TDS is required only if the property value exceeds ₹50 lakh. This threshold does not apply to NRI sellers. For them, TDS under Section 195 applies regardless of the sale value, even on a property worth ₹25 lakh. 

Buyer is Responsible 

The buyer is obligated to deduct TDS before making any payment to the NRI seller. Failing to do so makes the buyer liable for the tax amount, along with applicable interest and penalties. 

TAN is Mandatory 

Unlike under Section 194IA, where a PAN can be used, Section 195 requires the buyer to have a TAN (Tax Deduction Account Number) to deposit the TDS. 

TDS on Full Sale Value 

TDS must be deducted from the entire sale consideration, not merely from the capital gains portion, unless the NRI seller obtains a lower- or nil deduction certificate from the Income Tax Department. 

Step-by-Step Process for Buyer 

• Apply for TAN at NSDL/UTIITSL if you don't have one 
• Determine the holding period of the property (ask the seller for proof) 
• Calculate TDS based on LTCG or STCG rate + surcharge + cess 
• Deduct TDS from the payment amount before paying the NRI 
• Deposit TDS with the government using Form 27Q (not 26QB) 
• File TDS return - quarterly, using Form 27Q 
• Issue Form 16A (TDS certificate) to the NRI seller 

Lower Deduction Certificate - Big Money Saver

The NRI seller can apply to the Income Tax Department for a Certificate under Section 197, which allows TDS to be deducted at a lower rate or even nil based on the actual capital gains after eligible deductions. 

• Applied via Form 13 on the Income Tax portal 
• Processing time: a few weeks 
• Benefit: This can reduce TDS on a ₹25 lakh property from approximately ₹7–8 lakh down to the tax genuinely due on the real gains 
• Smart NRIs always do this 

Remittance of Proceeds 

After TDS is deducted, the NRI can repatriate the sale proceeds abroad using Form 15CA and 15CB: 

• Form 15CB - Certificate from a Chartered Accountant 
• Form 15CA - Online declaration by the NRI 

These must be submitted to the bank before transferring money abroad

Common Mistakes Buyers Make 

• Using Form 26QB instead of Form 27Q - that's a common error. Form 26QB is meant only for purchases from resident sellers, not NRIs. 
• Not getting a TAN and trying to deposit TDS using the buyer's PAN - this is non-compliant and can attract penalties. 
• Deducting TDS only on the "profit" portion - you can't do this unless the NRI seller has obtained a lower deduction certificate from the tax department.
• Forgetting to file the TDS return quarterly - many buyers miss this, but it's a mandatory requirement. 
• Not asking the NRI seller for their certificate of non-residency - this document is essential to confirm their status and apply the correct TDS rules.