Buying a Bangalore Home From an NRI: What TDS You Must Deduct

Few resale deals carry as much hidden tax risk as one where the owner lives abroad. Whoever signs off the payment ends up collecting the tax, and a mistake is recovered from that same person afterwards. The sections below set out how the deduction works in October 2026, what it costs and how a Bangalore buyer can handle it cleanly.

Start With the Seller's Tax Status

For TDS purposes a seller falls into one of two classes, and the class depends on days spent in India during the year. Citizenship, an Indian PAN or a house in Jayanagar do not decide it. A person who works in Singapore but visits family for a few weeks may still be an NRI in the year of sale.

Ask for a signed declaration of status before talking about price. Everything else, from the rate to the forms, follows from that one answer.

How the Rules Differ for Resident and NRI Sellers

If the owner lives in India, the buyer deducts 1% only when the price or the registered valuation reaches Rs. 50 Lakhs. That deduction is small and the process routine.

An NRI owner is on a different track. The buyer applies whichever capital gains rate suits that owner, with surcharge and cess added, and no minimum deal value exists. Even a modest plot purchase falls inside the rule.

Which Law Applies Now

A fresh statute, the Income-tax Act of 2025, replaced the older 1961 law from 1 April 2026. Under the earlier law, Section 194-IA covered payments to residents and Section 195 covered non-resident payments. Both now fall under Section 393. Form numbers changed too.

Sale agreements and many advisers still use the earlier section numbers, and people understand both. The procedure in force on the date of payment is what counts.

Holding Period Sets the Rate

A property owned by the NRI beyond 24 months produces a long-term gain, and a shorter holding produces a short-term one. The figures are these:

• Long-term holding: 12.5%, plus a surcharge of 10% or 15% scaled to the gain, plus cess at 4%
• Short-term holding: 30%, with whatever surcharge and cess apply
• Threshold: none, so every NRI sale is covered
• Base: the entire sale price, unless the seller shows a certificate for a smaller deduction

Here is a worked case. A flat held for years sells for Rs. 1.2 Crore, so the combined long-term rate of about 14.95% means close to Rs. 17.94 Lakhs is withheld. A resident seller on the same deal would face only Rs. 1.2 Lakhs. Mixing up the two categories is therefore a costly mistake.

The Lower Deduction Certificate

Because the deduction is taken on the full price, it can far exceed the tax the NRI truly owes on the profit. The remedy is a certificate, applied for online with the tax department, that sets a lower rate or limits the deduction to the real gain. The application asks for the purchase cost, the agreed price and the profit expected.

The certificate names the buyer and the rate allowed, and it must be in hand before payment. When the seller produces one, deduct exactly what it says and keep a copy with the sale papers. In its absence, deduct on the entire price.

TAN, Returns and Due Dates

Until 30 September 2026, a buyer paying an NRI needed a TAN and had to file quarterly returns. From 1 October 2026, an individual or HUF who is resident can deposit and report with a PAN alone, through Form 141. A company, firm or LLP keeps the TAN requirement.

Keep these items in mind:

• Deposit and statement: due thirty days after the month of deduction closes
• Proof for the seller: Form 132, available once the statement has been processed
• Details to supply: both PANs, addresses, valuation, consideration and the share held by each party
• For an NRI: the address abroad and, where the seller holds one, a tax residency certificate

What Happens If the Buyer Gets It Wrong

The deduction duty is the buyer's, so any gap falls on the buyer. The department may call the buyer a defaulter, charge interest running from the day of payment and add a penalty on top. It makes no difference that the seller received the full price.

Chasing a seller who has already wired the money overseas is slow and seldom works. Fix the TDS figure in writing before any money moves, including the booking advance.

Joint Owners and Loan-Funded Purchases

When owners are mixed, treat each one separately. A resident co-owner's share attracts 1% and an NRI co-owner's share attracts the capital gains rate, with separate reporting for each.

A home loan does not shift the duty. As the bank releases money on the buyer's behalf, the TDS must be held back from each release and deposited on time. The balance usually goes to the NRI's NRO account, and the seller's bank handles any remittance abroad.

A Practical Order of Work

Tax belongs in the price negotiation, not at the end of it. A sensible sequence looks like this:

1. Obtain a written declaration on the seller's residential status.
2. Find out whether a lower deduction certificate has been applied for or issued.
3. Have an accountant work out the deduction using actual numbers.
4. Record the TDS amount and who files what inside the sale agreement.
5. Deduct from every payment, loan disbursements included.
6. Deposit the tax, file the statement on schedule and issue the certificate.
7. Keep the challan, the filed statement, Form 132 and the status declaration in one folder with the sale deed.

All of it runs beside the title check, the EC and the khata transfer. Followed properly, it settles the tax once and avoids a notice years after registration.