A buyer’s story, a decision tree and the compliance steps every buyer should follow before paying a non-resident seller
By CA Surekha S Ahuja
The property was finalised. The price was negotiated. The bank was ready to release the money.
Then came one question from the buyer’s accountant:
“Are we deducting TDS at 1%—or is the seller a non-resident?”
The buyer had assumed that buying a property from an NRI was no different from buying one from a resident Indian. The agreement was ready, and the payment schedule had been discussed. Nobody had yet examined the seller’s tax-residency status, the applicable deduction rate or the procedure for depositing and reporting the tax.
That oversight can turn an otherwise straightforward property purchase into a tax-compliance problem for the buyer.
From 1 October 2026, the process has become more convenient for eligible buyers. A resident individual or HUF purchasing immovable property from a non-resident can use Form 141, Schedule E, through the income-tax e-filing portal without obtaining a TAN solely for this transaction.
But the distinction is crucial: simpler filing does not mean lower TDS, automatic tax-rate certainty or freedom from the buyer’s responsibility.
Here is how to get the transaction right.
1. One-page decision tree: Which TDS route should the buyer follow?
Use this decision tree before making an advance, paying an instalment or crediting the sale consideration.
START
|
v
Is the seller a resident of India for income-tax purposes?
|
+-- YES --> Examine the resident-seller TDS provisions.
| Where applicable, use Form 141, Schedule B.
| Do not use Schedule E.
|
+-- NO --> Treat the transaction under the applicable
non-resident property-transfer provisions.
|
v
Is the buyer a resident individual or HUF?
|
+-- YES --> Consider Form 141, Schedule E
| from 1 October 2026.
| No TAN is required solely for
| this eligible transaction.
|
+-- NO --> Schedule E is not available.
Follow the applicable TAN-based
TDS and reporting procedure.
|
v
Has the correct TDS rate and amount been determined?
|
+-- NO --> Review the seller's status, nature
| of capital gain, PAN, applicable
| rate and any valid lower/nil
| deduction determination.
|
+-- YES --> Record the basis and calculation.
|
v
Is payment being made in instalments or to multiple
buyers/sellers?
|
+-- YES --> Map each payment, buyer's share,
| seller's share and reporting
| requirement before payment.
|
+-- NO --> Proceed with the documented
deduction and reporting plan.
|
v
Deduct at the applicable time; deposit and report
within the deadline for the chosen route; preserve
proof of payment and filing; issue the TDS certificate.Decision-tree caution: The route depends on the actual facts and applicable law. Do not assume that a seller’s NRI label, overseas bank account or passport alone settles tax residency. Equally, do not assume that Form 141 Schedule E determines the correct rate for you.
2. Form 141: What changed from 1 October 2026?
The Income-tax Rules were amended to introduce the revised procedure. For an eligible resident individual or HUF buying immovable property from a non-resident, Schedule E of Form 141 provides a route through the buyer’s PAN-based e-filing login without requiring a TAN solely for that transaction.
| Buyer and seller | Compliance route to examine |
|---|---|
| Resident individual/HUF buying from a non-resident | Form 141, Schedule E, if the conditions are met |
| Company, firm, LLP or other buyer not eligible for Schedule E, buying from a non-resident | Applicable TAN-based TDS procedure |
| Buyer purchasing from a resident seller | Applicable resident-seller provisions; Schedule B of Form 141 where relevant |
The new facility is a filing-route change, not a blanket change in the tax treatment of a non-resident seller’s property transfer.
3. Do not apply the resident-seller rate automatically
One of the costliest mistakes is to apply the familiar 1% TDS rate associated with certain resident-seller property transactions to a purchase from a non-resident.
A non-resident seller’s transaction must be examined under the applicable provisions for payments to non-residents. The rate and amount of deduction depend on the legal character of the payment, the seller’s circumstances, the applicable rates and any valid determination or certificate.
Before fixing the payment amount, examine:
The seller’s tax-residency status for the relevant period.
The nature of the gain and the applicable tax provisions.
The consideration and other facts relevant to the deduction.
The seller’s PAN and other prescribed particulars.
Whether a valid lower- or nil-deduction certificate or determination applies.
In the absence of an applicable determination authorising a lower deduction, the buyer should not simply deduct tax on an assumed net gain or use a resident-seller rate. The amount to be withheld must be determined under the governing provisions for the actual transaction.
Where appropriate, the seller may seek a lower or nil deduction certificate under section 395(1), and the buyer may seek a determination under section 395(2). These routes should be considered early enough to avoid delaying the payment or creating a short-deduction exposure.
Practical rule: Settle the TDS position before the payment date—not after the sale deed has been registered and the money has left the buyer’s account.
4. When must TDS be deducted?
TDS timing is not postponed merely because the sale deed is registered later or the balance payment is scheduled for another date.
The buyer should identify the applicable trigger—credit or payment, whichever is earlier under the relevant provision—and document the deduction for each payment or credit.
For an instalment-based transaction, prepare a payment schedule showing:
The amount and date of each instalment.
The portion attributable to each buyer and seller.
The TDS calculation and amount deducted.
The filing and deposit deadline for each deduction.
Do not assume that an advance paid before registration can be ignored for TDS purposes.
5. Schedule E filing and the deadline
For an eligible transaction reported through Form 141, Schedule E, the filing and payment must be completed within 30 days from the end of the month in which tax is deducted.
For example, where deduction takes place on 21 October 2026, the 30-day period from the end of that month ends on 30 November 2026.
Do not confuse this with the deadlines applicable to the separate TAN-based quarterly statement route. Where Schedule E is not available, the buyer must follow the applicable deposit and reporting requirements for that route.
Keep the challan, filed statement, acknowledgement and TDS certificate available for the buyer’s records and the seller’s tax-credit reconciliation.
6. Multiple buyers or sellers: Do not treat the transaction as one undivided payment
Joint ownership can complicate both deduction and reporting.
Where there are multiple buyers: Each deductor must file separately for their own share of the transaction, following the applicable procedure. The form also requires the prescribed particulars of the buyers and their respective shares.
Where there are multiple sellers: A single Form 141 may cover multiple deductees only when the prescribed conditions are met, including the same deductee category and the same month of deduction. A resident seller and a non-resident seller cannot simply be combined in the same form; the applicable schedules and procedures must be followed separately.
Before making payment, reconcile the sale deed, ownership shares, payment instructions and TDS reporting plan. A mismatch between the registered ownership and the amounts reported can create avoidable questions later.
7. Verify the seller’s details before filing
The buyer should obtain and verify the information required for the applicable form and rate determination. Depending on the transaction, this may include:
Seller’s name, PAN and address.
Non-resident status and prescribed overseas particulars.
Tax Residency Certificate and Tax Identification Number, where required.
Sale consideration, ownership share and payment details.
Relevant lower- or nil-deduction certificate or determination, if obtained.
Missing or invalid PAN and other prescribed particulars can trigger higher-rate consequences under the applicable provisions. Do not wait until the last day to discover that the seller’s information is incomplete.
8. What can go wrong for the buyer?
A buyer who fails to deduct tax, deducts less than required or misses the applicable deposit or reporting deadline may face consequences under the Income-tax Act, including interest, fees, penalties or other proceedings where the statutory conditions are met.
The seller’s promise to pay the tax later does not, by itself, remove the buyer’s compliance obligation.
Nor should the buyer assume that registration of the sale deed, payment through a bank or the use of an e-filing form proves that the correct tax has been deducted.
Where funds are to be remitted outside India, FEMA and banking documentation should also be examined separately. Income-tax TDS compliance and the permissibility or documentation of a remittance are related transaction issues, but one does not automatically satisfy the other.
CA S.Ahuja Perspective
The new Schedule E route removes one procedural hurdle for eligible individual and HUF buyers. It does not remove the need to determine the seller’s status, calculate the correct deduction, document each payment and meet the applicable deadline.
Before signing off on a purchase from an NRI, a buyer should be able to answer three questions:
Have we selected the correct TDS route?
Can we support the rate and amount deducted with the applicable law and documents?
Have we assigned responsibility for every deduction, deposit, filing and certificate?
If any answer is uncertain, resolve it before releasing the money.
The safest property transaction is not merely one in which the sale deed is registered. It is one in which the buyer can also defend the TDS treatment adopted.
