Tax deducted at source (TDS) is the one tax on a home purchase that the buyer, not the seller, is legally responsible for getting right. Deduct too little, deposit late or file the wrong form, and the interest, fees and notices land on you. And the difference between buying from a resident and buying from a non-resident Indian (NRI) is not a small adjustment. It is the difference between withholding 1% of the price and withholding close to 15% of it.

This guide reflects the position on 3 October 2026. The Income-tax Act, 2025 came into force on 1 April 2026 and renumbered most TDS provisions. Where we found a verified mapping between the old section and the new one, we give both. Treat this as orientation, not advice: confirm your specific transaction with a chartered accountant before you pay.

The rule in one paragraph

If the seller is resident in India and the property (other than agricultural land) is worth ₹50 lakh or more, the buyer deducts TDS at 1% of the consideration. Under the Income-tax Act, 1961 this was section 194-IA. From 1 April 2026 it sits in section 393(1), Table Sl. No. 3(i) of the Income-tax Act, 2025, with the same 1% rate and ₹50 lakh threshold, per a TDSMAN analysis of the new Act. If the seller is a non-resident, the resident-seller rule does not apply at all; the buyer instead withholds tax on the seller's capital gains at the rates that apply to a non-resident (section 195 under the old Act), with no ₹50 lakh threshold, per Business Today's August 2026 explainer.

Buying from a resident seller: how the 1% works

Three details trip up buyers more than the headline rate does.

  • What counts as consideration: TDSMAN notes that consideration includes not only the basic sale price but incidental charges such as club membership, car parking, electricity and water facility charges, maintenance fees and advances. If the builder bills them, they are usually in the TDS base.
  • Stamp duty value: TaxGuru's guide to the 2025 Act states the threshold is tested on the consideration or the stamp duty value, whichever is higher. A deal recorded below the guideline or circle rate does not escape TDS for that reason.
  • Joint buyers or sellers: since 1 October 2024, if the total value is ₹50 lakh or more, TDS applies even where each buyer's or seller's individual share is below ₹50 lakh (TDSMAN). Each buyer deducts on their own share, and each seller needs a separate filing (TaxGuru).
  • Timing: TDS is deducted at the time of credit to the seller or payment, whichever is earlier. For an under-construction home paid in instalments, that means 1% on every instalment, not one deduction at the end.
  • No TAN needed: for a resident seller, the buyer pays through a challan-cum-statement using their own PAN. Historically this was Form 26QB; TaxGuru reports it is re-designated Form 141 under the Income-tax Rules, 2026. Use whichever label the e-filing portal shows on the day you pay.
  • PAN problems: if the seller's PAN is missing or inoperative (for example, not linked to Aadhaar), the buyer must deduct at 20% instead of 1%, per Outlook Money's summary of the department's reminder. Verify the seller's PAN on the e-filing portal's Verify Your PAN service before the first payment.

Worked example 1: resident seller, ₹2.4 crore resale flat in Bengaluru

Assume you agree to buy a resale apartment for ₹2.40 crore, including ₹4 lakh for two car parks. The guideline value is ₹2.25 crore. The seller is resident and their PAN is operative.

  • TDS base: ₹2.40 crore (the higher of consideration and stamp duty value, and parking is part of consideration).
  • TDS at 1%: ₹2,40,000.
  • If you pay ₹24 lakh as an advance in October and the balance at registration in December, you deduct ₹24,000 in October and ₹2,16,000 in December, each deposited within the deadline for that month.
  • Deadline: the challan-cum-statement is due within 30 days from the end of the month in which TDS was deducted (Outlook Money). For an October deduction, that is by 30 November.
  • After deposit, download the TDS certificate (historically Form 16B) from the TRACES portal and give it to the seller, who claims credit against their own tax.
  • If the seller's PAN were inoperative, the same deal would require ₹48 lakh of TDS at 20%. That single check is worth doing twice.

Buying from an NRI seller: why the number is so much larger

When the seller is non-resident, the buyer must withhold tax on the seller's capital gains at the rate applicable to a non-resident. Business Today (28 August 2026, quoting chartered accountant Suresh Surana) summarises the rates: for long-term capital gains (property held more than two years), 12.5% plus surcharge and cess; for short-term gains, the NRI's applicable slab rates plus surcharge and cess. There is no ₹50 lakh threshold.

In practice, unless the seller produces a lower-deduction certificate, buyers and their banks generally withhold on the full sale price rather than the gain, because the buyer has no reliable way to verify the seller's cost. With the 15% surcharge tier and 4% cess, the effective long-term rate works out to about 14.95%. Sources tracking the post-Budget 2022 surcharge cap, such as SBNRI and Bajaj Finserv's NRI explainer, cite the same 14.95% effective figure for long-term gains on sales above ₹1 crore.

Worked example 2: NRI seller, ₹3 crore Gurgaon apartment

Assume an NRI based in Germany sells you a Gurgaon apartment for ₹3.00 crore. They bought it in 2018 for ₹1.80 crore, so the holding period is well over two years and the gain is long-term.

  • Without a certificate: TDS on ₹3.00 crore at about 14.95% = roughly ₹44.85 lakh withheld by you and deposited to the government.
  • The seller's real liability: their gain is ₹1.20 crore before costs. At about 14.95% that is roughly ₹17.94 lakh, and less if they reinvest under the capital gains exemptions.
  • The gap: about ₹27 lakh of the seller's money sits with the tax department until they file a return and wait for a refund.
  • With a lower-deduction certificate stating, say, ₹17.94 lakh, you withhold exactly that figure and the seller receives the rest at closing.
  • Your obligation as buyer does not change with the seller's nationality or residence country: if you under-deduct without a valid certificate, the shortfall becomes your problem.

The lower-deduction certificate: section 197 is now section 395

This is the single most useful document in an NRI sale. Under the 1961 Act, the seller applied under section 197 using Form 13. From 1 April 2026, the corresponding mechanism is section 395(1) of the Income-tax Act, 2025, applied for on Form No. 128, which is furnished electronically, per TaxAj's and CalcGuru's updated guides and the department's Form 128 listing on incometaxindia.gov.in.

The certificate is addressed to the buyer by name and states the rate or amount to be deducted. A buyer should ask to see it before agreeing the payment schedule, check that it names them and the property, and check its validity period. Sellers should apply early: processing time varies and the certificate cannot be applied retroactively to a payment already made.

What changed on 1 October 2026: no TAN for individual buyers from NRIs

Until 30 September 2026, a resident buyer purchasing from an NRI had to obtain a Tax Deduction Account Number (TAN) and file a quarterly TDS return (Form 27Q), which was the slowest and most error-prone part of the process. Budget 2026 removed that requirement. From 1 October 2026, resident individuals and Hindu Undivided Families can deposit TDS on purchases from NRIs using their PAN, through a challan-cum-statement, per Business Today. The relief is limited to individuals and HUFs; company and firm buyers still need a TAN, according to coverage on NRI Information and Verified Real Estate.

Two cautions. First, the tax rates did not change, only the procedure. Second, because the change is days old, banks, registrars and online forms may lag. Keep the challan, the acknowledgement and screenshots of the filing.

A buyer's TDS checklist

  • Establish the seller's residential status in writing before you sign. Residence for tax is not the same as citizenship or passport.
  • Verify the seller's PAN is valid and operative.
  • Agree in the sale agreement who bears what, how TDS will be shown on each payment, and that the seller will provide a lower-deduction certificate if one is being relied on.
  • Deduct on every payment, including advances and instalments, at the right rate.
  • Deposit within the deadline, using the correct form for a resident or non-resident seller.
  • Download and hand over the TDS certificate; keep copies with your title documents.
  • If you are financing the purchase, tell your lender early: disbursements are often split so that the TDS amount is paid by you, not released to the seller.

Under-construction purchases: TDS on every demand

Buyers of new-launch homes often assume TDS is a one-time event at registration. It is not. Because the obligation arises when an amount is credited or paid, whichever is earlier, each construction-linked demand you pay on a home worth ₹50 lakh or more carries its own 1% deduction and its own filing. On a ten-instalment plan, that is ten challans and ten certificates.

Two practical habits prevent most errors. First, ask the developer to show the TDS line on every demand letter, so the net amount you pay is visibly 99%. Second, keep a simple ledger of each instalment, the TDS deducted, the challan number and the certificate download date. If the developer's accounts later show a shortfall, that ledger resolves it in minutes.

Not tax or legal advice

This article explains general rules as published by the sources below on the date shown. Section numbers and form names changed with the Income-tax Act, 2025 and may be further clarified. Your liability depends on facts we cannot see. Confirm every transaction with a qualified chartered accountant or tax lawyer before you pay.