New TDS Rules for NRI Property Sellers: PAN Replaces TAN from 1 October 2026

Buying property from an NRI has always come with one extra headache obtaining a TAN before depositing TDS. For many buyers, this meant additional paperwork, extra registrations, and unnecessary delays before the property transaction could move forward. That is finally changing. From 1 October 2026, the government has simplified the TDS compliance process by allowing eligible buyers to deposit TDS using their PAN instead of obtaining a TAN. Here’s what this change means, who it applies to, and what both NRI property sellers and buyers need to know before their next transaction..

What Was the Rule for TDS on Property Sale by NRIs?

Until this change, when a resident Indian bought property from an NRI seller, the transaction was governed by Section 195 of the Income Tax Act, 1961 a completely different track from the one used for resident sellers. The buyer had to:

• Apply for and obtain a TAN under Section 203A, purely for this one transaction.
• Calculate TDS on the capital gains (or the full sale value, if no Lower Deduction Certificate was in place).
• Deduct TDS at the applicable rate before making payment to the NRI seller.
• Deposit the TDS using the TAN via e-challan.
• File a quarterly TDS return (Form 27Q) using the TAN.
• Issue Form 16A to the NRI seller as proof of TDS deducted.

For most individual homebuyers, applying for a TAN they’d only ever use once was confusing and slow, and it frequently caused delays or buyers backing out of deals with NRI sellers altogether.

What Is the New TDS Rule for NRI Property Sellers?

Budget 2026 amends Section 397(1)(c) of the Income-tax Act, 2025 (the section governing TAN requirements under the new Act, which replaces the 1961 Act from 1 April 2026) to remove the TAN requirement for resident individual and HUF buyers purchasing immovable property from a non-resident seller. From 1 October 2026, these buyers can instead deduct and deposit TDS using their own PAN through a challan-cum-statement mechanism similar to Form 26QB — the form already used when buying property from a resident seller. Under the renumbered 2025 Act, the underlying TDS provision that used to be Section 195 is now Section 393(2), so if you see that number in newer guidance, it refers to the same rule.

Why Did the Government Replace TAN with PAN?

The change is about parity and friction, not revenue. Resident buyers purchasing property from other residents have never needed a TAN they’ve always used PAN-based Form 26QB under Section 194-IA. Buyers of NRI-owned property were the outlier, saddled with a heavier compliance process for what is usually a one-time purchase. By aligning both processes under the same PAN-based mechanism, the government has removed a genuine pain point that was making buyers hesitant to transact with NRI sellers in the first place, without touching how much tax is actually owed.

Who Will Benefit From This Change?

The TDS obligation legally remains with the buyer, so on paper, this is a buyer-side reform. In practice, though, NRI sellers benefit indirectly and meaningfully:

• Resident individual and HUF buyers get the most direct benefit of no more TAN applications for a single transaction.
• NRI sellers benefit from fewer buyers backing out or delaying deals over TAN paperwork, and from faster TDS deposit, which means faster TDS credit showing up in Form 26AS useful when it’s time to file an ITR or claim a refund.
• Property brokers and CAs handling NRI transactions deal with one less procedural bottleneck slowing down closings.

What Changes from 1 October 2026?

What Has NOT Changed?

This is the part every NRI seller should actually pay attention to, because none of the substance of the tax rule has moved:

• TDS rate is the same. Property sold by an NRI is still subject to TDS on long-term capital gains at 12.5% (for property held over 24 months, without indexation) or at slab rates for short-term gains (property held 24 months or less), plus applicable surcharge and cess. Where the NRI seller has no PAN, the higher rate of 20% continues to apply.
• Section 195 (now Section 393(2)) is the same. Only the TAN requirement was removed; the underlying provision requiring the buyer to deduct TDS on payments to non-residents is unchanged.
• The tax itself is the same. This amendment does not reduce, waive, or restructure the NRI seller’s actual income tax liability on the sale.
• Capital gains computation is the same. How gains are calculated, what counts as the cost of acquisition, and how the holding period is measured are all unaffected.
• Lower TDS (Form 13) is the same. NRI sellers can still apply under Section 197 for a Lower Deduction Certificate if their actual tax liability is lower than the standard TDS rate this route is completely untouched by the amendment.

How Property Buyers Will Deduct TDS After 1 October 2026

Here’s exactly what the process looks like for a resident buyer purchasing property from an NRI seller once the new rule takes effect:

Step 1: Calculate TDS

The buyer determines the applicable TDS rate 12.5% on long-term capital gains, slab rates on short-term gains, or the rate specified in a Lower Deduction Certificate (Form 13) if the NRI seller has obtained one and applies it to the correct base amount (capital gains, if a certificate is in place, or the full sale consideration otherwise).

Step 2: Deduct TDS

Before making payment to the NRI seller, the buyer deducts the calculated TDS amount from the payment, exactly as before this obligation hasn’t changed with the new rule.

Step 3: Deposit Using PAN

Instead of a TAN-based e-challan, the buyer deposits the deducted TDS using their own PAN through a PAN-based challan-cum-statement, aligned with the mechanism already used for Form 26QB filings on resident property deals.

Step 4: Issue Certificate

The buyer issues a TDS certificate to the NRI seller as proof of the tax deducted and deposited, which the seller will need when filing their income tax return in India or applying for a refund of any excess TDS.

What Should NRI Property Sellers Do Before Selling Property?

The compliance mechanism has gotten easier for buyers, but the groundwork for NRI sellers hasn’t changed. Before listing your property for sale, make sure you have:

• A valid PAN — without it, TDS jumps to a flat 20%, regardless of your actual capital gains.
• A Lower Deduction Certificate (Form 13), if applicable — apply through the TRACES portal well before the sale, since processing takes time and this remains the single biggest lever for reducing upfront TDS.
• A clear capital gains calculation — including your original cost of acquisition, cost of any improvements, and whether the gain qualifies as long-term or short-term.
• Supporting documents — the original purchase deed, proof of cost of acquisition and improvements, and records of any exemptions you plan to claim under Section 54, 54EC, or 54F.
• A CA experienced with NRI property transactions — to coordinate with the buyer on TDS deduction, help apply for a lower deduction certificate, and later assist with Form 15CA/15CB for repatriating the sale proceeds abroad.

Does This Rule Apply to Every Property Transaction?

No — this specific amendment is narrower than the headlines suggest. It applies to resident individual and HUF buyers purchasing immovable property from a non-resident (NRI) seller. Here’s how it breaks down by seller and buyer type:

• Resident seller, resident buyer: Unaffected — this transaction already used PAN-based Form 26QB under Section 194-IA and continues to do so.
• NRI seller, resident individual/HUF buyer: This is the transaction the new rule covers — TAN is no longer required from 1 October 2026.
• NRI seller, company or LLP buyer: The amendment as announced is specifically framed around individual and HUF buyers; company and LLP buyers should confirm the current TAN requirement with a tax advisor before relying on this change, since business entities may already hold or require a TAN for other purposes.

Misconceptions About the New Rule

• TAN removed means no TDS. Wrong — TDS is still fully applicable; only the account number used to deposit it has changed.
• NRI pays no tax now. Wrong — the NRI seller’s capital gains tax liability is completely unaffected by this amendment.
• Buyer doesn’t deduct TDS anymore. Wrong — the buyer’s obligation to deduct TDS before paying the NRI seller is unchanged; only the deposit mechanism is simpler.
• Capital gains tax has been removed. Wrong — capital gains computation, rates, and exemptions under Sections 54, 54EC, and 54F remain exactly as they were.

Conclusion

The replacement of TAN with PAN for TDS on NRI property sales is a genuinely useful compliance fix; it removes a procedural headache that has, for years, slowed down or scared off buyers dealing with NRI sellers. But it’s exactly that: a procedural fix. If you’re an NRI planning to sell property in India, the practical steps that actually reduce your tax outgo having a valid PAN, applying for a Lower Deduction Certificate early, and getting your capital gains documentation in order matter just as much after 1 October 2026 as they did before it.

Planning to sell property in India as an NRI? Talk to our team about applying for a Lower Deduction Certificate and structuring your sale before you sign anything with a buyer.