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Union Budget 2026–27: What the New TDS Compliance Change Means for NRI Property Sellers

Union Budget 2026 NRI Property Sale TDS on NRI Property NRI Taxation India
Budget 2026 Tds NRI Property Seller
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The Union Budget 2026–27 has proposed an important procedural change that directly impacts Non-Resident Indians (NRIs) selling immovable property in India. While the amendment primarily simplifies compliance for resident buyers, it also has meaningful implications for NRI sellers—particularly in terms of smoother execution of property transactions and reduced procedural delays.

Background: TDS on Sale of Property by NRIs

Under the Income-tax Act, when an NRI sells immovable property in India, the resident buyer is required to deduct Tax Deducted at Source (TDS) before making payment to the seller. Unlike transactions involving resident sellers, this TDS is generally deducted at higher rates, depending on whether the gain is short-term or long-term.

Until now, even for a one-time property purchase, the resident buyer was mandatorily required to:

  • Obtain a Tax Deduction and Collection Account Number (TAN)
  • Deposit TDS using TAN
  • File quarterly TDS returns

This additional compliance often led to delays in transactions, follow-ups and practical difficulties—issues that NRIs frequently experienced during property sales.

What Has Been Proposed in Union Budget 2026-27?

While presenting the Union Budget 2026–27, Finance Minister Smt.Nirmala Sitharaman announced a proposal to remove the requirement of obtaining TAN for resident buyers deducting TDS on property purchases from non-residents.

Under the proposed framework:

  • TDS on sale of immovable property by an NRI will be deducted and deposited using the buyer’s PAN
  • The buyer will no longer be required to obtain TAN solely for this transaction
  • The reporting mechanism will align with PAN-based challans already used for transactions involving resident sellers

This change is proposed to take effect from 1 October 2026.

What Does This Mean for NRI Sellers?

Although the TDS obligation continues to rest with the resident buyer, this proposal offers several indirect yet meaningful benefits to NRI sellers:

  1. Faster and Smoother Property Transactinos : Removal of the TAN requirement eliminates a procedural step for buyers, reducing documentation delays that often hold up payments to NRI sellers.
  2. Reduced Risk of Buyer Non-Compliance Many buyers were unfamiliar with TAN registration and TDS filings, increasing the risk of delays or errors. A PAN-based process is simpler and more widely understood.
  3. Greater Certainty in TDS Deduction With a streamlined mechanism, NRIs can expect more timely TDS deduction and deposit, which is crucial for:
    • Claiming TDS credit in Indian tax returns
    • Applying for refunds, if applicable
    • Ensuring smooth repatriation of sale proceeds
  4. Improved Buyer Confidence Simplified compliance may encourage buyers to transact more confidently with NRI sellers, especially in secondary market property sales.

Important Points for NRI Sellers to Note

  • TDS rates applicable to NRIs remain unchanged under this proposal
  • The buyer’s obligation to deduct TDS continues, only the reporting mechanism changes

NRIs must continue to

  • Obtain Form 16A from the buyer
  • File Indian income-tax returns to claim credit/refund
  • Comply with FEMA and RBI repatriation norms
  • The amendment addresses procedural complexity, not the substantive tax liability.

Conclusion

The Union Budget 2026–27 proposal marks a positive step toward simplifying property transactions involving NRIs. By removing the TAN requirement for buyers, the government has indirectly eased a long-standing practical hurdle faced by NRI property sellers.

NRIs planning to sell property in India should be aware of this upcoming change and its effective date of 1 October 2026, while continuing to comply with the existing framework until the amendment is implemented.

Source : Economic Times

Disclaimer: This article has been prepared solely for general information and investor education purposes, based on the Union Budget 2026-27 announcements, the Budget Speech and publicly available sources. The content is intended to provide an overview of the proposed compliance-related changes applicable to property transactions involving non-residents and does not constitute tax advice, legal advice, investment advice, or a recommendation or solicitation of any kind.