TDS Timeline When Buying an NRI Flat in Instalments

The Instalment Payment Moment: "Wait, Do I Deduct TDS Right Now?"

A Bengaluru-based software manager finally finds the resale flat he wants — three-bedroom, close to his office, priced right. The catch: the seller is an NRI based in Singapore, and the deal is structured the way most resale and under-construction purchases are, in tranches — a booking amount now, an agreement-value instalment in sixty days, and the balance at registration. He's paid token amounts before on resident-to-resident deals and vaguely remembers "1% TDS," so he assumes the same applies here. It doesn't, and the gap between what he assumes and what the law actually requires is exactly where buyers get into trouble.

When you buy from an NRI seller, the tax withholding obligation shifts from the familiar Section 194-IA (1% TDS on transactions above ₹50 lakh, for resident sellers) to Section 195, a fundamentally different regime — higher rates, applied to the full consideration rather than just the gain, with a separate deduction event triggered by each instalment payment, not one lump sum at the end. Get the timing wrong on any one instalment and you're personally liable for the shortfall, plus interest, as the buyer — regardless of what the seller told you or how cooperative they were. This guide lays out exactly when to deduct, when to deposit, which forms to file, and how instalment structures change the picture. It is informational guidance only; confirm your specific transaction with a chartered accountant before the first payment goes out.

Why Section 195, Not 194-IA, Governs This Purchase

The rule that trips up most first-time buyers-from-NRIs is simple to state but easy to forget under deal pressure: the seller's residency status, not the buyer's, determines which TDS section applies. If the seller is an NRI, Section 195 applies regardless of whether the buyer is resident or another NRI, and regardless of transaction size — there's no ₹50 lakh threshold exemption the way there is under Section 194-IA for resident-seller deals.

The practical differences are stark. Under Section 194-IA, a resident buyer deducts a flat 1% on the sale value above ₹50 lakh, files a simple Form 26QB, and is largely done. Under Section 195, the buyer must:

• Deduct TDS on the entire sale consideration, not just the capital gain portion (the buyer generally has no visibility into the seller's actual gain or cost basis unless the seller furnishes a Section 197 lower-TDS certificate — more on that below).
• Apply a materially higher rate — per ClearTax's 2026 guide on TDS on sale of property by NRIs, the effective long-term capital gains rate for an NRI seller works out to roughly 14.95% (12.5% base without indexation, plus applicable surcharge and cess), though the exact figure depends on the seller's holding period and specific circumstances — confirm with a CA before finalising the withholding rate.
• Obtain a TAN (Tax Deduction and Collection Account Number), since NRI-seller TDS is filed via Form 27Q, not the simpler Form 26QB used for resident sellers who don't require the buyer to hold a TAN.
• Treat each instalment as its own deduction event — deduct on the date of payment or credit to the seller's account, whichever is earlier, for every single tranche.

Step-by-Step: Deduct, Deposit, File, Certify

1. Deduct TDS at the time of each payment or credit, whichever is earlier — this applies independently to the booking amount, every milestone instalment, and the final registration-day balance. There is no single "TDS moment"; there are as many TDS moments as there are payments.
2. Deposit the deducted TDS with the government by the 7th of the month following the month of deduction (for most months; the deadline for March deductions is slightly different — confirm the exact date each year, as due dates can shift).
3. File Form 27Q quarterly — this is the TDS return format used specifically for payments to non-residents, distinct from the Form 26QB used in resident-seller transactions.
4. Issue a TDS certificate (Form 16A) to the seller after each quarterly filing, so the NRI seller has documentary proof of tax withheld to use in their own Indian tax return and in claiming Foreign Tax Credit relief in their country of residence.
5. Reconcile at the end of the transaction — once the final instalment and registration are complete, ensure all TDS deducted across every tranche has been deposited and reported, and that the cumulative TDS certificates match the total consideration paid.

Instalment Schedule vs Deduction Date vs Deposit Due Date vs Form

TAN, TRC Delays, and the Effective Rate: What Buyers Need to Know

A resident buyer purchasing from another resident under Section 194-IA never needs a TAN — the whole point of Form 26QB was to simplify small transactions without requiring buyers to register for tax deduction infrastructure. Section 195 removes that convenience: you need a TAN before you can legally deduct and deposit TDS on payments to an NRI seller, and applying for one takes time, so start the process the moment you know the seller is an NRI — ideally before the booking amount is even due, not after.

The effective TDS rate is also not something a buyer can casually estimate. The ClearTax guide notes the roughly 14.95% figure applies to standard long-term capital gains for an NRI seller, but the seller may hold a Section 197 lower-TDS certificate (see below) that legally requires you to withhold at a reduced, CA-verified rate instead — and if you deduct at the wrong rate (too little), the shortfall plus interest becomes your liability as the buyer, not the seller's.

A frequent real-world friction point: the NRI seller, based abroad, may take time to share their PAN, Tax Residency Certificate (TRC), or Section 197 certificate due to time-zone lag, courier delays, or simply not prioritising paperwork urgently from thousands of kilometres away. This delay does not excuse the buyer from deducting TDS on the payment date. If the seller's PAN or lower-TDS certificate isn't in hand by the time an instalment is due, deduct at the higher standard rate to stay compliant, and reconcile with the seller once documentation arrives — don't skip or delay the deduction itself waiting on paperwork.

Real-World Mini Scenario: A Bengaluru Buyer, Three Tranches

Rahul agrees to buy a resale flat from an NRI seller in Dubai for ₹1.2 crore, structured as: ₹12 lakh booking amount now, ₹60 lakh on agreement execution in 45 days, and the ₹48 lakh balance at registration in 90 days. Before the booking payment, Rahul applies for and receives a TAN — a process he starts the week he verbally agrees to the deal, anticipating the requirement.

On the booking amount, Rahul deducts TDS at the standard effective rate (since the seller hasn't yet furnished a Section 197 certificate) and deposits it by the 7th of the following month. Forty-five days later, the agreement-execution instalment is due; by now the seller has sent a Section 197 lower-TDS certificate reflecting their actual computed gain, so Rahul deducts at the CA-verified reduced rate specified in that certificate for this and the remaining instalment. At registration, the final balance triggers a third, separate deduction. Across the quarter, Rahul's CA files a single Form 27Q covering all three deductions, and Form 16A certificates are issued to the seller for each. Because Rahul modelled the TDS holdback for each tranche in advance using a simple cash-flow plan, none of the three payments caught him short on funds at the bank.

Lower-TDS Certificate: How the Seller Can Reduce Your Withholding

Section 197 of the Income Tax Act allows an NRI seller to apply to the Indian tax department for a certificate authorising a lower rate of TDS deduction, based on their actual computed capital gain (accounting for cost of acquisition, improvements, and indexation where applicable) rather than the standard flat-rate assumption applied to the full consideration. This benefits both parties: the seller avoids over-withholding and waiting for a refund, and the buyer deducts a smaller, more accurate amount.

As the buyer, you are not responsible for obtaining this certificate — it's the seller's application — but you are responsible for honouring it correctly once furnished, applying exactly the rate and conditions stated on the certificate, valid typically for a specified period and sometimes for a capped transaction amount. If the certificate arrives partway through an instalment schedule (as in Rahul's case above), earlier instalments deducted at the standard rate stand; only instalments paid after the certificate's effective date use the reduced rate. Confirm the certificate's validity dates and any conditions with your CA before applying it to a payment.

Pro Tips

1. Apply for your TAN the moment you know the seller is an NRI — before the first token payment, not after, since you cannot legally deduct without one.
2. Build a simple instalment-by-instalment TDS ledger before the first payment — list each expected tranche, its due date, the applicable rate, and the deposit deadline, so nothing is deducted or deposited late under deal-closing pressure.
3. Don't wait on the seller's paperwork to deduct on time — if PAN, TRC, or a Section 197 certificate hasn't arrived, deduct at the standard rate on the due date and reconcile later; late deduction is a compliance failure regardless of the reason.
4. Model the true cash outflow per instalment, including the TDS holdback, so your booking and milestone budgets reflect what you'll actually pay out, not just the seller's stated instalment amount.
5. File Form 27Q every quarter without gaps, even if only one instalment fell in that quarter — quarterly filing discipline avoids a compliance backlog by the time registration happens.

Common Mistakes to Avoid

• Assuming the 1% Section 194-IA rate applies because the transaction otherwise "looks like" a normal resale purchase — seller residency, not deal size or type, decides the applicable section.
• Deducting only at registration on the full consideration instead of at each instalment — this misses the deduction-timing requirement on every earlier tranche and generates interest liability retroactively.
• Delaying TDS deduction because the seller hasn't shared PAN or a lower-TDS certificate yet — the deduction obligation runs on the payment date regardless.
• Forgetting to apply for a TAN early, discovering the requirement only when the first payment is already due.
• Applying a Section 197 certificate's reduced rate retroactively to instalments already paid before the certificate's effective date, without checking the certificate's actual validity terms.

Integration With Other DrawMagic Features

DrawMagic is an information and planning platform — it does not deduct, deposit, or file TDS on your behalf, and it is not a substitute for a CA managing your Form 27Q filings. What it does well is help you plan the cash-flow side of a multi-instalment purchase so the TDS obligation never becomes a surprise. Use the financial planning suite to model the true outflow of each instalment, including the TDS you must withhold and deposit, so your booking-to-registration budget reflects reality rather than the seller's headline instalment schedule. The property tax calculator is a useful zero-login sanity check on ongoing property costs once you own the flat, separate from the one-off transaction TDS. For an overview of the buyer-side journey and to keep your documents organised for the CA who will actually file your Form 27Q, start from the buyer intelligence hub, and use DrawMagic's help centre for workflow guidance on structuring your document folder for a smooth CA handoff.

Value Note: Plan the Cash Flow, Not Just the Compliance

Buyers who get this wrong usually aren't confused about the law once it's explained — they're caught short on cash because they didn't budget for the TDS holdback on each instalment ahead of time, or they discovered the TAN requirement only when a payment was already due. Planning each instalment's net-of-TDS cash flow in advance, using DrawMagic's financial planning tools alongside a CA's guidance on the applicable rate, is what turns this from a compliance risk into a routine, predictable part of the purchase.

Key Takeaways

• Section 195, not Section 194-IA, governs purchases from NRI sellers — triggered by seller residency, with no ₹50 lakh threshold exemption.
• TDS is deducted on the full sale consideration, not just the gain, unless the seller furnishes a Section 197 lower-TDS certificate specifying a reduced, CA-verified rate.
• Each instalment — booking, milestone payments, and the final registration balance — is a separate TDS deduction event, deducted on the date of payment or credit, whichever is earlier.
• Deposit TDS by the 7th of the month following each deduction, and file Form 27Q quarterly (not Form 26QB, which is only for resident-seller transactions).
• Buyers must obtain a TAN before deducting TDS on NRI-seller payments — start this early, ideally before the first token payment.
• The effective LTCG rate for an NRI seller is roughly 14.95% per ClearTax's 2026 guide, though the exact rate depends on individual circumstances — always confirm with a CA.
• Seller delays in sharing PAN, TRC, or a Section 197 certificate do not excuse late deduction — deduct at the standard rate on the due date if documentation isn't yet available.
• Model each instalment's net cash outflow, including the TDS holdback, before committing to a payment schedule.
• This is informational guidance only — consult a licensed chartered accountant before finalising your specific transaction's TDS treatment.

FAQ

Do I need to deduct TDS on the booking amount, or only at registration? On the booking amount too — TDS under Section 195 is triggered on each payment or credit, whichever is earlier, so the very first token payment already carries a deduction obligation.

What if the NRI seller hasn't sent their PAN or lower-TDS certificate before my next instalment is due? Deduct at the standard effective rate on the scheduled due date rather than delaying — reconcile with the seller once their documentation arrives, since late deduction itself is a compliance failure regardless of the reason.

Can I use Form 26QB instead of Form 27Q since this still feels like a routine resale flat purchase? No — Form 26QB applies only to transactions where the seller is a resident. Any NRI-seller transaction, regardless of size or structure, requires Form 27Q and a TAN.

Before your next instalment is due, model your true post-TDS cash outflow with DrawMagic's financial planning workspace, and explore the buyer intelligence hub to keep your purchase documentation organised for your CA.