NRI Property Purchase: Why The Seller’s Residential Status Matters

Many Non-Resident Indians (NRIs) tend to buy property in India either for investment purposes or if they want to come back to India after retirement. However, when an NRI buys property in India, the tax implications differ a lot as compared to when a resident buys a property.

When The Seller Is A Resident 

When an NRI is buying property in India, a lot hinges on who's selling it to them. If the seller is a resident Indian, things stay fairly simple. Once the deal crosses Rs 50 lakh, the buyer just needs to deduct one per cent Tax Deducted at Source (TDS) and deposit it with the tax department — no Tax Deduction and Collection Account Number (TAN) needed, no extra paperwork headaches.

When The Seller Is An NRI 

“It's a different story when the seller is an NRI or non-resident. Right now, and until 30 September 2026, the buyer has to go through the full TAN-based compliance route that applies to payments made to non-residents. That means getting a TAN, deducting tax under the non-resident withholding rules, depositing it through that TAN, filing the TDS returns, and handing the seller a proper TDS certificate,” says Priyal Goel Jain, partner and NRI tax expert, Dinesh Aarjav and Associates Chartered Accountants.

For most long-term capital assets, you're looking at a TDS rate of 12.5 per cent, plus surcharge and cess on top, which adds up fast and can take a real bite out of the transaction.

Compliance May Ease From October 2026 

The good news is that from 1 October 2026, the government plans to bring in a simpler PAN-based system for these purchases, basically bringing it in line with how resident-seller deals already work. That should take a fair bit of the compliance burden off buyers' shoulders.

FEMA Rules Are Simpler 

On the FEMA side, there's really not much to worry about. NRIs can freely buy residential or commercial property in India — no real restrictions there. “The one thing to watch out for is agricultural land, plantation property, or farmhouses, since those remain off-limits. Beyond that, it's just the usual due diligence — checking the title, ownership history, and tax paperwork — before you go ahead and close the deal,” says Jain.

FAQs

1. Does an NRI buyer need to deduct TDS when buying property from a resident seller?

Yes. If the property value exceeds Rs 50 lakh, the NRI buyer must deduct one per cent TDS. A TAN is not required in such cases.

2. What changes when the property seller is an NRI?

The buyer must obtain a TAN, deduct TDS under non-resident withholding rules, deposit it, file TDS returns, and issue Form 16A to the seller.

3. Can NRIs buy any type of property in India?

NRIs can buy residential and commercial property, but cannot purchase agricultural land, plantation property, or farmhouses under FEMA rules.