Budget 2026: Buying property from an NRI? TDS rules will now get simpler

Finance Minister Nirmala Sitharaman on February 1 proposed a key change to simplify tax compliance for property transactions involving non-resident sellers.

 

In her Budget proposals, the finance minister said that Tax Deducted at Source (TDS) on the sale of immovable property by non-residents will now be deducted and deposited by resident buyers using their PAN-based challan, removing the requirement to obtain a Tax Deduction and Collection Account Number (TAN).

 

The move is aimed at easing compliance for resident buyers, who earlier had to apply for a TAN solely to deposit TDS when purchasing property from non-resident Indians (NRIs). This additional step often caused delays and confusion, particularly for one-time property transactions.

 

 

Under the proposed system, resident buyers will be able to deduct and deposit TDS directly using their Permanent Account Number (PAN), similar to the process followed for property purchases from resident sellers. This change is expected to streamline procedures and reduce the administrative burden on taxpayers. 

"By allowing TDS on NRI property sales to be deposited using the buyer’s PAN instead of forcing a one-time TAN registration, the Finance Minister has removed a purely procedural irritant that caused delays and technical defaults without adding any real compliance value. It simplifies life for genuine one-off homebuyers while leaving tax collection intact, which is exactly how tax administration should work," Raheel Patel, Partner, Gandhi Law Associates told Business Standard. 

"Budget 2026 delivers a long-overdue compliance fix for property transactions involving non-resident sellers by removing the mandatory Tax Deduction Account Number (TAN) requirement for resident buyers. 

 

Until now, buyers in one-off NRI deals were forced to obtain a TAN solely to deposit TDS, leading to procedural delays, avoidable errors, and litigation exposure. Allowing TDS deduction and payment through a PAN-based challan brings parity with transactions involving resident sellers and significantly simplifies compliance," said Alay Razvi, Managing Partner, Accord Juris.

 

The reform streamlines the operation of Sections 194-IA and 195 of the Income Tax Act without altering substantive tax rates, while eliminating ancillary burdens such as e-TDS filings and issuance of Form 16A. 

 

"From a market perspective, this improves transaction efficiency, reduces holding costs, and eases cash-flow pressures for non-resident sellers. More importantly, it reflects a shift toward practical tax administration, one that prioritizes ease of compliance over procedural rigidity, while retaining the integrity of the withholding framework," said Razvi.  "By removing the requirement to obtain a separate TAN for what is often a one-time transaction, the government has addressed a long-standing pain point that caused delays, confusion and procedural burden. The move aligns the treatment of non-resident and resident property transactions, improves ease of compliance, and should significantly reduce administrative friction for taxpayers without diluting tax oversight," said Rajarshi Dasgupta, Executive Director - Tax, AQUILAW.