Finance Minister Nirmala Sitharaman has announced significant changes regarding the sale of property by Non-Resident Indians (NRIs) in India. These updates, stemming from recent budget announcements, aim to simplify the tax process and lower the burden on sellers. The government has decided to reduce the Tax Deducted at Source (TDS) rates for long-term assets and has also simplified the paperwork required for buyers residing in India.
आपके लिए जरूरी खबर: New Income Tax Act to apply from April 1 2026, Revised ITR filing date extended to March 31।
New TDS Rates Reduced to 12.5 Percent
For NRIs selling a property that they have held for more than two years, the TDS rules have been updated. The tax rate on Long Term Capital Gains (LTCG) has been reduced from the earlier 20 percent (with indexation) to 12.5 percent (without indexation). This change is intended to make the tax structure cleaner and reduce the amount deducted at the time of the deal.
After adding the necessary surcharge and cess, the effective TDS rate now stands at approximately 13 percent for property deals up to Rs 50 lakh. For deals exceeding Rs 1 crore, the effective rate is around 14.95 percent. However, if an NRI sells a property within two years of purchase, the TDS rate remains at the standard slab rate, which is usually 30 percent plus surcharge.
Buyer No Longer Needs TAN Number
In a move to make things easier for common people, the Finance Minister announced that resident buyers purchasing property from NRIs will no longer need a Tax Deduction Account Number (TAN). Previously, obtaining a TAN was a mandatory and often tedious step for buyers to deduct tax.
Under the simplified process proposed in the 2026-27 budget announcements, buyers will be able to deduct and deposit TDS using just their PAN card. This new rule is expected to be effective from April 1, 2026, removing a significant compliance hurdle for Indian residents buying homes from NRIs.
Key Rules for Payment and Accounts
The tax deduction on property sales by NRIs falls under Section 195 of the Income Tax Act. A crucial point for sellers to remember is that TDS is calculated on the total sale amount, not just the profit. To avoid excess deduction, an NRI seller can apply for a ‘Lower TDS Certificate’ using Form 13, which allows tax to be cut only on the actual gain.
Additionally, the money received from the sale must be deposited into the seller’s Non-Resident Ordinary (NRO) account. The government has also proposed relief for small taxpayers regarding foreign asset disclosure, stating that no penalty or prosecution will apply for failing to disclose foreign assets up to Rs 20 lakh.
