TDS on Purchase of Property from NRI: Rules & Rates

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As an NRI, if you are planning to purchase or sell a property in India, it is important to be aware about the taxation rules and TDS obligations regarding such transactions. In this guide, we breakdown what TDS on property purchase from NRI means and how it applies.

Applicability of TDS on Purchase of Property from NRI

A specific amount of TDS is applied to transactions in which an NRI sells real estate to an Indian resident which is deducted by the buyer as per The Income Tax Act's regulations.

No Minimum Threshold

TDS applies to all property sales by NRIs, regardless of the sale price. There are no exemptions or minimum thresholds for TDS. Properties such as agricultural land, and commercial and residential real estate fall under this mandate. 

Applicability Under Section 195 (Difference from Resident Seller Transactions)

TDS requirement for purchase of property from NRIs comes under Section 195 which states that TDS is applicable on the capital gain from your sale, and not just the property value. If you, as an NRI, sell a property for INR 40 lakh, the buyer will deduct TDS from the total purchase amount which will be based on short- or long-term capital gains rate.

TDS Rates on Property Transactions with NRIs

There are different rules for TDS on purchase of property from NRI, which are usually based on the holding period of the property and the sell value of the property. The different types of TDS rates on property transactions with NRIs are:

LTCG & STCG TDS Rates under Section 195

When it comes to TDS on purchase of immovable property (other than agricultural land) from an NRI, the tax rate is based on whether the gains are short-term or long-term under section 195 of the Income Tax Act:

Type of Capital Gain	Holding Period	TDS Rate (Deducted by Buyer)
Short-Term Capital Gain (STCG)	Less than 24 months	30%
Long – Term Capital Gain (LTCG)	24 months or more	20%

 Example:

Assume that an NRI purchased a property in the year 2018 for INR 60 lakhs and sold it in 2025 for INR 1.2 crore. As the holding period is more than 24 months, this is considered LTCG. The purchaser will withhold 20% TDS on the amount of indexed gain and remit it to the NRI seller.

TDS on Property Purchase Above INR 50 Lakhs

During a purchase of property from NRI, if the transaction value exceeds INR 50 lakh, the TDS is applied as per Section 195 of the Income Tax Act, 1961. The tax implications are different than that from when the property is sold by resident seller:

• No Threshold Relaxation: Even if the property value is exact INR 50 lakh or slightly above, TDS must be deducted on the entire sale amount.
• Applicable rate: The TDS rate on purchase of property from NRI under Section 195 varies based on whether the gain is short-term or long-term.
• Buyer’s role: The buyer is responsible for deducting the tax at source and depositing it with the government before releasing the payment to the seller.

Buyer's Responsibilities Before Deducting TDS

As an NRI. when you sell property in India, the buyer is legally responsible for deducting TDS under Section 195. Here are a few steps to ensure compliance for TDS on purchase of property by NRI:

Need for TAN Before TDS Deduction

• The buyer needs to have a Tax Deduction and Collection Account Number (TAN) prior to TDS being withheld.
• TAN helps ensure that tax deducted from your sale of property is properly reported to the Income Tax Department.
• Without a valid TAN, the buyer will be unable to comply with TDS on property purchase by NRI norms, and there can be penalties.

Buyer's Checklist for TDS Compliance

Buyers have to ensure compliance with TDS on purchase of immovable property from NRI. The key steps include:

1. Determine the nature of gain – Check if it is short-term or long-term based on the holding period.
2. Calculate the applicable TDS – The tax rate is based on the holding period, including surcharge and cess.
3. Buyer has to deposit TDS – Submit form 26QB to the Income Tax Department or other prescribed methods.
4. Issue Form 16A (TDS Certificate) – This serves a formal confirmation to the NRI seller for filing income tax returns in India.
5. Maintain comprehensive records – Retain proof of TDS deduction and payment for regulatory compliance and future reference.

Important Considerations in TDS on Purchase of Property from NRI

In any purchase of property from NRI, the TDS obligations rest with the buyer, to ensure that the transactions are compliant with the regulations keep these factors in consideration:

• TDS is deducted on the entire transaction value, not just on the capital gain.
• A TAN is mandatory to deposit TDS under Section 195.
• The TDS must be deposited with the Income Tax Department within seven days from the end of the month in which the deduction is made.
• Form27Q is used for payment of TDS, and Form 16A must be issued to the seller as proof of deduction.
• In cases where the seller’s PAN is operative, TDS may be applied at 20% or more.

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TDS Deduction Process and Compliance

When deducting TDS on purchase of property by NRI transaction, it is essential for the buyer to follow proper filing, certification, and documentation procedures to ensure regulatory compliance.

How to File Form 27Q and Generate Form 16A

1. Make deposits of TDS using Form 27Q through the TIN website.
2. Issue Form 16A (general TDS certificate) through the TRACES portal.
3. Certificates will be needed for the NRI seller's income tax return and capital gains report.

How to Obtain Form 16B (TDS Certificate)

After depositing the TDS, the buyer must file Form 27Q online through the TIN-NSDL or TRACES portal. Once filed, the buyer can download Form 16A and also obtain Form 16B, the specific TDS certificate for property transactions. These must be provided to the seller within 15 days of the due date of Form 27Q.

Documents Required for TDS Deduction

• Property sale deed
• Proof of address and PAN of the NRI seller
• Payment proof of TDS
• Form 26QB acknowledgment (if required)

Timeline for TDS Payment

• You have 30 days to pay TDS following the last day of the month in which the deduction is made.
• Early payment does not incur interest or penalty under Section 201(1A).

>> Also Read: How to Invest in Stock Market

Repatriation Rules After TDS Deduction

After the buyer deducts TDS on purchase of immovable property from NRI, the seller may wish to transfer the proceeds abroad. Repatriation of funds is subject to regulatory compliance under the Foreign Exchange Management Act (FEMA) and income tax laws. Proper submission of required forms ensures the remittance is legally valid and avoids delays or penalties.

Filing Form 15CA and 15CB for Sale Proceeds Transfer

Form 15CA:

Declaration form filed online with the Income Tax Department stating the amount payable to a non-resident. This ensures that taxes have been duly accounted for prior to remittance.

Form 15CB:

This form, signed by a Chartered Accountant, confirms that the TDS has been deducted under the provisions of the Income Tax Act and that the remittance is in accordance with tax laws.

These forms are collectively required for making remittance of sale proceeds overseas and are filed through the authorized dealer bank prior to initiating the remittance.

How to Reduce TDS on Property Purchase from NRI

By applying for a certificate for a lower or zero TDS deduction on Form 13, you, as an NRI, can lower the TDS on your real estate transaction.

The application will be submitted to Income Tax department to get the TDS certificate. Once approved, you can reduce TDS liability on the sale of property. You can provide this certificate to the buyer so that TDS is deducted as per the approved rate.

Tax Implications for Buyers and NRIs in Property Transactions

Being aware of implications for the TDS on purchase of immovable property from NRI is important for both buyers and sellers to ensure that transactions are compliant with regulatory requirements of Income Tax and avoid penalties:

For Buyers

• Buyers must deduct TDS at the applicable rate under Section 195 when purchasing property from an NRI.
• Timely deposit of TDS and maintaining proper records ensures compliance and avoids penalties.

For NRIs

• NRIs are liable for capital gains tax based on the holding period of the property.
• They may apply for a lower or nil TDS certificate through Form 13 and must adhere to FEMA repatriation guidelines when remitting funds overseas.

NRIs managing proceeds from property sales can also explore the DBS Treasures Premium Savings Account. It provides flexible banking solutions, easy fund access, and a range of privileges designed to support international financial needs.

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Also Read: TDS on Sale of Property by NRI in India

Conclusion

Compliance with TDS on purchase of property by NRI is essential for smooth transactions between NRIs and Indian residents. Proper deduction, payment, and documentation help avoid penalties and ensure regulatory adherence. For efficient management of funds, NRIs can benefit from the DBS Treasures NRI Savings Account, offering flexible banking, easy repatriation of funds, and a range of privileges to support global financial needs.