Buying a Flat From an NRI: TDS Checklist for Buyers From October 1

Buying a home from an NRI now comes with extra checks, according to reporting by Moneycontrol.com. A fresh set of dos and don'ts applies from October 1.

For you as a buyer, the main risk is tax. Suppose you pay the full price to the seller. If you skip the tax steps, the tax office can come after you. Read the checklist below before you sign anything.

Key takeaways

• Reporting says new dos and don'ts for NRI property deals apply from October 1.
• Buyers usually must cut tax before paying a non-resident seller.
• The tax is often charged on the full sale price, not just the profit.
• A lower-deduction certificate from the tax office can cut that bill.
• Plan your home loan payout around the tax deposit.

How buying from an NRI works

When the seller lives in India, you pay the full price to them. With an NRI seller, the rules differ. You must hold back some tax from the payment. You then deposit it with the government on the seller's behalf.

This is called TDS, or tax deducted at source. It means the tax is taken before the money reaches the seller. You also need a TAN, which is a tax deduction number. It's different from your PAN.

The rate depends on how long the seller owned the home. Long-term gains are taxed at 12.5% under current law, plus surcharge and cess. Short-term gains are taxed at higher rates. We don't have the new October 1 details from the headline, so check the latest notice.

What it costs you: a worked example

Say you buy a flat for ₹80 lakh. The NRI bought it years ago for ₹50 lakh. The profit is ₹30 lakh.

If the seller has no lower-deduction certificate, tax is cut on the full ₹80 lakh. If they have one, tax is cut only on the actual gain. Here's how that looks at a 12.5% long-term rate, before surcharge and cess.

Situation	Amount taxed	Tax you hold back
No certificate	₹80 lakh	₹10 lakh
Certificate on gain	₹30 lakh	₹3.75 lakh
Difference	₹50 lakh	₹6.25 lakh

That gap is why sellers chase the certificate. It leaves more cash for them. It also leaves you with less to worry about.

Who is affected

Anyone buying a flat, plot or house from an NRI is affected. That includes first-time buyers and people using a home loan.

NRI sellers feel it too. Their sale money arrives later if tax is held back. Sending money abroad also has limits under foreign exchange rules. Their bank or a chartered accountant can explain these.

If you use a loan, your lender will check the title and the seller's papers. It may not fix your tax duty for you. That part stays with you. You can test your EMI on our home loan EMI guides and the EMI calculator.

What to do now

Don't rush on registration day. Do these steps in order.

1. Confirm the seller's status. Ask for their passport and residency proof.
2. Ask if they hold a lower-deduction certificate. If yes, get a copy.
3. Get your TAN before you make any payment.
4. Keep the tax amount aside from the money paid to the seller.
5. Deposit the tax on time and collect the proof.
6. Give the seller the tax certificate after you pay.

And a few don'ts. Don't pay the full price in cash. Don't skip the agreement paperwork. Don't trust verbal promises about tax. Check your loan limit first on our eligibility check.

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Frequently asked questions

Do I have to deduct tax if I buy from an NRI?

Usually yes. You must deduct tax before paying a non-resident seller. The amount depends on the gain and any certificate the seller holds.

Can the tax be lower than 12.5% of the price?

Yes, if the seller gets a lower-deduction certificate. Then tax is cut on the actual gain only. That can mean a much smaller amount.

What happens if I skip the tax step?

The tax office can ask you to pay the missing tax. You may also face interest and penalties. It's safer to follow the steps and keep proof.