NRI Property TDS: How PAN Now Replaces TAN

If you are buying property from an NRI in India, the compliance process just got significantly simpler. Budget 2026-27 introduced a key change: resident buyers no longer need to obtain a Tax Deduction Account Number (TAN) to deposit TDS on NRI property transactions. Instead, they can now use their existing PAN – the same way they do for purchases from resident sellers. This guide explains what the change means, what stays the same, and what both buyers and NRI sellers need to do next.

Key Facts at a Glance

What Changed: TAN Is Out, PAN Is In

Until now, when a resident Indian bought property from an NRI, they were legally required to first obtain a TAN – a Tax Deduction and Collection Account Number – before they could deposit TDS. For most buyers, this was a one-time, unfamiliar registration process that slowed down the transaction.

Finance Minister Nirmala Sitharaman announced in Budget 2026-27 that this TAN requirement will be removed. From 1 October 2026, buyers can deposit TDS using a simple PAN-based challan – the same mechanism already used when buying property from a resident Indian.

This removes a procedural step that added no real compliance value but caused delays, technical defaults, and penalties for honest buyers who simply weren’t aware of the TAN requirement.

Old Process vs New Process

What Stays the Same: TDS Rates Are Unchanged

This reform is procedural, not substantive. The actual tax burden remains exactly the same. Here is what continues to apply:

• LTCG TDS rate: 12.5% for property held more than 24 months (introduced by Finance Act 2024)
• STCG TDS rate: Applicable income slab rates for property held 24 months or less
• Surcharge and health & education cess continue to apply on top of these rates
• TDS is calculated on the full sale consideration, not just the capital gain amount
• If the NRI seller does not provide a valid PAN, TDS jumps to 20% under Section 206AA

The buyer’s legal obligation to deduct and deposit TDS before or at the time of each payment also remains unchanged. Only the mechanism for doing so has been simplified.

What This Means for NRI Sellers

The reform is buyer-facing, but NRI sellers benefit indirectly. Here is how:

• Fewer delays: Buyers who previously hesitated due to TAN complexity will be able to complete transactions faster.
• Faster Form 26AS credit: Quicker TDS deposit means TDS reflects sooner in your tax account.
• Smoother repatriation: Once TDS is credited and the ITR is filed, fund repatriation via NRO account becomes faster.
• Reduced buyer errors: Common mistakes like wrong TAN entry or delayed TAN registration led to penalties on buyers – and complications for sellers. PAN-based deposits reduce these risks.

NRI sellers should still ensure they provide their PAN to the buyer before the transaction, apply for a Lower Deduction Certificate (LDC) under Section 197 if applicable, and file their Indian ITR to claim any refund when TDS exceeds actual tax liability.

Practical Tips for Buyers and NRI Sellers

For Resident Buyers

• Confirm the seller is a non-resident for income tax purposes before applying TDS rules.
• Obtain the NRI seller’s PAN at the start – without it, TDS must be deducted at 20%.
• Determine whether the gain is long-term or short-term based on the holding period (24 months is the threshold).
• After 1 October 2026, use the PAN-based challan and the new reporting form under IT Rules 2026.
• Do not mistakenly apply Section 194IA (1% TDS meant for resident sellers) – NRI transactions fall under Section 195(I-T Act 1961) / 393(2) (I-T Act 2025) with higher rates.

For NRI Sellers

• Apply for an Lower Deduction Certificate (Form 13) if your actual tax liability is lower than the TDS that will be deducted.
• Keep your PAN linked and active to avoid the 20% rate under Section 206AA.
• Check your Form 26AS after the transaction to confirm TDS has been correctly credited.
• File your Indian ITR to claim any refund – the excess TDS is refundable.
• Explore exemptions under Sections 54, 54EC, and 54F to reduce your capital gains tax liability.

Conclusion

The Budget 2026-27 amendment to NRI property TDS compliance is a welcome, practical reform. By replacing the TAN requirement with a simpler PAN-based deposit mechanism – effective 1 October 2026 – the government has removed a long-standing procedural hurdle that caused delays and errors without adding any meaningful compliance value.

For resident buyers, the process now mirrors what they already do for resident-to-resident property transactions. For NRI sellers, fewer buyer-side delays mean faster closings, quicker TDS credits, and smoother repatriation of sale proceeds. The tax rates and core obligations remain unchanged – this is a win for convenience, not a reduction in tax duty.

If you are planning an NRI property transaction in 2026, work with a qualified CA or tax advisor to ensure you are using the right forms, correct rates, and filing your ITR to claim any refund that may be due.

You can call or whatsapp us on +91 9769647582 for ITR filing or TDS filing queries or services.

Frequently Asked Questions

Q1. Does this change apply to all NRI property transactions?

Yes. From 1 October 2026, the PAN-based deposit mechanism will apply to all resident buyers purchasing immovable property from NRI sellers in India, regardless of the transaction value.

Q2. Do I need a TAN if I am buying NRI property before October 2026?

Yes. Until the amendment takes effect on 1 October 2026, the existing rules apply and buyers must still obtain a TAN before depositing TDS.

Q3. Has the TDS rate on NRI property sales changed?

No. The rates remain 12.5% for long-term capital gains and applicable slab rates for short-term capital gains. Surcharge and cess apply on top of these rates.

Q4. What if the NRI seller does not have a PAN?

TDS must be deducted at 20% under Section 206AA. This is why NRI sellers should always furnish their PAN to the buyer before the transaction.

Q5. Can NRI sellers reduce TDS through a Lower Deduction Certificate?

Yes. NRI sellers can apply to the Income Tax Department for a Lower Deduction Certificate under Section 197 if their actual tax liability is lower than the standard TDS rate. The simplified buyer process makes execution faster once the certificate is issued.