The NRI Desk · Guides
TDS on Indian Property: What NRI Buyers and Sellers Must Get Right
TDS — Tax Deducted at Source — is the tax a property BUYER must withhold from the payment and deposit with the government. It is the single most-missed compliance step in NRI transactions, and the mistake lands on the buyer. Which regime applies depends entirely on the seller's tax residency, so that is the first thing to establish — before the token cheque, not after.
By Gaurav Jain · Founder, Truth Estate · General information, not legal or tax advice
Buying from a resident seller: the 1% rule
When you buy property worth ₹50 lakh or more from a tax-resident seller, you deduct 1% of the consideration under Section 194-IA and deposit it against the seller's PAN. It is simple, form-driven, and most banks and lawyers handle it routinely.
Buying from an NRI seller: Section 195, and a much bigger number
When the seller is an NRI, Section 194-IA does not apply. TDS falls under Section 195 — deducted on the capital gain at rates far higher than 1%, plus surcharge and cess, and the mechanics are heavier: the buyer needs a TAN (tax deduction account number) to deposit it.
This is the step that is routinely missed in resale deals, and the liability for under-deduction sits with the buyer. Establish the seller's residency in writing up front; if the seller claims resident status, get the basis documented.
An NRI seller can apply for a lower or nil deduction certificate from the tax department, which fixes the TDS to the actual gain rather than a headline rate — worth doing early, because the certificate takes time.
If you are the NRI in the transaction
As an NRI buyer, the TDS duty is yours when you purchase — the same 1% or Section 195 logic applies based on your seller's residency, and it must be deposited from the transaction, through banking channels.
As an NRI seller, expect Section 195 deduction on your sale, plan the lower-deduction certificate in advance, and route proceeds through your NRO account — that is also where the repatriation paperwork (Forms 15CA/15CB) begins.
Where Truth Estate fits
In every transaction we assist, we identify the seller's residency up front and get the TDS mechanics right on both sides, alongside vetted cross-border CAs. On the project side, our reports flag the legal and registration state of the asset itself — because clean tax compliance on a compromised title is still a bad purchase.
Frequently asked
What is the TDS when buying property from a resident seller?
1% of the consideration under Section 194-IA, for purchases of ₹50 lakh or more, deposited against the seller's PAN.
What is the TDS when the seller is an NRI?
Section 195 applies instead: TDS is deducted on the capital gain at substantially higher rates plus surcharge and cess, and the buyer needs a TAN to deposit it. The exact figure depends on the gain and holding period — this is where a cross-border CA earns their fee.
Who is liable if TDS on an NRI seller is missed?
The buyer. Under-deduction creates a liability on the buyer's side — which is why the seller's tax residency must be established in writing before any payment.
Can TDS on an NRI sale be reduced?
Yes — the NRI seller can apply for a lower or nil deduction certificate (Section 197) so tax is withheld against the actual computed gain rather than a headline rate. Apply early; it takes time.
Does TDS apply on under-construction purchases from a developer?
Purchases from a resident developer of ₹50 lakh or more attract the same 1% deduction on payments. Your bank or lender typically operationalises it instalment by instalment.
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General information current as of 2026, summarised in good faith from public rules that change. Nothing here is legal, tax or investment advice; confirm your specific situation with a qualified cross-border chartered accountant before acting. Truth Estate assists with exactly that as part of its NRI Desk.