Selling a property in India while living abroad can involve more than finding a buyer and signing the sale agreement. NRIs need to check tax deductions, documents, payment procedures and rules for transferring the sale money outside India.
In 2026, some important changes have been introduced in the way property transactions involving NRIs are handled. One of the biggest changes is related to TDS and TAN requirements for buyers purchasing property from an NRI.
If you are an NRI planning to sell a flat, house, plot or other eligible property in India, understanding these changes can help you avoid delays and unexpected tax deductions.
What Has Changed for NRI Property Sales in 2026?
The biggest procedural change is connected with the buyer’s TDS compliance.
From 1 April 2026, the new Income-tax Act, 2025 came into effect. Several provisions were renumbered, including the provisions dealing with TDS on payments to non-residents. The earlier Section 195 framework is now covered under Section 393(2) of the new Act.
Another important change starts from 1 October 2026.
From this date, a resident individual or HUF buying immovable property from an NRI can deduct and report the applicable TDS using a PAN-based process without obtaining a separate TAN. Until 30 September 2026, the TAN-based process continues to apply to such transactions.
This change mainly makes the buyer’s compliance process easier. It does not mean that TDS itself has been removed.
TDS Still Applies When an NRI Sells Property
A common misunderstanding is that the new 2026 changes have removed TDS on NRI property sales. That is not correct.
When a resident buyer purchases property from an NRI, the buyer generally has to deduct tax from the payment made to the non-resident seller. The NRI seller is covered by the non-resident TDS provisions rather than the simple 1% property TDS rule that applies to certain resident-seller transactions.
This is important because using the wrong TDS procedure can create tax and compliance problems for the buyer.
The amount deducted may also be higher than the seller’s final tax liability. If the actual tax liability is lower, the seller may need to claim the excess amount through the income-tax return or explore the applicable lower-deduction procedure before the transaction.
No ₹50 Lakh Relief for NRI Sellers
The ₹50 lakh threshold often creates confusion.
The familiar 1% TDS rule for certain property purchases from resident sellers should not simply be applied when the seller is an NRI. Transactions involving a non-resident seller follow the non-resident payment provisions.
Therefore, both the buyer and NRI seller should establish the seller’s residential status before finalising the payment structure.
This is especially important when the seller has an Indian PAN, Aadhaar or an Indian address. These documents alone do not decide whether a person is resident or non-resident for income-tax purposes.
What About Capital Gains Tax?
TDS and capital gains tax are two different things.
TDS is collected by the buyer during the payment process. Capital gains tax is calculated based on the seller’s taxable gain from the property transaction.
The final tax liability can depend on factors such as:
- Purchase price of the property
- Date of acquisition
- Sale price
- Cost of eligible improvements
- Nature of the property
- Holding period
- Applicable tax provisions
- Any available exemption or relief
Because the TDS deducted during the sale can be based on the sale consideration rather than the final capital gain, an NRI may sometimes have more tax deducted than the final amount payable.
For this reason, it is sensible to calculate the expected capital gain before completing the sale.
Can an NRI Reduce Excess TDS?
In some cases, an NRI seller may apply for a lower or nil deduction certificate where the applicable conditions are satisfied.
This can be useful when the expected final tax liability is significantly lower than the amount that would otherwise be deducted from the sale consideration.
However, the application should be planned before the payment is completed. Waiting until after the transaction may mean that a larger amount is already withheld and the seller then has to follow the refund process.
A Chartered Accountant familiar with NRI taxation can review the property documents, acquisition cost, sale consideration and expected capital gain before the sale.
What Happens to the Sale Money?
Selling the property is only one part of the process. NRIs also need to understand what happens to the money after the sale.
The sale proceeds may be credited through the appropriate Indian banking channel, depending on the transaction and applicable FEMA rules.
Repatriation of the money outside India is subject to FEMA requirements. For eligible NRI/OCI property transactions, RBI rules provide routes for repatriation, subject to conditions such as the manner in which the property was acquired and the source of funds used for its purchase. For certain residential properties acquired with foreign exchange, repatriation is also subject to the applicable limit on the number of properties.
Properties acquired through inheritance or certain rupee-funded routes can have different rules. In some situations, the USD 1 million annual remittance facility may be relevant, subject to the prescribed conditions and documentation.
Therefore, an NRI should not assume that the entire sale amount can automatically be transferred to a foreign bank account immediately after the sale.
Documents NRIs Should Keep Ready
Before starting the sale, keep important documents organised. Depending on the property and transaction, these may include:
- Sale deed or purchase agreement
- Previous ownership documents
- PAN card
- Passport and overseas address proof
- Property tax records
- Bank details
- Purchase payment records
- Documents showing the cost of improvements
- Inheritance or succession documents, where applicable
- Power of Attorney, if someone is representing the NRI
- TDS-related documents
- Lower or nil TDS certificate, if applicable
Keeping these documents ready can make communication with the buyer, bank, tax professional and property representative much easier.
Why Professional Property Support Can Help
Managing an Indian property from another country can become difficult when the owner is not available locally.
There may be property visits, document collection, buyer coordination, maintenance, tenant communication, bank coordination and other local tasks involved in the process.
NRIs looking for broader NRI Services in India can also consider professional support for property-related requirements, especially when they cannot personally visit India for every step.
Similarly, Property management services in India can help NRIs handle local property responsibilities such as maintenance, inspections, tenant coordination and other day-to-day requirements.
The right support can be particularly useful when an NRI is selling an inherited property, dealing with an old family property or managing a property from overseas.
What NRIs Should Check Before Selling Property in 2026
Before signing the final sale agreement, an NRI should check:
- Whether they qualify as a non-resident for tax purposes.
- Whether the buyer has understood the correct TDS procedure.
- What TDS amount is expected to be deducted.
- Whether a lower or nil TDS certificate may be applicable.
- The expected capital gains tax.
- Whether all property ownership documents are complete.
- Whether a Power of Attorney is required.
- How the sale proceeds will be credited.
- Whether the proposed repatriation is allowed under FEMA rules.
- What tax documents will be needed after the sale.
These checks can help reduce last-minute problems.
Final Thoughts
The 2026 changes have simplified an important part of NRI property transactions, particularly the buyer’s TDS compliance process from 1 October 2026. However, the change should not be confused with removal of TDS or capital gains tax.
For an NRI seller, the important points remain the same: confirm residential status, understand the correct TDS treatment, calculate the expected tax liability, keep property documents ready and check the FEMA rules before moving sale proceeds abroad.
Because tax and foreign-exchange rules can depend on the individual transaction, NRIs should verify their specific case with a qualified tax professional before completing a property sale.
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