Planning to buy property from an NRI? Budget 2026 simplifies TDS compliance
Buying property in India from a non-resident seller has long involved cumbersome paperwork. In a significant compliance relief announced on February 1, Finance Minister Nirmala Sitharaman proposed procedural changes aimed at making such transactions far smoother for resident buyers.
By waiving the requirement for a separate TAN for TDS on immovable property sales and allowing resident buyers to use PAN-based challans, the Budget has meaningfully reduced ‘procedural friction’ in NRI property transactions, say experts.
While the move may seem technical, it addresses a long-standing procedural hurdle that often delays or complicates one-time property transactions involving Non-Resident Indians (NRIs). By removing the TAN requirement and allowing TDS to be deducted using only PAN, the government has significantly reduced paperwork for NRI property deals.
This is what Budget 2026 has proposed
Under the proposal, TDS on the sale of immovable property by non-residents will be deducted and deposited by resident buyers using a PAN-based challan, removing the requirement to obtain a Tax Deduction and Collection Account Number (TAN). This aligns the mechanism for NRI property transactions more closely with the system already in place for resident-to-resident property sales.
Why this matters for NRI sellers
Earlier, when an NRI sold property in India, the resident buyer had to obtain a TAN, deduct tax under Section 195, deposit it using the TAN, and file TDS returns.
For buyers unfamiliar with tax procedures, this often delays transactions or makes them reluctant to deal with NRI sellers. As a result, NRIs frequently faced longer sale timelines and weaker bargaining power, despite having otherwise marketable assets, say experts.
What changes on the ground
TAN (Tax Deduction and Collection Account Number) is a 10-digit alphanumeric number issued by the Income Tax Department to anyone responsible for deducting or collecting tax. It must be quoted while deducting TDS/TCS, depositing the tax with the government, and filing TDS returns.
By abolishing the TAN requirement, Budget 2026 removes a major operational hurdle. Buyers can now comply using their PAN alone, making the process quicker and more intuitive. This improves the ease of executing property sales for NRIs, particularly those managing transactions remotely or through power of attorney, say experts.
“The proposal fixes a long-standing procedural anomaly in NRI property transactions. Forcing resident buyers to obtain a TAN solely for a one-time TDS payment under Section 195 created unnecessary friction and compliance risk,” says Alay Razvi, Managing Partner, Accord Juris.
What remains unchanged
The proposal does not alter the TDS rate applicable to non-resident sellers, nor does it change the underlying tax liability. Buyers must still deduct tax at the applicable non-resident rates, including surcharge and cess, and consider lower or nil deduction certificates where applicable, say experts.
In the case of a non-resident seller, a higher TDS of 20% (if the seller doesn’t have a PAN and it’s an LTCG asset) or 30% shall be applicable u/s 195 of the IT Act on the entire sale proceeds.
Also Read: What NRIs must know about property sale, rent, and tax filing when returning to India?
What the Budget 2026 proposal means
“Allowing PAN-based TDS payment brings parity with Section 194-IA transactions, simplifies execution without diluting tax collection, and reduces delays and inadvertent non-compliance. It marks a clear shift toward outcome-oriented tax administration, where ease of compliance takes precedence over procedural rigidity,” says Razvi.
“Thus, by allowing TDS on NRI property sales to be deposited using the buyer’s PAN instead of forcing a one-time TAN registration, the Finance Minister has removed a purely procedural irritant that caused delays and technical defaults without adding any real compliance value. It simplifies life for genuine one-off homebuyers while leaving tax collection intact, which is exactly how tax administration should work,” says Raheel Patel, Partner, Gandhi Law Associates.
S. Vasudevan, Executive Partner at Lakshmikumaran & Sridharan attorneys, points out that this will expedite and simplify the transactions involving purchase of immovable property from non-residents. Overall, this shift consolidates compliance responsibility with the resident purchaser, thereby mitigating unnecessary procedural complexity.
Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics
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