TDS on Sale of Ancestral property

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For property purchased from an NRI heir, TDS is governed by Section 195 not Section 194-IA.

Key differences from Section 194-IA:
Rate: TDS under Section 195 applies on the capital gains amount, not the total sale consideration. The rate depends on whether gains are long-term or short-term.

For long-term capital gains (property held by seller or original owner for more than 24 months):
- Original purchase before July 23, 2024: seller can choose 12.5% without indexation or 20% with indexation. TDS at the lower rate.
- Original purchase after July 23, 2024: 12.5% flat (no indexation).

For ancestral property, cost of acquisition is the cost to the previous owner, or FMV as on April 1, 2001 for pre-2001 acquisitions.

Practical steps for the buyer:
1. Get the seller PAN (NRIs must have Indian PAN for property transactions)
2. Deduct TDS at the applicable LTCG or STCG rate on the gains portion
3. Deposit via Challan 281 (buyer needs TAN, not just PAN)
4. File Form 27Q (not Form 26QB) for TDS on non-resident payments
5. Issue Form 16A to the seller after the quarter

The NRI seller can apply in advance for a Lower/Nil Deduction certificate under Section 195(3) if their actual gains are lower than what the buyer would estimate. Faster than claiming a refund later.

This [NRI capital gains and TDS guide](https://taxgarden.in/blog/nri-capital-gains-tax-property-shares-tds-itr-india-guide) covers post-Budget 2024 grandfathering rules and Section 195 steps for property transactions.