Published On:
September 27, 2026
Updated On:
September 27, 2026
Starting October 1, 2026, property transactions involving Non-Resident Indians (NRIs) become significantly simpler as the government eliminates the mandatory TAN requirement, allowing buyers to deduct TDS using just their PAN. This major compliance relief is expected to speed up property sales, reduce paperwork, and boost NRI investment in the Indian real estate market.
The Indian real estate market has always held a special allure for Non-Resident Indians. Whether it is the emotional pull of owning a home in their motherland, the desire to secure a retirement nest egg, or simply a strategic move to capitalize on India’s booming property sector, NRI investments have been a massive driver of real estate growth. However, for years, the enthusiasm of buying or selling property in India has been dampened by a labyrinth of tax regulations, tedious paperwork, and complex compliance requirements.
One of the biggest hurdles in this process has been the strict Tax Deducted at Source (TDS) framework, specifically the mandate to obtain a Tax Deduction and Collection Account Number (TAN). But the tide is finally turning. In a move that aligns perfectly with the government's broader vision of improving the ease of doing business and attracting foreign investment, a massive tax relief measure is set to kick in.
Starting October 1, 2026, the cumbersome TAN requirement is officially a thing of the past for individual buyers. This singular policy shift is poised to revolutionize how NRIs and resident Indians transact in the property market, removing friction, saving time, and eliminating unnecessary bureaucratic roadblocks.
To understand the magnitude of this relief, we must first look at the rule taking effect in October. Under the revised guidelines issued by the Central Board of Direct Taxes (CBDT), resident individuals and Hindu Undivided Families (HUFs) purchasing immovable property from an NRI will no longer need to apply for and obtain a TAN to deduct the applicable tax at source.
Instead of navigating the separate, often confusing TAN application process, buyers will now be allowed to use their existing Permanent Account Number (PAN) to deduct, report, and deposit the TDS.
This transition represents a massive shift from a complex corporate-style compliance framework to a simplified, individual-friendly process. The Income Tax Department has rolled out a new PAN-based challan-cum-statement mechanism, meaning the entire tax deduction loop can be closed using the same tax identification number the buyer already possesses.
If you have never been involved in a high-value property transaction with an NRI, it might be difficult to grasp just how frustrating the TAN requirement was.
Historically, when a resident Indian decided to buy a house, plot, or commercial space from a non-resident seller, the buyer was legally obligated to deduct TDS before making the final payment. While deducting tax is standard practice, the law previously required the buyer to act almost like a corporate entity by securing a TAN.
For an ordinary salaried individual or a small business owner looking to buy a family home, applying for a TAN was an intimidating prospect. It meant filling out additional forms, waiting for processing, and then navigating a completely different portal for tax remittance. Furthermore, once a TAN was acquired, it triggered a series of ongoing compliance expectations that a regular homebuyer was ill-equipped to handle.
This bureaucratic friction often led to delayed property registrations, canceled deals, and immense anxiety. Buyers were sometimes hesitant to purchase properties from NRIs simply to avoid the tax paperwork, which inadvertently penalized NRI sellers by reducing their pool of potential buyers. By eliminating the TAN requirement, the government is essentially unblocking a major bottleneck in the secondary real estate market.
While the paperwork is getting lighter, it is absolutely crucial to understand that the obligation to deduct TDS remains firmly in place. The October 1 update changes how you report the tax, not whether you pay it. Property transactions involving NRIs still attract specific TDS rates that differ significantly from resident-to-resident transactions.
If you are buying a property from an Indian resident, the rules are relatively straightforward: a flat 1% TDS is applicable if the total sale consideration exceeds fifty lakh rupees.
However, when an NRI is involved, the tax implications are much steeper and require careful calculation. When an NRI sells a property, the buyer must deduct TDS based on the capital gains the NRI is making. If the sale results in a Long-Term Capital Gain (LTCG), the mandatory TDS rate is 12.50%. If the property sale results in a Short-Term Capital Gain (STCG), the TDS is not a flat rate but is calculated based on the seller's respective income tax slab rate for that financial year.
It is also important to note that these base rates are often subject to additional surcharges and health and education cesses, which can push the effective TDS rate higher. Therefore, while the PAN-based system makes depositing the money easier, calculating the exact amount still requires precision.
For NRIs looking to optimize their tax liabilities, understanding the holding period of the asset is the most critical factor. The Indian tax system differentiates between long-term and short-term holdings, and this distinction dictates the massive difference in TDS rates.
In the context of real estate, an immovable property—like a flat, independent house, or land—must be held for a continuous period of at least 24 months to qualify as a long-term asset. If an NRI purchases a property and sells it after holding it for more than two years, the profits are categorized as Long-Term Capital Gains, which currently attract a 12.50% tax rate.
Conversely, if the NRI decides to liquidate the asset within 24 months of purchase, the profits are categorized as Short-Term Capital Gains. In this scenario, the gains are added to the NRI’s total taxable income in India and taxed according to their applicable income tax slab. If the gains are substantial, the NRI could easily fall into the highest tax bracket, leading to a massive tax deduction at source.
One of the most common issues NRIs face is that the mandatory TDS is often calculated on the total sale consideration rather than the actual capital gain. For example, if an NRI bought a property for one crore rupees and sells it years later for one crore twenty lakh rupees, their actual gain is only twenty lakh rupees. However, the law often requires the buyer to deduct tax on the entire sale value unless the NRI takes proactive steps.
This is where Section 197 of the Income Tax Act comes into play. An NRI seller can approach the Income Tax Department and apply for a certificate for lower or nil deduction of tax. By presenting their purchase documents, cost of acquisition, and actual calculated gains, the NRI can prove that their actual tax liability is much lower than the standard TDS rate.
Once the Income Tax Officer approves this application and issues the certificate, the buyer is legally permitted to deduct TDS at a significantly lower rate. While the October 1 changes make the buyer's life easier regarding TAN, obtaining a lower TDS certificate remains a highly recommended strategy for NRIs to prevent a large chunk of their funds from getting locked up with the tax department until they file their annual returns.
So, how exactly does the new PAN-based reporting system work? The Central Board of Direct Taxes has introduced a simplified compliance framework under the Income-tax (Fifth Amendment) Rules, 2026. A key component of this framework is the expanded Form No. 141, which now specifically covers property transactions where a non-resident transfers immovable property to a resident individual or HUF.
This form includes a newly inserted Schedule E, dedicated entirely to TDS on consideration for the transfer of immovable property. While it removes the need for a TAN, it does require a high level of transparency and detailed record-keeping.
When filing Form 141 Schedule E, the buyer must provide comprehensive details. This includes the complete address and type of the property, the PAN details of all buyers and sellers involved, and specific contact information including the overseas address and email ID of the NRI seller. Furthermore, the form mandates the submission of the seller's tax residency certificate and their tax identification number from their country of residence.
Transaction-level details are also heavily monitored. The form captures the date of the sale agreement, the final registration date, the stamp duty value of the property, and the total sale consideration. If the buyer is paying the NRI in installments, the form requires the buyer to specify whether the current payment is the first, subsequent, or final installment.
For most NRIs selling property in India, the ultimate goal is to repatriate the sale proceeds back to their country of current residence. The Reserve Bank of India allows NRIs to repatriate up to one million US dollars per financial year from their Non-Resident Ordinary (NRO) accounts, provided that all taxes have been duly paid.
This is exactly why the simplification of the TDS process is so impactful. In the past, if a buyer struggled to secure a TAN, the TDS deposit would be delayed. Until the TDS was deposited and the buyer issued a TDS certificate to the NRI, the NRI could not finalize their tax filings or smoothly secure the mandatory forms required by banks for international wire transfers.
By allowing buyers to use their PAN and instantly generate the challan-cum-statement, the entire timeline from the property registration to the final repatriation of funds is drastically shortened.
While navigating TDS is crucial, NRIs should also be fully aware that they are entitled to several tax benefits and exemptions under the Indian Income Tax Act, completely similar to resident Indians.
If an NRI avails of a home loan to purchase a property in India, they can claim a deduction on the interest paid under Section 24(b) of the Income Tax Act. They can also claim deductions on the principal repayment under the Section 80C umbrella.
Moreover, the massive tax bite of long-term capital gains can be completely legally avoided through smart reinvestment. Under Section 54, if an NRI sells a residential property and reinvests the capital gains into purchasing or constructing another residential property in India within a specified timeframe, the capital gains tax is exempt. Similarly, Section 54F provides an exemption if the sale proceeds of any other long-term capital asset are reinvested into a residential house.
For NRIs generating rental income from their Indian properties, that income is taxable in India. However, the law provides a standard deduction of 30% on the net annual value of the property to cover repairs, maintenance, and regular wear and tear, significantly reducing the taxable rental amount.
The elimination of the TAN requirement for property transactions involving non-residents is not just a procedural tweak; it is a powerful economic catalyst.
India currently has a massive diaspora, with millions of NRIs living across the globe. As the Indian economy shows incredible resilience and infrastructure projects connect once-distant suburbs, the appetite for Indian real estate among expats in the Middle East, North America, and Europe has hit record highs.
Real estate experts project that the October 1 rule change will act as a major lubricant for the secondary housing market. Resident buyers who previously walked away from prime resale properties simply because the seller lived abroad will no longer have a reason to hesitate. The bureaucratic friction of the deal is gone.
For developers, this is also excellent news. NRIs are a prime target demographic for premium luxury projects, branded residences, and gated communities. When the overall ecosystem of buying, managing, and eventually selling property becomes digitized and frictionless, overall confidence in the market surges.
If you are currently in the middle of negotiating a property deal, timing is everything.
For transactions that must be completed and registered before September 30, 2026, the old rules strictly apply. The buyer must initiate the TAN application process immediately, as it can take several days for the number to be allotted. Proceeding without a TAN before the deadline can result in severe penalties.
However, if both the buyer and the NRI seller have the flexibility to wait, scheduling the final payment and registration for October 1 or later is highly advisable. Waiting for the transition date means the buyer can simply log into the income tax portal, use their PAN, fill out Form 141 Schedule E, pay the TDS, and close the compliance loop in a matter of hours instead of weeks.
Regardless of the timeline, consulting with a tax expert specializing in cross-border transactions is non-negotiable. Every NRI’s tax residency status, holding period, and international tax treaty implications are unique. A professional can ensure that the lower TDS certificates are applied for correctly and that no money is unnecessarily trapped in the system.
The October 1 amendment is a clear signal that the regulatory environment is actively adapting to the needs of its global citizens and domestic taxpayers. By replacing the archaic TAN requirement with a streamlined PAN-based system, a significant administrative barrier to real estate investment has been successfully removed, paving the way for faster transactions and renewed market enthusiasm.
