If you’re an NRI selling property in India, you might be surprised to learn that the buyer, not you, plays a major role in ensuring the tax deduction at source (TDS) is done correctly. Many deals get delayed or stuck because buyers are unaware of their legal obligations—especially around TAN (Tax Deduction Account Number) and TDS deductions. In this blog, we’ll break it down in the simplest way possible so both sellers and buyers stay compliant and avoid penalties.
Table of Contents
- Why TDS Deduction is the Buyer’s Responsibility
- What is TAN and Why the Buyer Needs It
- TDS Rate for NRI Property Sales
- How the Buyer Should Deduct and Pay TDS
- Consequences of Buyer Non-Compliance
- How Sellers Can Ensure Buyers Do This Right
- Pro Tips for a Smooth Transaction
- Frequently Asked Questions
1. Why TDS Deduction is the Buyer’s Responsibility
Under Indian tax law, the buyer must deduct TDS from the property sale payment before transferring the money to an NRI seller. This ensures the government collects tax upfront and prevents evasion.
Example: If your property is selling for ₹1 crore, the buyer must deduct TDS at the prescribed rate before paying you.
2. What is TAN and Why the Buyer Needs It
A TAN (Tax Deduction Account Number) is a 10-digit number issued by the Income Tax Department. Without it, the buyer cannot deposit TDS with the government. It’s mandatory for all property purchases involving NRI sellers.
3. TDS Rate for NRI Property Sales
As per the latest Finance Budget (post July 2024), the TDS rate is 12.5% + cess + surcharge on the sale consideration or capital gains amount (if a lower deduction certificate via Form 13 is obtained).
4. How the Buyer Should Deduct and Pay TDS
- Step 1: Apply for TAN on the TRACES portal or NSDL website.
- Step 2: Deduct TDS at the correct rate when making payment to the seller.
- Step 3: Deposit TDS with the government within 30 days of deduction using Form 27Q.
- Step 4: Issue Form 16A (TDS certificate) to the seller as proof.
5. Consequences of Buyer Non-Compliance
If the buyer fails to deduct or deposit TDS:
- Heavy penalties and interest may apply.
- The buyer may be treated as an assessee-in-default and liable for the tax.
6. How Sellers Can Ensure Buyers Do This Right
- Include TDS compliance clauses in the sale agreement.
- Assist the buyer in getting TAN and understanding timelines.
- Hire a CA to oversee the process.
7. Pro Tips for a Smooth Transaction
- Start the TAN application early—it can take a week or more.
- Consider applying for a lower deduction certificate via Form 13 to reduce TDS.
- Keep all TDS-related proofs for future ITR filing and refunds.
8. Frequently Asked Questions
Q. Can the seller apply for TAN instead of the buyer?
No, TAN is always the buyer’s responsibility.
Q. What if the buyer forgets to deduct TDS?
The buyer may face penalties, and the seller could face delays in ITR filing and refunds.
Q. Is TDS the same for all properties?
The rate depends on whether the capital gain is short-term or long-term, but the base rate for NRIs is 12.5% + cess + surcharge.
✅ Final Tip: Sellers should never assume the buyer knows these rules. Educating the buyer and guiding them through TAN and TDS compliance can save you months of trouble later.
