TAX COMPLIANCE for those buying a property from an non-resident Indian (NRI) gets a tad easier from October 1. They will not have to obtain a Tax Deduction and Collection Account Number (TAN) as the Central Board of Direct Taxes (CBDT) has simplified the tax deducted at source (TDS) rules for such purchases. However, the buyer will now have to furnish more granular details including payment by way of instalments.
When a payment is made to a resident, the TDS can be deposited online using the payer’s PAN. The payer fills Form 141, which is the challan-cum-statement for TDS. The payer then issues a TDS certificate in Form 132 to the payee as evidence of the tax deducted and deposited.
However, this simplified PAN-based mechanism is not available where the payment is made to an NRI. In such cases, a payer has to first obtain a TAN and thereby file Form 144. This created an additional compliance burden for residents.
From October 1, 2026, resident individuals and HUFs purchasing immovable property from NRIs will be able to comply with the TDS requirement through the PAN-based mechanism. The buyer can log in to the income tax portal, access the applicable TDS payment facility, fill in Form 141 with the required transaction and TDS details and deposit the tax. “This eliminates the additional step of obtaining a TAN solely for the purpose of making TDS payments and makes the compliance process simpler,” says Neeraj Agarwala, senior partner, Nangia and Company.
Schedule E in Form 141
The new rules introduce Schedule E in Form 141, which is the challan-cum-statement through which the buyer deposits the TDS and reports the transaction to the income tax department. The new Schedule E will require more granular information including details of the property, all buyers and sellers, sale consideration, stamp duty value, agreement and registration dates, payment by way of lump sum or instalments, TDS rate and amount, and details of any lower/nil deduction certificate.
Where the seller is a non-resident, the buyer will also need to capture overseas contact details, address, Tax Residency Certificate and foreign Tax Identification Number or equivalent identification details, even where the seller does not have an Indian PAN.
Amit Maheshwari, managing partner, AKM Global, a tax and consulting firm, says the new reporting requirements bring greater visibility to transactions where the consideration is paid in instalments, as the reporting framework now captures the nature of the instalment and links subsequent or final instalments with the earlier acknowledgement. “This should make it easier for the tax administration to track cumulative consideration and corresponding TDS compliance,” he says.
The notification also updates Form 132, which is the TDS certificate provided to the seller as proof of the tax deducted and deposited by the buyer. The amended form will specifically cover property transactions involving non-resident sellers.
TDS rates
When a resident purchases property from an NRI, he has to deduct TDS on sales consideration at the applicable tax rates of the NRI and there is no threshold for non-deduction of TDS. For an NRI selling immovable property in India, short-term capital gains are generally taxable at the applicable slab rate, plus applicable cess and surcharge, while long-term capital gains are taxable at 12.5%, plus surcharge and cess.
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