Last verified: 28 August 2026. Rules in this area changed on 1 April 2026 and change again on 1 October 2026 — see the TAN section below.

A buyer in Noida agreed to purchase a 3 BHK for ₹3.4 crore. The seller had an Indian PAN, an Aadhaar card and a Noida address. The buyer did what everyone does: deducted 1% TDS, filed the form online, paid the seller and registered the property.

The seller was an NRI. The correct deduction was closer to 14.95%. The shortfall was roughly ₹47 lakh — and under Indian tax law that money is recoverable from the buyer, not the seller, along with interest and a penalty that can equal the entire amount not deducted.

This is the most expensive mistake in Indian residential property, and it is almost always made in good faith. Here is exactly how it works.

Why the 1% rule does not apply

Most buyers know the 1% TDS rule for property above ₹50 lakh. That provision — formerly Section 194-IA, now Section 393(1) of the Income-tax Act 2025 — applies only where payment is made “to a resident transferor.”

When the seller is a non-resident, a completely different provision applies: formerly Section 195, now Section 393(2). Two things change immediately:

The rate is not 1%. It is based on capital gains tax rates and lands between 13% and 15% for a long-term sale.
There is no ₹50 lakh threshold. None. A ₹25 lakh property bought from an NRI attracts TDS. The same property bought from a resident attracts nothing.

Why buyers misclassify the seller

An Indian PAN, Aadhaar and Indian address prove nothing about residential status. Status depends on days of physical presence in India in the relevant year — not on documents. Someone who lived in India for twenty years and moved to Dubai last year is an NRI for this transaction.

The portal will not catch it either. You enter two PANs, pay 1%, and the system accepts it. Nothing bounces. The error surfaces when the Department reconciles — often a year later, by which time the seller’s money has left the country.

What to do: get a copy of the seller’s passport including immigration stamp pages, and put a written declaration of residential status into the sale agreement.

What you actually deduct

For property held more than 24 months, gains are long-term. The base rate is 12.5% without indexation. Surcharge is added based on the sale consideration, then 4% health and education cess on top.

Sale consideration	Base	Surcharge	Cess	Effective TDS
Up to ₹50 lakh	12.5%	Nil	4%	13.00%
₹50 lakh – ₹1 crore	12.5%	10%	4%	14.30%
₹1 crore – ₹2 crore	12.5%	15%	4%	14.95%
Above ₹2 crore	12.5%	15% (capped)	4%	14.95%

Surcharge on capital gains is capped at 15% however large the transaction, so 14.95% is the ceiling for a long-term sale.

If the property was held 24 months or less, the gain is short-term and taxed at slab rates. Deductors generally apply 30%, giving effective rates of roughly 31.20% up to ₹50 lakh, 34.32% to ₹1 crore, 35.88% to ₹2 crore, and around 39% above that. Short-term sales above ₹2 crore are genuinely contested territory — take advice.

The part that shocks people: TDS is on the whole sale price

You do not deduct on the seller’s profit. You deduct on the entire sale consideration.

Take a ₹2 crore flat the NRI bought for ₹1.6 crore:

Actual gain: ₹40 lakh. Real tax due at 14.95%: about ₹5.98 lakh
TDS you must deduct at 14.95% of ₹2 crore: ₹29.90 lakh
Over-deduction: roughly ₹23.9 lakh, locked up until the seller files a return and claims a refund

This is why NRI sellers push back hard, and why buyers get talked into deducting less. Understand the asymmetry clearly: the entire economic burden falls on the seller, but the entire legal risk falls on you. Do not trade one for the other.

The legitimate fix is the lower deduction certificate covered below — not an informal agreement.

What most guides on this get wrong

Before going further, one correction — because if you have already read two or three articles on this topic, you have probably absorbed a mistake.

Several widely-read tax portals still describe long-term capital gains for NRI property sellers as “20% with indexation, or 12.5% without — choose whichever is lower.” That choice does exist. It does not exist for NRIs.

The July 2024 amendment that created the two-option regime restricted it to resident individuals and HUFs. A non-resident seller pays a flat 12.5% on long-term gains with no indexation benefit at all, regardless of when the property was purchased. There is no pre-23-July-2024 versus post-23-July-2024 split to apply.

Why it matters to you as the buyer: if you build your deduction on a rate you copied from an article written for resident sellers, your deduction is wrong, and the shortfall is recovered from you — not from the seller.

You need a TAN — and this rule changes on 1 October 2026

Here is the second place buyers get caught.

When you buy from a resident seller, you deposit TDS using a simple challan-cum-statement quoting only your PAN. No registration, no separate number.

When you buy from an NRI, you are treated as a deductor in the full sense. Under the current rules you must obtain a TAN (Tax Deduction and Collection Account Number) before you deposit a single rupee. If you are buying jointly with your spouse, and both names go on the sale deed, each of you needs your own TAN.

Applying takes a few days, costs a nominal fee, and is done through the Income Tax Department e-filing portal or a TIN facilitation centre. It is not difficult. It is simply a step almost nobody knows exists until the money is already paid.

Change coming 1 October 2026. The TAN requirement for property purchases from non-residents is being withdrawn, and the application forms are being renumbered. If you are reading this after that date, verify the current position before applying — this section describes the rule as it stands today, and today it still applies.

The forms, and the dates you cannot miss

Under the Income-tax Act 2025 the form numbers changed on 1 April 2026. If you are working from an older guide, or an older accountant’s checklist, the numbers will not match. Here is the current set.

What you are doing	Form (current)	Old number	When
Depositing the TDS	Challan	—	By the 7th of the month after deduction (for March: by 30 April)
Quarterly TDS return for non-resident payments	Form 144	27Q	Quarterly
TDS certificate you give the seller	Form 131	16A	Within 15 days of filing the return
Seller’s lower-deduction application	Form 128	13	Before the sale — allow 6–8 weeks
Remittance declaration (buyer)	Form 145	15CA	Before remitting abroad
CA certificate for remittance	Form 146	15CB	With Form 145

The deposit deadline is the one that bites. Deduct in June, and the money must reach the government by 7 July. Not when the registry completes, not when the loan disburses — by the 7th.

What it costs you if you get it wrong

This is not a paperwork infraction. The consequences sit on the buyer, and they compound.

Interest at 1% per month for every month you failed to deduct, from the date the deduction was due.
Interest at 1.5% per month if you deducted but did not deposit — a higher rate, because the money was already the government’s.
Penalty equal to 100% of the tax you failed to deduct. Read that again. On a ₹2 crore sale where you deducted nothing, the exposure is the ₹29.90 lakh you should have deducted, plus a penalty of the same amount, plus interest.
Disallowance of the payment in your books, if the property is a business asset — relevant to the lease structures covered in our guide to commercial property in Noida.
Prosecution under the failure-to-deposit provisions — three months to seven years, where TDS was deducted and knowingly not paid over.

The department does not need to chase the seller first. You are the deductor; the demand is raised on you, and you are left to recover from a seller who has already taken the money out of the country.

There is one relief worth knowing: if the seller has genuinely filed a return, declared the transaction and paid the tax, you can be relieved of the tax itself on producing an accountant’s certificate to that effect. The interest still runs. And it depends entirely on the co-operation of someone who is now abroad and has no reason to help you.

The legitimate way to reduce the deduction: Form 128

Almost every NRI seller will, at some point, ask you to deduct less. The honest answer is: there is a proper route, it works, and it is the seller’s job to use it.

The seller applies to the Assessing Officer in Form 128 for a certificate authorising deduction at a lower rate — computed on their actual gain rather than the gross sale price. In the ₹2 crore example, a certificate could bring the deduction from ₹29.90 lakh down to something close to the real ₹5.98 lakh liability. That is a genuine ₹24 lakh difference in the seller’s working capital, and it is entirely legal.

Three things you must hold firm on:

The seller applies, not you. It is their gain being certified. Your role is to insist the certificate exists before you release funds.
Allow six to eight weeks. This is the single most common reason NRI transactions slip. If the seller raises it a week before registry, it is too late — plan it into the timeline the day the deal is agreed.
No certificate in hand means full rate. No exceptions. Not “the application is filed.” Not “it is expected next week.” Not a written indemnity from the seller. Until you are physically holding the certificate, you deduct the full amount, because a promise from the seller is worth nothing against a demand raised on you.

Where the seller genuinely has no gain — or a loss — the certificate can authorise a nil deduction. That is the correct mechanism, and it is a reasonable thing for a seller to pursue.

Buying in Noida or Greater Noida: what is specific to you

Everything above is national law. A few things are local, and they change the arithmetic on the ground. Read this alongside our assessment of the Noida market in 2026 — a soft resale market is exactly when NRI sellers become most willing to negotiate on price, and least patient about a deduction that locks up their money for a year.

Stamp duty is separate — and is not TDS

Buyers routinely confuse the two because both are paid around registry. In Uttar Pradesh you pay stamp duty of 7% where the buyer is male, 6% where the buyer is female, and 6.5% for joint male-and-female ownership, plus a 1% registration charge, collected by the UP Stamps and Registration Department. That goes to the state. TDS goes to the Income Tax Department. Registering in a woman’s name saves 1% of the deed value; it has no effect whatsoever on your TDS obligation.

Circle rates moved this year

Greater Noida revised circle rates by an average of 3.58% on 3 May 2026. Circle rate matters because stamp duty is charged on the higher of the deed value and the circle rate.

Whether the TDS base under the non-resident provision also grosses up to circle rate is genuinely unsettled. For resident sellers, the law explicitly says to use the higher figure. The non-resident provision is worded differently. Practitioners take both views. If your deed value is below circle rate, this is a specific question to put to a chartered accountant before you deduct — not something to resolve by picking whichever reading is cheaper.

If you are still deciding which corridor to buy in, our comparison of Noida Expressway versus Noida Extension and our Yamuna Expressway outlook to 2030 cover the price and delivery differences, and the YEIDA Master Plan 2041 sets out what the authority has actually committed to build around Jewar.

Authority transfer charges

For allotments still held on lease from the Noida, Greater Noida or YEIDA authority, the transfer memorandum and the authority’s own transfer charges sit alongside all of this and are entirely separate. Where the NRI seller is not physically present, this is usually the step that exposes a defective power of attorney — worth checking early, because it delays registry more often than the tax does.

The mistakes that actually happen

From transactions we have seen go wrong, in rough order of frequency:

Deducting 1% because the seller has an Indian PAN and an Indian bank account. Residential status is about days spent in India, not documents held in India.
Never asking the question at all. Ask directly, in writing, before the agreement: “Are you a resident of India for income-tax purposes in this financial year?” Keep the answer.
Deducting on the gain instead of the sale price. The seller supplies a purchase cost, the buyer computes a gain, and deducts on that. The base is the full sale consideration unless a certificate says otherwise.
Deducting on instalments but forgetting the last one. Every payment carries the obligation, including the final tranche at registry.
Skipping the TAN and depositing through the resident challan route. The money reaches the department but is credited wrongly, and unwinding it takes months.
Missing the 7th. The deposit deadline is not the registry date.
Accepting an indemnity in the agreement instead of deducting. A clause saying the seller will bear any tax demand does not transfer the statutory liability. It gives you a civil claim against someone in another jurisdiction. That is not protection.
Not giving the seller Form 131. They cannot claim credit without it, which is how disputes start after the deal has closed.

Where a chartered accountant is not optional

We advise on property, not on tax, and the line matters. Engage a CA — before you sign, not after — if any of these apply:

The seller is an NRI, in any transaction, at any value. The cost of the advice is a rounding error against a 100% penalty.
Your deed value sits below circle rate.
There are multiple sellers, or a mix of resident and non-resident co-owners — the deduction is split by each seller’s share and residential status.
The seller claims exemption by reinvesting in another property or in bonds.
The seller’s country of residence has a treaty position they intend to rely on.
The property is inherited, or held through a power of attorney.

Bring the CA in when the deal is agreed. The lower-deduction certificate takes six to eight weeks, and that clock only starts once someone begins the work.

What good looks like

A clean NRI purchase, in order:

Establish the seller’s residential status in writing, before the agreement.
If non-resident, apply for your TAN immediately.
Ask the seller, on day one, whether they are applying for a Form 128 certificate — and get a date.
Build the six-to-eight week certificate timeline into the payment schedule.
Deduct the correct rate on every payment, at full rate unless the certificate is in hand.
Deposit by the 7th of the following month.
File Form 144 quarterly, issue Form 131 within 15 days.
Keep the whole file for at least eight years.

None of this is difficult once you know it exists. All of it is expensive to discover afterwards.

TDS on Buying Property From an NRI Seller: Complete 2026 Guide