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—tds-buying-property-from-nri-section-195 [2026/07/22 17:47] (current) – created - external edit 127.0.0.1
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 +{{htmlmetatags>metatag-description=(Buying property from an NRI seller? You deduct TDS under section 195 not the 1 percent under 194-IA. Learn the rate, TAN, Form 27Q and how to avoid penalty.)&metatag-keywords=(TDS on buying property from NRI India, section 195 TDS property, Form 27Q NRI, lower TDS certificate Form 13)&metatag-robots=(index,follow)&metatag-og:title=(TDS When Buying Property From an NRI Seller in India)&metatag-og:description=(Buying property from an NRI seller? You deduct TDS under section 195 not the 1 percent under 194-IA. Learn the rate, TAN, Form 27Q and how to avoid penalty.)&metatag-og:type=(article)}}
 +====== TDS When Buying Property From an NRI Seller in India ======
 +
 +
 +
 +{{ :social:auto:tds-buying-property-from-nri-section-195.png?direct&1200 |TDS When Buying Property From an NRI Seller in India — RTI Wiki}}
 +
 +<WRAP center round info 95%>
 +**Quick Reply:** Buying property from an NRI seller? You deduct TDS under section 195 not the 1 percent under 194-IA. Learn the rate, TAN, Form 27Q and how to avoid penalty.
 +</WRAP>
 +
 +If the seller of the flat or land you are buying is a non-resident, the 1 percent TDS rule you heard about does NOT apply to you. You sit under section 195 instead, the rate jumps to roughly 12.5 to 20 percent plus surcharge and cess, and getting it wrong can leave you, the buyer, personally liable for the shortfall plus interest and penalty.
 +
 +<WRAP info>
 +When the seller is an NRI, deduct TDS under section 195 of the Income-tax Act 1961, not section 194-IA. For long-term gains the base rate is 12.5 percent plus surcharge and 4 percent cess. You must hold a TAN, deposit by the 7th, and file Form 27Q. Form 26QB does not apply.
 +</WRAP>
 +
 +===== What section 195 TDS is =====
 +
 +Section 195 of the Income-tax Act 1961 makes the buyer responsible for deducting tax at source on any sum paid to a non-resident that is chargeable to tax in India. When you buy immovable property from an NRI, the capital gain is taxable here, so you must withhold tax before paying the seller and deposit it with the government.
 +
 +===== The legal position =====
 +
 +Two TDS provisions cover property purchases, and they do not overlap. **Section 194-IA** (deposited through **Form 26QB** at a flat **1 percent** of the sale value) applies only when the **seller is a resident**. The moment the seller is a non-resident, section 194-IA is switched off and **section 195** takes over. The Income Tax Department and CBDT administer both.
 +
 +The seller's **tax** is on the **capital gain**, computed under **section 112** of the Act, but unless the seller hands you a section 197 certificate (or you obtain a section 195(2) determination), you deduct the applicable **rate on the full sale consideration**, not on a gain you estimate yourself. For property held **more than 24 months** the gain is **long-term**, taxed at **12.5 percent without indexation** (the rate in force for transfers on or after 23 July 2024 under the Finance (No.2) Act 2024). Held **24 months or less**, the gain is **short-term**, taxed at the seller's slab rate which can reach **30 percent**. On top of the base rate, **surcharge** applies (capped at **15 percent** for capital gains under section 112) plus **4 percent health and education cess**. So the highest effective long-term TDS works out to about **14.95 percent** (12.5 x 1.15 x 1.04).
 +
 +Note the relief that lets resident individuals and HUFs choose 20 percent with indexation instead of 12.5 percent (second proviso to section 112(1)(a)) is **not available to a non-resident seller**. The NRI is on 12.5 percent without indexation.
 +
 +Because deducting at the full rate on the whole sale price would over-withhold, the seller can apply to the Assessing Officer under **section 197** using **Form 13** for a **lower or nil deduction certificate**; alternatively the buyer can apply under **section 195(2)** to have the chargeable portion determined. If a certificate is issued, you deduct at the certified rate. To deduct at all you need a **TAN** under **section 203A**; a buyer using only a PAN (as Form 26QB allows) is the single most common and costly mistake here.
 +
 +===== Step by step for the buyer =====
 +
 +  - Confirm the seller's residential status in writing (passport, visa, days-in-India). If non-resident, you are in section 195, not 26QB.
 +  - Apply for a **TAN** on the Protean (NSDL) or income tax portal before the first payment. See [[https://righttoinformation.wiki/apply-tan-tds-deduction-2026|how to apply for a TAN]].
 +  - Ask the seller for a section 197 lower-deduction certificate (Form 13). If they have one, deduct at the certified rate; if not, deduct at the full section 195 rate on the gain or, to be safe, on the consideration.
 +  - Compute TDS: base rate (12.5 percent long-term or slab up to 30 percent short-term) plus applicable surcharge plus 4 percent cess.
 +  - Deduct the TDS from the payment to the seller. Do not pay them the gross amount.
 +  - Deposit the TDS by **challan (ITNS 281)** on or before the **7th of the month following deduction** (for March deductions, by 30 April).
 +  - File the quarterly **Form 27Q** TDS return by the 31st of the month after each quarter (31 July, 31 October, 31 January, 31 May).
 +  - Issue **Form 16A** to the NRI seller within 15 days of the return due date so they can claim credit.
 +
 +===== Documents required =====
 +
 +  * Seller's PAN and proof of non-resident status (passport, visa or stay record)
 +  * Your TAN (and PAN)
 +  * Sale agreement showing consideration and dates of acquisition and sale by the seller
 +  * Seller's section 197 certificate (Form 13), if obtained
 +  * Challan ITNS 281 for the TDS deposit
 +  * Form 27Q acknowledgement and Form 16A issued to the seller
 +
 +===== Common mistakes =====
 +
 +  * **Using Form 26QB / 1 percent.** Section 194-IA is for resident sellers only. With an NRI seller this under-deducts massively and the buyer pays the shortfall plus interest under section 201.
 +  * **Assuming small deals are exempt.** Section 194-IA only applies at ₹50 lakh and above, but section 195 has **no threshold**. Even a low-value purchase from an NRI attracts TDS.
 +  * **Not getting a TAN.** Section 195 deductions cannot be reported without a TAN under section 203A; PAN-only does not work here.
 +  * **Deducting on the gain without a section 197 certificate.** Unless the seller produces a Form 13 certificate, the safe default is to deduct on the full consideration; only the certificate authorises a lower base.
 +  * **Missing the 7th-of-month deposit or the quarterly Form 27Q.** Late deposit attracts interest under section 201(1A) and late filing fee under section 234E.
 +  * **Forgetting surcharge and cess.** The headline 12.5 percent is the base; surcharge (up to 15 percent) and 4 percent cess sit on top.
 +
 +<WRAP center round box>
 +Dr. Shrawan Kumar Pathak of Lucknow district agreed on 12 March 2026 to buy a flat for ₹1,20,00,000 from a seller settled in Dubai. His broker told him to file Form 26QB and deduct ₹1,20,000 at 1 percent. Because the seller was a non-resident, that was wrong: the correct route was section 195. The seller had held the flat since 2017, so the gain was long-term at 12.5 percent. The seller produced a section 197 certificate fixing TDS at ₹6,40,000. Dr. Pathak first took a TAN, deducted ₹6,40,000, deposited it by 7 April 2026 via challan ITNS 281, filed Form 27Q for the quarter, and issued Form 16A. Had he stuck with the 1 percent figure, he would have owed the ₹5,20,000 shortfall plus interest under section 201 personally.
 +</WRAP>
 +
 +===== FAQ =====
 +
 +==== Is TDS on buying property from an NRI 1 percent like a resident sale? ====
 +No. The 1 percent under section 194-IA (Form 26QB) applies only when the seller is a resident. For an NRI seller, section 195 applies at the capital-gains rate, plus surcharge and cess.
 +
 +==== What is the section 195 TDS rate on NRI property? ====
 +For long-term gains (property held over 24 months) the base rate is 12.5 percent without indexation. Short-term gains are taxed at slab rates up to 30 percent. Surcharge (up to 15 percent) and 4 percent cess apply on top.
 +
 +==== Do I, the buyer, need a TAN? ====
 +Yes. Section 195 deductions are reported using a TAN under section 203A. A PAN alone, which works for Form 26QB, is not enough for an NRI purchase.
 +
 +==== Which form do I file, 26QB or 27Q? ====
 +Form 27Q, the quarterly TDS return for payments to non-residents. Form 26QB is only for resident-seller transactions and must not be used here.
 +
 +==== Can the TDS be reduced if the actual gain is small? ====
 +Yes. The NRI seller can apply under section 197 in Form 13 for a lower or nil deduction certificate from the Assessing Officer. You then deduct at the rate stated in that certificate.
 +
 +==== When must I deposit the TDS and file the return? ====
 +Deposit by the 7th of the month after deduction (March deductions by 30 April) via challan ITNS 281, and file Form 27Q by 31 July, 31 October, 31 January or 31 May for the respective quarter.
 +
 +==== What happens if I wrongly deduct only 1 percent? ====
 +You are treated as an assessee-in-default under section 201, liable for the unpaid TDS plus interest under section 201(1A), and a late-filing fee under section 234E may apply.
 +
 +==== Is the seller entitled to indexation at 20 percent? ====
 +The option to pay 20 percent with indexation (second proviso to section 112(1)(a)) is available only to resident individuals and HUFs. A non-resident seller is taxed at 12.5 percent without indexation.
 +
 +===== Sources =====
 +
 +  * Section 195, Income-tax Act 1961 (TDS on payments to non-residents): [[https://incometaxindia.gov.in/pages/acts/income-tax-act.aspx|Income Tax Department]]
 +  * Finance (No.2) Act 2024, section 112 LTCG at 12.5 percent without indexation: [[https://cleartax.in/s/long-term-capital-gains-ltcg-tax|ClearTax LTCG guide]]
 +  * Section 195 TDS on NRI property sale, TAN, Form 27Q, Form 16A: [[https://cleartax.in/s/section-195|ClearTax section 195]]
 +  * Surcharge on capital gains capped at 15 percent under sections 111A/112/112A: [[https://blog.saginfotech.com/income-tax-section-111a-112a-112|SAG Infotech]]
 +  * NRI excluded from indexation option, 12.5 percent without indexation: [[https://cleartax.in/s/tax-implications-for-nri-willing-to-sell-property-in-india|ClearTax NRI property sale]]
 +
 +===== Related on RTI Wiki =====
 +
 +  * [[https://righttoinformation.wiki/apply-tan-tds-deduction-2026|How to apply for a TAN for TDS deduction]]
 +  * [[https://righttoinformation.wiki/nri-property-sale-proceeds-nro-repatriation-stuck-form-15ca-15cb|NRI property sale proceeds: NRO repatriation, Form 15CA/15CB]]
 +  * [[https://righttoinformation.wiki/capital-gains-account-scheme-property-sale-section-54-india|Capital Gains Account Scheme and section 54 on property sale]]
 +  * [[https://righttoinformation.wiki/ais-form-26as-mismatch-property-sale-fd-interest-salary|Fixing AIS and Form 26AS mismatch after a property sale]]
 +  * [[https://righttoinformation.wiki/home-loan-tax|Home loan tax benefits explained]]
 +  * [[https://righttoinformation.wiki/ai-to-draft-your-rti|AI RTI Drafter tool]]
 +  * [[https://righttoinformation.wiki/book|The RTI Playbook]]
 +
 +{{tag>nri property tds buying seller}}