A S BANKA ADVISORS

Until this week, an Indian resident buying a flat from a cousin in Dubai or a friend in California had to become a registered tax deductor for one transaction. Apply for a TAN, pay the TDS by challan, file a quarterly non-resident TDS statement, then issue a certificate. Most buyers only found out at the registration desk, and many paid a consultant just to get the TAN in time.

From 1 October 2026 that changes for one group of buyers. If you are a resident individual or a resident HUF, you no longer need a TAN to deduct and deposit tax on a property bought from a non-resident. Here is what moved, what did not, and where we expect buyers and their advisers to trip up.

The two changes behind the headline

The Act. The Finance Act, 2026 substituted clause (c) of Section 397(1) of the Income-tax Act, 2025, with effect from 1 October 2026. The new sub-clause (iii) says the TAN requirement in Section 397(1)(a) does not apply to “a resident individual or Hindu undivided family in respect of a transaction where he is required to deduct tax on any consideration for the transfer of any immovable property under section 393(2) [Table: Sl. No. 17]”.

The Rules. CBDT Notification No. 121/2026 (G.S.R. 830(E), dated 22 September 2026) notifies the Income-tax (Fifth Amendment) Rules, 2026, in force from 1 October 2026. It amends rules 215(1), 218(3) and 219(5) of the Income-tax Rules, 2026, adds a new Schedule E to Form No. 141 and adds an option to Form No. 132 for “Transfer of immovable property by a non-resident to a resident individual or Hindu undivided family”.

Put simply: the NRI purchase now uses the same PAN-based challan-cum-statement that buyers already file when the seller is a resident.

What the new route looks like in practice

A worked date: if you deduct tax on a payment made on 10 October 2026, the payment and Form No. 141 are due by 30 November 2026. Joint buyers file separately; Note 11 to Form No. 141 says “In case of more than one deductor, each deductor has to file separate form.”

What did not change, and why it still bites

The relief is about paperwork, not about tax. Three things stay exactly where they were.

• No threshold. The Rs 50 lakh threshold and the 1 percent rate belong to purchases from a resident seller. A purchase from a non-resident falls under Section 393(2) Sl. No. 17, which applies the rates in force on the seller’s gain and has no minimum. A Rs 30 lakh flat bought from an NRI still attracts TDS.
• The rate follows the seller’s gain. Schedule E asks whether the gain is long-term or short-term. Long-term capital gains are taxed at 12.5 percent under Section 197(1), and the tax deducted must include surcharge and cess (Note 10 to Form No. 141).
• The penalty. Pay without deducting and Section 448 allows a penalty “equal to the tax which such person failed to deduct or pay”, on top of interest.

In our experience the costliest mistake is not the rate. It is deducting on the full sale price when the seller’s actual gain is small. The fix sits in Section 395: the seller can apply for a lower or nil deduction certificate, and the buyer can separately ask the Assessing Officer to determine the chargeable proportion. Schedule E now has fields for both certificate numbers, so plan the application weeks before completion, not days.

Who still needs a TAN

This is where founders and business owners should slow down. The relief is limited to resident individuals and HUFs. If your company, LLP or partnership firm is buying an office or a warehouse from a non-resident, nothing has changed: the entity uses its TAN, pays by challan, files the quarterly Form No. 144 and issues Form No. 131. The same applies to a non-resident buyer.

We also see founders buy a home personally from a family member who has moved abroad. That purchase now fits the new route, but only if the founder is resident for the tax year and the payment is consideration for land or a building. Residential status is the first thing to confirm, because the whole route depends on it.

When the seller has no PAN

Section 397(2)(b) requires deduction at the higher of the rates in force or 20 percent when the payee has not furnished a PAN. For a non-resident selling a capital asset, rule 217 of the Income-tax Rules, 2026 switches this off if the seller provides a set of details. Note 6 to Form No. 141 makes the seller’s contact number, e-mail and overseas address mandatory in Schedule E whether or not a PAN is available, and the tax residency certificate and tax identification number are needed where the PAN is missing. Collect all of it before the first payment, including the token advance.

The grey area: deals that straddle 1 October

Many property deals are paid in instalments. If you paid an advance in September under a TAN, that deduction follows the old route: challan, the quarterly Form No. 144 for the July to September quarter and Form No. 131. For later instalments, Schedule E asks for the acknowledgement number of the previous Form No. 141, but the Rules do not say how a purchase that began under a TAN moves to Form No. 141 midway. Until the portal position is clear, confirm the treatment before the first post-October instalment and keep a note of the route used for every payment.

A six-step checklist for a purchase from an NRI after 1 October 2026

1. Confirm the seller is non-resident and that you are a resident individual or HUF for the tax year of transfer.
2. Obtain the seller’s PAN, or the rule 217 details: contact details, overseas address, tax residency certificate and tax identification number.
3. Ask whether the seller holds a Section 395(1) or 395(6) certificate; if the gain is small, consider a Section 395(2) application yourself.
4. Fix the rate based on the holding period, adding surcharge and cess.
5. Deduct on every instalment and file Form No. 141 with Schedule E, paying the tax within thirty days from the end of the month of deduction. Each joint buyer files separately.
6. Issue Form No. 132 to the seller within fifteen days from the Form No. 141 due date, and keep the acknowledgement for the next instalment.

We have summarised the change as a nine-slide carousel covering the old and new routes, the eligibility test, caveats and key dates. Download the full carousel PDF.

Sources

• CBDT Notification No. 121/2026 [F. No. 370142/29/2026-TPL], G.S.R. 830(E), 22 September 2026, Income-tax (Fifth Amendment) Rules, 2026. Source: https://www.incometaxindia.gov.in/documents/d/guest/notification-no-121-2026-pdf, retrieved 26 September 2026.
• Income-tax Act, 2025 as amended by the Finance Act, 2026 (Sections 197(1), 393(2) Sl. No. 17, 395, 397(1)(c) footnote “Substituted by the Finance Act, 2026, w.e.f. 1-10-2026”, 397(2)(b), 448). Source: https://www.incometaxindia.gov.in/documents/d/guest/income_tax_act_2025_as_amended_by_fa_act_2026-pdf, retrieved 26 September 2026.
• Income-tax Rules, 2026, consolidated text (rules 215, 218, 219). Source: https://www.incometaxindia.gov.in/income-tax-rule-2026, consolidated version 9.0 retrieved 19 September 2026.

This article is for general information and is not tax or legal advice. The treatment of a property transaction depends on residential status, holding period and any certificate under Section 395.

Buying from an NRI, or advising a client who is? A S Banka Advisors Private Limited can work out the rate, the certificate route and the Schedule E filing before the payment date. Book a call: https://calendly.com/asbanka-info/30min