As of October 2026, individual buyers and HUFs no longer need a Tax Deduction and Collection Account Number (TAN) when purchasing property from NRIs. However, the obligation to deduct the correct amount of Tax Deducted at Source (TDS) remains, and miscalculating this tax can lead to significant financial penalties.
Effective October 1, 2026, the tax department has introduced a change to simplify the compliance process for resident individuals and Hindu Undivided Families (HUFs) purchasing immovable property from Non-Resident Indians (NRIs). The government has removed the requirement for these specific buyers to obtain a Tax Deduction and Collection Account Number (TAN). Instead, buyers can now proceed with the transaction and fulfill their tax obligations using their Permanent Account Number (PAN).
Transition from TAN to PAN
Previously, obtaining a TAN was a mandatory administrative step for anyone, including individuals, looking to deduct tax on property purchases from non-residents. By removing this requirement, the authorities have effectively reduced the paperwork burden for homebuyers. It is important to note that this relaxation applies exclusively to resident individuals and HUFs. Companies, firms, and other business entities are excluded from this change and must continue to follow the existing TAN-based mechanism for tax deduction and reporting.
Why TDS Calculation Accuracy Matters
While the administrative process has become easier, the tax obligation remains strict. A common risk for buyers is the confusion regarding the TDS rate. Many individuals mistakenly apply the standard 1% TDS rate commonly used for resident-to-resident property transactions. However, property sales by NRIs are subject to different rules based on capital gains, which include varying surcharges and cess.
If a buyer incorrectly deducts tax at the wrong rate, they may face demands for tax shortfalls, interest, and penalties from the tax department. The responsibility to calculate the correct withholding tax lies entirely with the buyer. To mitigate this risk, buyers often verify if the seller holds a valid Lower Deduction Certificate (LDC). This certificate, issued by the income tax authorities, allows the buyer to deduct tax at a reduced, pre-approved rate, providing clarity on the exact tax amount required.
Compliance and Documentation
Once the transaction occurs, the tax must be deposited, and the necessary reporting must be completed via the designated channels, such as Schedule E of Form 141, within 30 days from the end of the month in which the tax was deducted. Failing to file these details correctly or missing the deadline can lead to compliance issues.
For investors and homebuyers, the best approach is to maintain a complete set of documentation, including the final sale agreement, payment schedules, and evidence of TDS deposits. Given that tax residency status and capital gains calculations can be complex, consulting a qualified tax professional is often necessary before releasing any funds, including token money, to ensure the buyer does not become personally liable for the seller’s tax obligations.