Starting October 1, 2026, resident individuals and Hindu Undivided Families purchasing property from NRIs no longer need a Tax Account Number. Buyers can now use their PAN for TDS payments via Form 141. However, the 12.5% tax deduction rate remains unchanged, and buyers must continue to strictly follow compliance procedures to avoid heavy penalties.
Effective today, the Income Tax Department has eased the compliance process for resident individuals and Hindu Undivided Families (HUFs) purchasing immovable property from Non-Resident Indians (NRIs). The mandatory requirement to obtain a Tax Deduction and Collection Account Number (TAN) for these specific transactions has been removed, simplifying the documentation involved in such deals.
Previously, property buyers had to apply for and obtain a TAN before they could process the tax deducted at source (TDS), a process that could sometimes delay property transactions by up to 10 days. Under the updated rules, buyers can now simply use their Permanent Account Number (PAN) to handle the tax payments. This administrative change is designed to make the property buying process smoother for individual taxpayers.
Under the new framework, buyers must use Form 141 to document and deposit the TDS. This form has been updated to include a specific section, 'Schedule E,' which acts as a combined payment challan and statement. Buyers are required to deposit the tax within 30 days from the end of the month in which the deduction occurred. Additionally, the buyer must issue a TDS certificate in Form 132 to the NRI seller to finalize the tax documentation.
It is crucial for buyers to understand that this change is purely administrative and does not lower the tax cost. The standard TDS rate for property acquisitions from NRIs remains at 12.5%, along with applicable surcharges and cess. The responsibility to verify the seller’s residency status and ensure the correct tax amount is deducted rests entirely on the buyer.
Failure to comply with these rules carries significant risks. The tax authorities impose a monthly interest charge of 1% on any tax shortfall, calculated from the date of the transaction. In serious cases, penalties can even equal the total amount of the tax shortfall. Therefore, verifying the seller's status and tax liability before transferring funds remains a critical step for all buyers.
This relaxation applies exclusively to resident individuals and HUFs. Other entities such as companies, Limited Liability Partnerships (LLPs), and business firms are not included in this update and must continue to follow the existing procedure of obtaining a TAN. Buyers should monitor their compliance closely, ensuring that the correct form is used and that all documentation, including the TDS certificate, is issued within the legal timeline to avoid future scrutiny.