Buying Property from an NRI? TDS Rules and Form 141 Explained

Buying a property involves more than checking the price, title documents and registration date. If the seller is a non-resident for income-tax purposes, the buyer must also get the TDS treatment right.

TDS means deducting the applicable tax from the seller’s payment and depositing it with the government.

Before paying an advance, establish the seller’s status, the applicable deduction and who will complete the payment and filing.

From 1 October 2026, eligible buyers have a simpler PAN-based route through Form 141, Schedule E. The buyer still needs to determine the correct TDS.

1. Start with the seller’s tax-residency status

Do not decide residency from an Indian passport, PAN, local address or bank account alone. Check the seller’s position under the income-tax residency rules for the relevant tax year.

This matters because resident-seller and non-resident-seller property transactions follow different TDS provisions.

If there are joint owners, examine each seller separately. One seller may be resident while another is non-resident.

2. Who can use Form 141, Schedule E?

From 1 October 2026, a resident individual or resident Hindu Undivided Family (HUF) buying immovable property from a non-resident can use Form 141, Schedule E through the buyer’s PAN login.

An eligible buyer need not obtain a TAN solely for this transaction.

The route depends on who is buying and who is selling:

• Resident individual or HUF buying from a non-resident: Examine eligibility for Form 141, Schedule E.

• Company, LLP, firm or another buyer outside Schedule E eligibility: Follow the applicable TAN-based procedure.

• Purchase from a resident seller: Examine the resident-seller provisions and Form 141, Schedule B where applicable.

A company or LLP should not assume that the PAN-based facility available to a resident individual also applies to it.

3. Do not assume that TDS is only 1%

The familiar 1% property TDS rule relates to qualifying purchases from resident sellers. It should not automatically be applied when the seller is non-resident.

The applicable non-resident withholding provisions must be examined. The deduction depends on the nature of the payment, the relevant rates, the seller’s particulars and any valid determination or certificate. Applicable surcharge and cess also need to be considered.

The resident-seller ₹50 lakh threshold is also not a general exemption for an NRI sale. A price below ₹50 lakh does not, by itself, remove the need to examine TDS under the non-resident provisions.

Do not deduct tax only on the seller’s own estimate of the gain without reviewing the legal basis or obtaining the appropriate determination where needed.

4. Can the seller obtain a lower TDS certificate?

A seller may apply for a lower or nil deduction certificate in Form 128 under section 395(1), where eligible.

The Assessing Officer examines the application and determines whether relief is justified. Approval is not automatic.

Consider this early, before the payment or deduction that the certificate is intended to cover. An application acknowledgement is not permission to deduct less.

Before using an approved certificate, check its rate, validity, covered amount and applicability to the transaction.

5. When should the buyer deduct, pay and file?

Under the relevant non-resident provision, deduction is generally required at credit or payment, whichever is earlier.

An advance or instalment can therefore trigger TDS before registration. Waiting for the sale deed to be registered may leave the deduction overdue.

For an eligible Schedule E transaction, pay the deducted tax with Form 141 within 30 days from the end of the month of deduction. The challan-cum-statement follows this deadline.

For example, if TDS is deducted on 21 October 2026, complete payment and filing by 30 November 2026.

The TAN-based route has its own deposit and reporting requirements. Do not transfer the Schedule E deadline to a transaction using that route.

Keep the challan, acknowledgement and payment records. Download the prescribed TDS certificate through TRACES and provide it to the seller.

6. Plan for joint buyers, joint sellers and instalments

Each buyer must file separately for their own share of the amount liable for TDS.

Multiple sellers can be included only where the prescribed conditions are met, including the deductee category and month of deduction. Resident and non-resident sellers cannot be combined under the same schedule.

Match the ownership shares, payment instructions and reporting details. For instalments, maintain a record of earlier payments, deductions and acknowledgements.

7. Documents to arrange before payment

Keep the following ready:

• Buyer and seller PAN and contact details.

• Information supporting the seller’s tax-residency position.

• Draft agreement or sale deed and property details.

• Sale consideration, stamp duty value and ownership shares.

• Advance and instalment payment schedule.

• Lower or nil deduction certificate, if applicable.

• Overseas address and other prescribed particulars; Tax Residency Certificate and Tax Identification Number where required.

Tell your lender about the TDS plan before disbursal. Agree who will calculate, deposit, file and track the deduction.

How ARK Advisors LLP can help

ARK Advisors LLP in Hyderabad can assist buyers and sellers with reviewing the applicable TDS position, payment and filing requirements, and eligible lower or nil deduction applications.

Share the draft agreement, seller details and payment schedule before releasing an advance. This gives time to identify missing documents and arrange the compliance steps.

Incorrect deduction or delayed compliance can expose the buyer to interest, fees or other proceedings, depending on the failure. A promise that the seller will pay tax later is not a substitute for a documented TDS plan.

Information checked as of 27 October 2026. This article provides general guidance; the treatment must be reviewed for the facts of each transaction.