Finance Minister Nirmala Sitharaman has brought major relief for Non-Resident Indians (NRIs) who own property in India. The government has announced a reduction in the Tax Deducted at Source (TDS) rates when an NRI sells their house or land. Along with reducing the tax burden, the process for local buyers purchasing property from NRIs has also been made much simpler in the recent budget announcements. These changes aim to make investment and property management easier for Indians living abroad.
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What are the new TDS rates on property sale?
The biggest change has come for properties held for a long time. If an NRI sells a property after keeping it for more than two years (24 months), it falls under Long Term Capital Gains (LTCG). The government has lowered the tax deduction rate significantly.
- Old Rate: Earlier, the TDS was 20% with an indexation benefit.
- New Rate: Now, the TDS rate is reduced to 12.5% without indexation benefit.
- Total Tax: After adding surcharge and cess, the effective tax is around 13% to 14.95% depending on the deal value.
- Short Term: If the property is sold within 2 years, the TDS remains high at 30% plus surcharge.
Buyers will not need TAN number anymore
In the Budget 2026-27 announcements, the Finance Minister addressed a major headache for common people buying property from NRIs. Until now, a resident buyer had to obtain a special Tax Deduction Account Number (TAN) to deduct TDS. This rule is being removed.
Buyers can now deduct and deposit the tax using just their PAN card. This simplification is expected to start from April 1, 2026, under the proposed new income tax laws. This means a common man purchasing a flat from an NRI does not need to run around for extra paperwork.
Important rules for transferring money
There are specific banking rules that must be followed during the transaction. The money received from selling the property must be deposited only into the seller’s Non-Resident Ordinary (NRO) account. Direct transfer to a foreign account is not the standard procedure.
Also, the TDS is calculated on the total sale price, not just the profit. However, if the NRI feels the tax is too high compared to their actual profit, they can apply for a ‘Lower TDS Certificate’ (Form 13) from the Income Tax Department to reduce the deduction.
