TDS on Purchase of Immovable Property from Non-Residents FY 2026-27: TAN Mandatory Till September 30, PAN-Based System Effective From October 1, 2026.
Understand the latest FY 2026-27 rules for TDS on purchase of immovable property from Non-Residents (NRIs). Learn why TAN remains mandatory till 30 September 2026, how the new PAN-based system from 1 October 2026 will work, compliance requirements, penalties, forms, and expert advisory support from Intellex Strategic Consulting Pvt Ltd.
Introduction
The taxation framework governing the purchase of immovable property from Non-Residents (NRIs) in India continues to remain an area of significant compliance sensitivity for buyers, developers, tax professionals, and financial advisors. With the enactment of the Income Tax Act, 2025 and subsequent amendments introduced under the Finance Act, 2026, substantial confusion has emerged regarding whether buyers purchasing property from NRIs can directly use a PAN-based payment mechanism instead of obtaining a Tax Deduction and Collection Account Number (TAN).
A large number of taxpayers mistakenly believe that the newly introduced PAN-based TDS compliance mechanism has already become operational for all NRI property transactions. However, the legal and procedural position is very clear: the existing TAN-based mechanism remains fully applicable up to 30 September 2026.
The PAN-based simplified system introduced under the Finance Act, 2026 will become effective only from 1 October 2026.
Until that notified date, all deductors purchasing immovable property from non-residents must continue to comply with the existing TAN-based TDS framework to avoid penalties, interest exposure, and non-compliance proceedings.
Legal Framework Under Income Tax Act, 2025
TDS on purchase of immovable property from non-residents is governed by Section 393(2) of the Income Tax Act, 2025. The section applies where any sum is chargeable to tax in India and is payable to a non-resident transferor.
Unlike resident property transactions where simplified PAN-based mechanisms are available in specified cases, transactions involving non-residents continue to attract a more detailed withholding tax compliance structure because of:
- Cross-border taxation implications
- Capital gains determination complexities
- DTAA applicability
- Tax residency considerations
- Foreign remittance implications
- Enhanced reporting obligations
The buyer becomes responsible for deducting applicable TDS before making payment to the seller and ensuring timely deposit with the Income Tax Department.
Current Compliance Position Applicable Till 30 September 2026
TAN Remains Mandatory
Up to 30 September 2026, the buyer of immovable property from a non-resident seller must compulsorily obtain and use a TAN for TDS deduction and deposit.
This remains the legally valid mechanism despite the Finance Act, 2026 amendment.
Failure to obtain TAN may result in:
- Inability to deposit TDS correctly
- Non-filing of mandatory forms
- Interest liability
- Late filing fees
- Penalty proceedings
- Disallowance complications
- Tax notices and compliance scrutiny
Why Form 26QB Cannot Be Used Currently
One of the most common compliance errors arises from the assumption that Form 26QB can be used for NRI property purchases.
This is incorrect as of now.
Form 26QB is a PAN-based TDS payment mechanism applicable only in specified resident property transactions. It is presently not operational for property purchases from non-residents.
Accordingly:
- Buyers cannot rely on Form 26QB for NRI property transactions before 01.10.2026.
- TDS payment must continue through TAN-based procedures.
- The applicable payment section code remains 1057.
Existing Compliance Mechanism Applicable Till 30.09.2026
The following compliance requirements continue to apply for NRI property transactions completed before 1 October 2026:
1. TAN Registration
The buyer must first obtain a valid TAN before deducting TDS.
2. TDS Deduction
TDS must be deducted on the amount chargeable to tax as per applicable provisions under the Income Tax Act, 2025.
The applicable rates may vary depending upon:
- Nature of capital gains
- Residential status
- DTAA provisions
- Availability of lower deduction certificates
- Indexation benefits
- Period of holding
3. Deposit of TDS
TDS must be deposited through the Income Tax Portal using TAN credentials.
Applicable section code: 1057
4. Filing of Form 144
Form 144 compliance continues to remain mandatory wherever applicable.
5. Issuance of Form 131
TDS certificates must be issued within prescribed timelines.
6. Compliance with Form 145 / Form 146
Where relevant, additional reporting and procedural compliances involving Forms 145 or 146 must also be completed.
Finance Act, 2026 Amendment – What Has Changed?
The Finance Act, 2026 introduced a significant simplification measure by providing for a PAN-based TDS payment mechanism for certain property transactions involving non-residents.
The objective behind the amendment is to:
- Reduce procedural burden
- Eliminate mandatory TAN requirement in future
- Simplify tax payment procedures
- Improve ease of compliance
- Digitize property transaction reporting
- Reduce litigation arising from procedural defaults
However, the critical point often ignored is the notified effective date.
The amendment becomes operational only from:
1 October 2026
Therefore, no procedural relaxation is presently available before that date.
Why There Is Confusion in the Market
The confusion largely stems from premature interpretation of the Finance Act, 2026 amendments without examining the statutory effective date provisions.
Several taxpayers, intermediaries, and online commentators assumed that the amendment became immediately operational upon enactment of the Finance Act.
However, tax law implementation depends not merely on legislative passage but also on:
- Effective date notifications
- Portal readiness
- Utility activation
- Procedural rules
- Compliance infrastructure rollout
Until the PAN-based system is officially activated from 01.10.2026, the existing TAN-based mechanism legally continues.
Risks of Non-Compliance Before 01 October 2026
Buyers ignoring the current TAN-based mechanism may face substantial tax exposure including:
Interest Liability
Interest may apply for:
- Non-deduction of TDS
- Short deduction
- Late payment
Penalty Exposure
Penalties may arise for:
- Failure to obtain TAN
- Incorrect filing
- Failure to issue TDS certificates
Late Filing Fees
Delays in TDS return filing may attract statutory late fees.
Property Transaction Scrutiny
High-value property transactions involving NRIs are increasingly data-driven and monitored through integrated reporting systems.
Incorrect compliance may trigger:
- Income tax notices
- AIS/TIS mismatches
- Property transaction verification
- Capital gains scrutiny
Practical Guidance for Buyers Purchasing Property From NRIs
Before 01 October 2026
Buyers should ensure:
- TAN is obtained and active
- Correct TDS rate determination
- Proper documentation of seller residency
- DTAA analysis wherever applicable
- Timely TDS deduction
- Correct section code usage (1057)
- Filing of all applicable forms
- Timely issuance of certificates
From 01 October 2026 Onwards
The PAN-based system is expected to simplify compliance significantly.
However, taxpayers should still verify:
- Final procedural notifications
- Updated portal utilities
- Operational guidelines
- Applicable reporting requirements
Importance of Professional Advisory in NRI Property Transactions
NRI property transactions involve a combination of:
- Income tax law
- FEMA regulations
- Capital gains taxation
- TDS provisions
- DTAA interpretation
- Property documentation
- Regulatory filings
Even small procedural mistakes can lead to substantial financial exposure and prolonged litigation.
Professional advisory support becomes essential for:
- Buyers
- Sellers
- Builders
- Real estate consultants
- Chartered accountants
- Legal professionals
- NRIs investing or divesting Indian property assets
How Intellex Strategic Consulting Pvt Ltd Can Help
Intellex Strategic Consulting Pvt Ltd provides specialized advisory and end-to-end compliance support for NRI property transactions, TDS matters, FEMA advisory, income tax litigation support, and transaction structuring.
Our Services Include
- TAN registration assistance
- TDS computation and compliance
- NRI taxation advisory
- Lower deduction certificate support
- FEMA compliance advisory
- Capital gains tax planning
- Property transaction structuring
- Income tax representation
- DTAA analysis
- Real estate tax litigation support
Contact Details
- WhatsApp: +91-98200-88394
- Email: intellex@intellexconsulting.com
Our Knowledge Platforms
- IntellexConsulting.com
- IntellexCFO.com
- EconomicLawsPractice.com
- CreditMoneyFinance.com
- StartupStreets.com
- IncomeTaxDigest.com
Conclusion
The legal position for FY 2026-27 is unambiguous.
There is presently no change in the compliance mechanism applicable up to 30 September 2026 for purchase of immovable property from non-residents.
The existing TAN-based TDS framework continues to remain fully operational and mandatory.
The PAN-based simplified mechanism introduced under the Finance Act, 2026 will become effective only from 1 October 2026.
Accordingly, taxpayers purchasing property from NRIs before that date must continue to comply with all existing TAN-based procedures including TDS deduction, payment, filing obligations, and issuance of certificates to avoid defaults, penalties, and future litigation.
Businesses, investors, professionals, and individual buyers should proactively ensure full compliance and seek expert advisory support wherever required.
Stay updated with the latest developments in GST, Income Tax, FEMA, Corporate Laws, and Financial Regulations through GST, Tax & Finance Alerts by Intellex Strategic Consulting Pvt Ltd.
Intellex Strategic Consulting Pvt Ltd.
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