NRI property purchase TDS rules ease from Oct 1: What buyers need to know | Personal Finance

From October 1, resident individuals and Hindu Undivided Families (HUFs) buying property from non-resident sellers will no longer need to obtain a separate Tax Deduction and Collection Account Number (TAN) solely for complying with the TDS requirement.

 

The Finance Ministry has introduced a PAN-based compliance mechanism through an amended Form 141. The form now includes a dedicated Schedule E for reporting TDS on purchases of immovable property from non-residents. Buyers will also have to issue the prescribed TDS certificate, Form 132, to the non-resident seller.

 

The change will reduce the procedural burden on individuals who may otherwise have had to obtain a separate TAN for what could be a one-off property transaction.

  

What changes from October 1

Under the revised system, eligible resident individuals and HUFs can use their existing PAN to report and deposit TDS through Form 141 instead of obtaining a separate TAN for the transaction.

 

The amended Form 141 includes Schedule E, which is specifically designed for property purchases from non-resident sellers. It requires details relating to the transaction, including:

 

• Details of the property and the parties involved
• Names and details of buyers and sellers
• Sale consideration and stamp duty value
• Instalment details, where applicable
• Seller’s residential status and tax residency information
• Applicable TDS rate and amount deducted
• Details of a lower or nil deduction certificate, if applicable

 

If the non-resident seller does not have a PAN, the revised mechanism also provides for specified foreign contact details, Tax Residency Certificate details and foreign Tax Identification Number.

 

“This is a welcome compliance reform for resident individuals and HUFs buying property from non-resident sellers,” said Alay Razvi, managing partner, Accord Juris.

 

According to Razvi, the new mechanism should reduce procedural delays, particularly in transactions involving multiple buyers or sellers. However, he stressed that the change does not remove the buyer’s tax obligation.

 

“Buyers must still correctly determine the seller’s residential status, deduct tax at the applicable rate, deposit it within the prescribed timeline and issue the required TDS certificate,” he said.

 

How the new TDS process will work

 

The revised mechanism has two important parts. 

First, the buyer has to report the transaction through Form 141. The TDS deducted from the payment to the non-resident seller has to be deposited with the government within the prescribed timeline.

 

Second, the buyer has to issue Form 132 to the seller. This serves as the TDS certificate for the non-resident seller after the Form 141 filing.

 

The process therefore removes the separate TAN requirement but not the need to deduct and report TDS correctly.

 

Harsh Khabar, advocate, Delhi High Court, said the earlier requirement meant that a buyer had to obtain a separate TAN before completing the applicable non-resident TDS formalities.

 

“TAN being a separate number specifically required for deducting and reporting TDS, created an additional compliance step for an individual buyer, whereas PAN is the buyer’s existing tax identification number,” Khabar said.

 

He said the amended framework allows resident individuals and HUFs to use their PAN for TDS reporting through Form 141 with Schedule E and issue Form 132 to the seller.

 

Why this matters for one-off property purchases

The earlier process could be cumbersome for an individual buying property from an NRI for a single transaction. Obtaining and managing a separate TAN added another layer of compliance.

 

Supriya Majumdar, partner at Elarra Law Offices, said individual buyers earlier had to apply for, track and manage a TAN even where it was required only for a one-off transaction.

 

She said the new system allows the buyer to complete the tax transaction using the existing PAN while retaining detailed disclosure of the buyer, seller and property.

 

According to Majumdar, the simplified process could also help with faster transaction closures by reducing the procedural burden involved in TDS compliance.

 

Kunal Savani, partner at Cyril Amarchand Mangaldas, said the earlier system could be cumbersome, particularly for cross-border transactions involving a non-resident seller.

 

The new challan-cum-statement mechanism, he said, allows relevant information such as the seller’s overseas address and tax residency details to be captured without requiring a TAN for this purpose.

 

“Overall, this is a welcome and practical step that eases cross-border property transactions while still keeping them within the tax net,” Savani said.

 

Easier TDS process does not replace property due diligence

While the tax reporting process is being simplified, buyers still need to conduct the usual checks before purchasing property from a non-resident.

 

Shashank Agarwal, founder, Legum Solis, said reducing procedural complexity should not mean reducing due diligence.

 

Buyers, he said, must continue checking title, ownership, applicable stamp duty and other regulatory requirements. He added that easier documentation should go together with safeguards against fraud and disputes.

 

The revised system therefore addresses the tax compliance process, not the wider legal and regulatory checks involved in purchasing property.

 

What buyers should remember

The change from October 1 is essentially a shift from a TAN-based process to a PAN-based reporting mechanism.

 

Anam Khan, associate, PSL Advocates & Solicitors, said the amendment reduces the procedural burden on resident individual and HUF purchasers by removing the requirement to obtain a TAN solely for complying with the TDS obligation.

 

For buyers, however, the important point is that the tax obligation itself has not been removed. They still need to establish that the seller is a non-resident, determine the applicable TDS requirement, deduct and deposit the tax within the prescribed timeline, complete Form 141 with the required details and issue Form 132 to the seller.

 

The new system should make the paperwork simpler, but mistakes in TDS deduction or reporting can still create tax and compliance issues for the buyer.