Published 9 May 2026
Use Permanent Account Number Instead of Tax Deduction Account Number
Buying immovable property from a non-resident Indian? The tax-deducted-at-source framework is COMPLETELY DIFFERENT from buying from a resident seller. Section 195 -- not section 194-IA -- applies. The buyer must deduct AT THE NON-RESIDENT INDIAN's TAX RATE (often 20% or higher depending on holding period). And critically, the buyer can use his / her Permanent Account Number to deposit tax-deducted-at-source -- no Tax Deduction Account Number is required for individual / Hindu Undivided Family buyers. This article unpacks the framework.
The Two Different Tax-Deducted-at-Source Regimes
Item | Resident Seller (Section 194-IA) | Non-Resident Seller (Section 195) |
|---|---|---|
Rate | 1% of consideration (above INR 50 lakh) | 20% Long-term Capital Gains / 30% Short-term Capital Gains (default rates) |
Tax Deduction Account Number requirement | Yes (buyer must obtain) | Not required for individual / Hindu Undivided Family buyer; Permanent Account Number suffices |
Form for Deposit | Form 26QB | Challan ITNS-281 |
Quarterly Statement | Form 26QB | Form 27Q |
Certificate to Seller | Form 16B | Form 16A |
Many buyers do not realise this distinction. The Assessing Officer disallows expense / triggers section 271C penalty plus section 271BB.
Computing Tax-Deducted-at-Source on Non-Resident Indian Property Sale
Non-resident Indian seller's tax position:
- Holding above 24 months: Long-term Capital Gains at 12.5% (post 23 July 2024) or 20% with indexation (pre or election under Finance Act, 2024 carve-out).
- Holding 24 months or less: Short-term Capital Gains at slab rate.
Buyer's tax-deducted-at-source computation: ON CONSIDERATION (or stamp duty value if higher per section 50C). The non-resident Indian typically applies for a section 197 LOWER-RATE certificate to avoid tax-deducted-at-source at maximum slab; the buyer should ASK for the section 197 certificate before deducting at the default rate.
Practical Steps for the Buyer
Step | Action |
|---|---|
1 | Verify non-resident Indian status: Form 26AS, residential status declaration, passport. |
2 | Request section 197 certificate from non-resident Indian (lower tax-deducted-at-source rate) -- issued by the Assessing Officer. |
3 | Deduct tax-deducted-at-source at certificate rate (or default 30% if no certificate). |
4 | Deposit tax-deducted-at-source via Challan ITNS-281 within 7 days of month-end. |
5 | File Form 27Q quarterly. |
6 | Issue Form 16A to non-resident Indian seller within 15 days of statement filing. |
7 | Non-resident Indian gets tax-deducted-at-source credit; can apply for refund if actual tax liability is less than tax-deducted-at-source deducted. |
Key Note Provided buyer has Permanent Account Number and the property was for personal use (no business), no Tax Deduction Account Number is required -- use Permanent Account Number instead. |
Common Mistakes
- Buyer assumes 1% under section 194-IA applies -- wrong; section 195 governs non-resident.
- Buyer does not ask for section 197 certificate; deducts at maximum 30%; non-resident has refund hassles.
- Buyer uses Form 26QB instead of Form 27Q -- different forms for non-resident.
- Buyer fails to obtain a Tax Deduction Account Number for non-resident-related tax-deducted-at-source -- but Finance Act, 2024 streamlined: Permanent-Account-Number-based deposit acceptable for individual / Hindu Undivided Family buyers.
- Buyer fails to provide tax-deducted-at-source certificate to non-resident Indian -- non-resident Indian cannot claim refund.
- Stamp duty value above consideration: tax-deducted-at-source computed on higher of two (section 50C deeming).
Foreign Exchange Management Act and Reserve Bank of India Compliance Layer
Beyond income-tax: Foreign Exchange Management Act / Reserve Bank of India compliance for outward remittance to non-resident Indian. Reserve Bank of India Liberalised Remittance Scheme limits: USD 250,000 per financial year for the resident remitter (general). Form 15CA / 15CB Chartered-Accountant-certified mandatory for repatriation of sale proceeds. Bank verifies tax-deducted-at-source deposit before allowing repatriation. The Chartered Accountant's role: Form 15CB certification plus Foreign Exchange Management Act compliance review.
Key Takeaways
- Property purchase from non-resident Indian: tax-deducted-at-source under section 195 (NOT section 194-IA).
- Rate: non-resident Indian's applicable rate (20% Long-term Capital Gains / 30% Short-term Capital Gains default).
- Individual / Hindu Undivided Family buyer can use Permanent Account Number (no Tax Deduction Account Number required) for section 195 deposit.
- Form 27Q quarterly statement (not Form 26QB).
- Get section 197 lower-rate certificate from seller; otherwise default high rate.
- Form 15CA / 15CB for repatriation of sale proceeds.
- Stamp duty value if higher than consideration (section 50C deeming).
Disclaimer: This article is for general information only. It does not constitute tax / legal advice. Please consult a qualified Chartered Accountant or tax practitioner for advice specific to your circumstances. The legal position is current as of FA 2024 (No. 2) / FA 2025; subsequent amendments and CBDT notifications may modify the position.