Does the Buyer Need a TAN to Deduct NRI Seller TDS?

"I'm buying from an NRI and my CA just told me I need a TAN — is that real?" is a question that surfaces almost every week from resident buyers who assumed every Indian property purchase works the same way: deduct 1%, file Form 26QB, done. It doesn't work that way when the seller is an NRI, and finding this out late — after you've already agreed a payment schedule — can put you in a genuinely uncomfortable position with the tax department holding you, the buyer, personally liable for getting it wrong.

If you're mid-negotiation on a flat, plot, or independent house owned by an NRI, here is the compliance path you need to walk before you release a single rupee of the sale consideration.

Why Section 195 Is a Different World From Form 26QB

When you buy from a resident Indian seller, Section 194-IA applies: a flat 1% TDS on the sale value (for properties above ₹50 lakh), deposited and reported through the simple online Form 26QB, no TAN required. Most resident-to-resident deals never require the buyer to touch a TAN at all.

Buying from an NRI seller falls under an entirely different provision: Section 195. According to ClearTax's guide to TDS on sale of property by NRIs (2026), Section 195 requires the buyer to deduct TDS on the full sale consideration — not the seller's gain — at a rate that works out to an effective ~14.95% for long-term capital gains (12.5% base rate without indexation, or 20% with indexation, plus surcharge and cess), unless the NRI seller has obtained a Section 197 lower- or nil-deduction certificate. Critically, this compliance path requires the buyer to hold a TAN (Tax Deduction and Collection Account Number) — a different registration entirely from Form 26QB's TAN-free process — and to file the deduction via the quarterly Form 27Q, not Form 26QB.

This is a meaningful shift in liability. Under Form 26QB, the process is largely a guided online form. Under Section 195, you are stepping into the same TDS-compliance regime that employers and businesses use for salary and vendor payments — TAN registration, quarterly filing, and issuing a TDS certificate (Form 16A) to the seller.

Step-by-Step: TAN, Deduction, Deposit, Filing

1. Apply for a TAN via Form 49B through NSDL/Protean before you finalize the payment schedule with the seller — this cannot be skipped or substituted with your PAN.
2. Determine the correct deduction rate. Absent a Section 197 certificate, deduct on the full consideration at the effective LTCG rate (~14.95%, per ClearTax's 2026 figures) plus applicable surcharge/cess tiers — confirm the exact current-year rate with a CA, since surcharge slabs depend on the total consideration value.
3. Deduct at the time of each payment, not just once at final registration — if you're paying in tranches, TDS applies to each tranche.
4. Deposit the TDS with the government within the prescribed timeline for the relevant quarter.
5. File Form 27Q, the quarterly TDS return for payments to non-residents, reporting the deduction against the seller's PAN.
6. Issue Form 16A to the NRI seller as their TDS certificate, which they will need for their own ITR filing — see our companion piece on when an NRI must file an ITR for property income for how they use it.

Before you commit to a payment schedule, it's worth modeling exactly how much of the sale consideration you'll need to hold back for TDS — DrawMagic's financial planning workspace lets you work through that cash-flow math against your actual deal size, and the property tax calculator is a useful sanity-check on the numbers before you finalize anything with the seller.

Resident-Seller vs NRI-Seller TDS: Side by Side

Geographic and Practical Compliance Specifics

• TAN is obtained via Form 49B through NSDL/Protean, the same infrastructure used for PAN applications, but it is a distinct registration and number.
• The deduction base is the full sale consideration, which is why buyers are often surprised at how much larger the TDS hold-back is compared to a resident-seller deal — you are not deducting on the gain, you are deducting on the price.
• Penalty exposure for buyers who get this wrong is real and personal. Failing to deduct, deducting at the wrong rate, or using Form 26QB instead of the correct TAN-based process under Section 195 can expose the buyer to interest and penalty consequences under Sections 201 and 234E — commonly discussed in practice as running to roughly ₹1 lakh per day of default in filing-related penalties, though the exact exposure depends on the specific default and should be confirmed with a CA rather than assumed.
• The effective ~14.95% LTCG rate cited by ClearTax (2026) reflects the 12.5% base rate without indexation plus surcharge and cess — confirm the exact applicable surcharge tier for your transaction size, since it can shift the effective rate.

Mini Scenario: Buying a ₹1.2 Crore Flat From an NRI Seller in Bengaluru

A resident buyer in Bengaluru agreed to purchase a flat from an NRI seller based in the UK for ₹1.2 crore. Early in due diligence, the buyer's advocate flagged that this was a Section 195 transaction, not a standard 194-IA deal. The buyer applied for a TAN via Form 49B before signing the agreement — a step that took a couple of weeks, which the buyer built into the closing timeline rather than discovering at the last minute. At registration, absent any Section 197 certificate from the seller, the buyer deducted TDS on the full ₹1.2 crore consideration at the effective LTCG rate, deposited it, and filed the deduction through Form 27Q in the relevant quarter, issuing Form 16A to the seller. Because the buyer planned the hold-back into the payment schedule from the outset — rather than negotiating a full payment and then discovering the TDS obligation — there was no last-minute cash crunch or dispute with the seller over how much would actually be disbursed at closing.

Section 197: How the Seller Can Reduce Your Deduction Burden

If the NRI seller's actual capital gain is meaningfully lower than what a full-consideration deduction would produce — for instance, if they have a high cost basis, plan to reinvest under Section 54, or have other exemptions available — they can apply to the tax department for a Section 197 lower- or nil-deduction certificate. If the seller obtains this certificate and provides it to you before the transaction, you deduct TDS only at the certified rate rather than the default effective rate on full consideration. This is squarely in the seller's interest to pursue, but as the buyer, you should ask about it early: it directly affects your hold-back calculation and payment schedule, and deducting at the wrong rate because you didn't check for a valid certificate is your compliance risk, not the seller's.

Pro Tips

1. Apply for your TAN the moment you know the seller is an NRI — don't wait until the agreement is signed, since registration processing takes time you may not have at closing.
2. Hold back the estimated TDS amount from the final payment tranche, not the first one, so you're not deducting before you've confirmed the exact rate and any Section 197 certificate status.
3. Ask the seller directly and early whether they hold or are pursuing a Section 197 certificate — it changes your entire deduction calculation.
4. Keep every TDS challan and the Form 27Q acknowledgment as your compliance record; you may need to produce these if questioned later.
5. Confirm the exact effective rate and surcharge tier with a CA before finalizing the payment schedule — don't rely on a rounded figure from a general guide for your specific transaction value.

Common Mistakes to Avoid

• Using Form 26QB out of habit, as if this were a resident-seller transaction — it is the wrong form entirely for an NRI seller.
• Deducting TDS on the seller's gain instead of the full sale consideration, which under-deducts and leaves the buyer exposed.
• Not obtaining a TAN before the transaction, forcing a rushed registration that can delay closing.
• Ignoring a valid Section 197 certificate the seller has already obtained, leading to over-deduction and unnecessary disputes over disbursed funds.
• Treating the TDS obligation as a one-time deduction when payments are staggered across multiple tranches, each of which attracts its own deduction.

Integration With DrawMagic Features

DrawMagic is an information and planning platform — not a tax preparer, broker, or payment intermediary — but it can help you get the cash-flow planning right before you're locked into a payment schedule you can't adjust. Use the financial planning workspace to model exactly how much of the sale consideration needs to be held back for TDS given your deal size, and the property tax calculator to cross-check the numbers independently. The buyer workspace is where you can organize your transaction documents — TAN confirmation, challans, Form 27Q filings — and keep the whole NRI-purchase timeline in one place. For general questions on how this process typically works, our help center has further guidance; remember that DrawMagic informs, it does not file your TDS returns for you.

Value Note: Planning the Hold-Back Protects Your Closing Budget

The single biggest risk in an NRI-seller transaction isn't the TDS rate itself — it's discovering the hold-back requirement late, after you've already committed to a payment schedule that doesn't account for it. Buyers who confirm the TAN requirement, the deduction base, and any Section 197 certificate status before finalizing terms consistently avoid the awkward, sometimes contentious renegotiation that happens when a seller expects full proceeds and a buyer suddenly has to explain a large statutory deduction.

Key Takeaways

• Buying from an NRI seller falls under Section 195, not the resident-seller Section 194-IA — and requires the buyer to obtain a TAN.
• TDS is deducted on the full sale consideration, not the seller's gain, at an effective rate of roughly 14.95% for long-term capital gains absent a Section 197 certificate, per ClearTax's 2026 guidance.
• Filing is via the quarterly Form 27Q, not Form 26QB, and the buyer must issue Form 16A to the seller.
• Apply for the TAN via Form 49B well before finalizing the payment schedule — it cannot be skipped.
• A Section 197 lower-/nil-deduction certificate, if the seller obtains one, changes the buyer's deduction rate — ask early.
• Buyer non-compliance carries real interest and penalty exposure under Sections 201 and 234E — confirm exact exposure with a CA.
• Staggered payments each attract their own TDS deduction, not a single one-time deduction at closing.
• Planning the hold-back into your payment schedule upfront avoids disputes with the seller over disbursed funds at registration.

FAQ

Can a buyer use Form 26QB when buying from an NRI seller? No — Form 26QB is for resident-seller transactions under Section 194-IA. NRI-seller transactions fall under Section 195 and require a TAN plus Form 27Q.

Is TDS deducted on the sale price or the seller's profit? On the full sale consideration, unless the NRI seller has obtained a Section 197 lower-deduction certificate specifying a different basis.

What happens if a buyer fails to deduct TDS correctly on an NRI-seller purchase? The buyer can face interest and penalty exposure under Sections 201 and 234E — confirm the specific consequences for your situation with a licensed CA before finalizing the transaction.

Model your TDS hold-back and closing cash flow with DrawMagic's financial planning workspace, cross-check the numbers with the property tax calculator, and organize your NRI purchase from due diligence to registration inside the buyer platform.