Budget 2026 TAN Relief for NRI Property Sales: Individual and HUF Buyers

Introduction

Finance Act, 2026 section 87 removed the requirement for resident individual and Hindu undivided family (HUF) buyers of NRI properties to obtain a Tax Deduction and Collection Account Number (TAN), with effect from 1 October 2026. This administrative change removes a major friction point and should widen the pool of buyers for your NRI property.

Tax rates, sections and forms checked on 2 November 2026 against the Income-tax Act, 2025, Finance Act, 2026 and G.S.R. 830(E). General information, not tax advice: confirm your case with a CA.

For years, the biggest hurdle for an NRI trying to sell property in India wasn't finding a buyer—it was the buyer's fear of the dreaded NRI TDS paperwork. Thankfully, Union Budget 2026 delivered a real win for the retail buyer, though companies, firms, LLPs, trusts and non-resident buyers still need a TAN.

This simple administrative change improves the liquidity of an NRI's Indian real estate portfolio.

The Old Friction Point

Previously, under Section 393(2) of the Income-tax Act, 2025 (old Section 195), a resident Indian buying property from an NRI had to deduct TDS at the prevailing capital gains rate (which currently stands at 12.5% for LTCG post-July 2024, plus surcharge and cess).

However, to legally deduct and deposit this TDS, until 1 October 2026, every buyer had to apply for a TAN. From 1 April to 30 September 2026 that meant Form 144 (old Form 27Q) and Form 131 (old Form 16A); on or before 31 March 2026, Form 27Q and Form 16A under the Income-tax Act, 1961.

For a retail buyer—who isn't a corporation and has never interacted with a TAN—this process was intimidating, tedious, and often required hiring a Chartered Accountant just to buy a house. Many buyers simply walked away from NRI-owned properties, preferring to buy from resident Indians where only a simple PAN was needed for the 1% TDS.

This left NRIs with highly illiquid assets, forcing them to sell at a discount simply to compensate the buyer for the administrative headache.

The "Frictionless Exit"

Section 87 of the Finance Act, 2026 streamlined this process by rewriting Section 397(1)(c) of the Income-tax Act, 2025 (old Section 203A). From 1 October 2026, who needs what depends on the buyer:

The buyer still deducts TDS. The change removes the TAN, not the deduction. It is also sale-only: a tenant paying rent to an NRI landlord still needs a TAN.

A deduction on or after 1 October 2026 by a resident individual or HUF should take the new route whatever the agreement date. If your buyer already used a TAN and has later instalments, they should confirm with a CA.

Expect your buyer to ask you for details too. Schedule E needs your contact number, e-mail, foreign address, PAN if available (otherwise tax residency certificate and TIN details), and whether the gain is long-term or short-term.

What does this mean for your portfolio? It means the secondary market for your Indian real estate should expand. Individual and HUF buyers who previously filtered out NRI-sellers have one less reason to do so, though the deduction itself remains far bigger than the 1% on a resident sale.

What Hasn't Changed: The 12.5% Tax Hit

While the process of deduction is easier for an individual or HUF buyer, the financial impact of the tax remains significant for the NRI. The flat 12.5% Long-Term Capital Gains tax (without indexation) is still the law of the land for properties sold on or after July 23, 2024 (why it's 12.5%). Effective TDS on a long-term gain is 13.00% to 14.95%, and an NRI seller gets neither the ₹50 lakh threshold nor the 1% rate.

Furthermore, unless the Assessing Officer issues a certificate, buyers generally deduct on the whole amount paid, not just your capital gains, because their route to anything less is an application to the Assessing Officer. Forms 145 and 146 (old Forms 15CA and 15CB) also survive the TAN relief, so ask your CA which apply to you.

To truly capitalize on this new frictionless exit, you should still apply for a Lower Deduction/Nil Deduction Certificate under Section 395 (old Section 197), using Form 128 (old Form 13), from the Assessing Officer (NRI TDS guide). You need a PAN, and the rate rests on the officer's view of your total income and estimated tax. A lower rate leaves you with more immediate capital to repatriate or reinvest.

Strategic Takeaway

The elimination of the TAN requirement removes the biggest psychological and administrative barrier for your individual and HUF buyers. If you have been holding onto an underperforming legacy apartment in India because it felt "too hard to sell," 2026 is the year to liquidate it.

For those buyers, the exit door is now much wider. Pair this simplified process with a Lower Deduction Certificate, and you can finally free up trapped capital to deploy into higher-yielding, institutional-grade corridors or repatriate it to fund your global lifestyle.

Frequently Asked Questions

Do Indian buyers still need to deduct TDS when buying from an NRI?

Yes, buyers are still legally required to deduct Tax Deducted at Source (TDS) under Section 393(2). However, from 1 October 2026, Finance Act, 2026 section 87 removed the requirement for a resident individual or HUF buyer to obtain a TAN to do so: they use PAN-based Form 141 with Schedule E, significantly easing the administrative burden. Companies, firms, LLPs, trusts and non-resident buyers still need a TAN, and so does a tenant paying rent to an NRI.

What is the new LTCG tax rate for NRIs selling property in 2026?

The Long-Term Capital Gains (LTCG) tax rate for properties sold on or after July 23, 2024, is a flat 12.5% plus applicable surcharge and cess, without the benefit of indexation.

How can NRIs lower the TDS on their property sale?

NRIs can apply for a Lower/Nil Deduction Certificate under Section 395, using Form 128, from the Assessing Officer. The rate depends on the officer's view of your total income and estimated tax, and you need a PAN. The buyer then deducts at that rate, or not at all, instead of the full rate on the whole amount paid.