- Resident buyers will no longer be required to obtain a TAN when purchasing property from an NRI or OCI from 1 October 2026. The Finance Bill 2026 will replace the TAN framework with a PAN-based TDS system, removing the administrative step that currently falls on the buyer.
- Implementation: The elimination of the TAN requirement will take effect on October 1, 2026.
- This change potentially widens the pool of willing resident buyers for NRI-owned property. Without the TAN burden, buyers will be less likely to withdraw from NRI transactions, and sales will proceed without the 15–30 day TAN processing delay.
- Your obligations as the seller under Section 195 of the Income Tax Act 1961 remain in place. TDS will still be deducted from your sale proceeds — what will change is the administrative mechanism the buyer uses to report and deposit it.
- An inactive or incorrectly classified PAN can override the benefit of these reforms entirely. If your PAN is not linked to Aadhaar or not formally exempted as an NRI or OCI PAN, the TDS rate defaults to 20% regardless of the new rules.
As a resident buyer in India purchasing property from an NRI, OCI, or foreign citizen, a TAN will no longer be required from 1 October 2026. Under the Finance Bill 2026, the resident buyer’s TDS obligation for NRI property purchases will move to a PAN-only basis, removing the need to obtain a separate Tax Deduction and Collection Account Number. For NRI and OCI sellers based in the UK, this will affect how marketable your Indian property is to local buyers, how quickly a transaction can close, and what your pre-sale compliance checklist must include.
| Requirement | Old Framework (Pre-Oct 2026) | New Framework (Post-Oct 2026) |
|---|---|---|
| Buyer Credential | TAN Required (Form 49B) | PAN Only |
| Filing Form | Form 27Q (Quarterly) | PAN-based Challan (One-time) |
| TDS Rate (LTCG) | 12.5% + Surcharge & Cess | 12.5% + Surcharge & Cess |
| Inoperative PAN | 20% TDS Default | 20% TDS Default |
What Was the TAN Requirement for NRI Property Sales?
Under Section 195 of the Income Tax Act 1961, when a resident Indian purchased property from an NRI, the buyer was legally required to deduct tax at source using a Tax Deduction and Collection Account Number (TAN), not a PAN. This was the compliance difference between resident-to-resident sales under Section 194-IA, which required only a PAN, and NRI seller transactions, which required the buyer to register separately for a TAN.
The buyer had to apply for a TAN, deduct TDS at the applicable rate on the gross sale consideration, deposit it under that TAN reference, and issue the relevant certificate to the NRI seller. The process frequently took 15–30 days and carried ongoing quarterly TDS return filing obligations, compliance burdens that many buyers were unwilling to take on for a single property purchase.
For NRI sellers, this may have resulted in a narrower pool of buyers and reduced interest. Resident Indian buyers, particularly those purchasing for personal use, may have regularly withdrawn from NRI-owned property deals to avoid the TAN process. Ancestral homes and inherited flats may have been disproportionately affected, as these transactions are often time-sensitive and managed remotely from the UK.
What Changed Under the 2024–2026 Tax Reforms?
The Indian government has legislated to move NRI property sale TDS to a fully PAN-based system, eliminating the TAN requirement for resident buyers from 1 October 2026. From that date, a resident buyer will be able to deposit TDS deducted under Section 195 using their own PAN and the NRI seller’s PAN through the standard Income Tax portal, the same mechanism used for resident-to-resident transactions under Section 194-IA.
The TDS credit will post directly to the seller’s consolidated tax credit statement, creating a clear digital audit trail linked to the seller’s PAN 2.0 record. This alignment with the PAN 2.0 framework is consistent with the Indian government’s broader objective of centralising all tax compliance within the PAN ecosystem, supporting cross-border repatriation and improving transaction transparency.
What TAN Removal Means for NRI and OCI Sellers in Practice
For an NRI or OCI selling Indian property in 2026, the removal of the TAN requirement will have three direct effects: a potential wider pool of willing buyers, a faster transaction timeline, and a TDS chain that will be fully traceable through your PAN 2.0 record from the point of deduction through to your repatriation documentation.
To illustrate: an OCI based in the UK selling a flat in Mumbai valued at Rs1.2 crore currently faces the risk of a willing buyer withdrawing from the deal rather than applying for a TAN and taking on filing obligations. From 1 October 2026, the same buyer will deposit TDS using their PAN, the credit will appear in the seller’s consolidated tax credit statement within days, and the transaction will proceed without the TAN administrative requirement on the buyer’s side.
For sellers managing the process remotely from the UK, this reduction in buyer-side friction will be significant. It will not remove the seller’s own compliance obligations, but it will remove the risk of a buyer withdrawing for administrative rather than commercial reasons, which has been a genuine and common occurrence under the current framework.
If you are preparing to sell Indian property from the UK and want tailored Indian law advice based on your property matter, our team advises NRIs and OCIs. Call us on 0208 757 5751 or use our free assessment form by filling in this form.
Your TDS Obligations Under Section 195 Have Not Changed
TAN removal will affect the buyer’s process, not the seller’s tax liability.
As an NRI or OCI seller, TDS under Section 195 will still be deducted from your sale proceeds, typically calculated on the gross sale consideration, not your actual capital gain. Without a formal directive from the Income Tax Department in place before the transaction completes, the default withholding can result in a significant portion of your proceeds being held in the Indian tax system pending a refund claim, a process that commonly takes over a year.
The legal mechanism for reducing this withholding to your actual capital gains liability is a Lower TDS Certificate obtained under Section 197. For more information, read our overview on the Lower TDS Form. Typically, the seller would work closely with an Indian chartered accountant to facilitate the process.
The Inoperative PAN Risk: When the New Rules Work Against You
If your Indian PAN is flagged as inoperative, the buyer is legally required to deduct TDS at the default rate, regardless of the new PAN-based framework and regardless of what your actual capital gains liability would be. This is one of the most commonly overlooked risks in NRI property sales following the 2024–2026 reforms.
A PAN becomes inoperative where it is not linked to Aadhaar and has not been formally exempted under the NRI or OCI carve-out. For UK-based sellers, the exemption exists but must be actively applied. An inoperative PAN also prevents the TDS credit from appearing correctly in the subsequent forms, which may create problems at the repatriation stage when your bank’s Authorised Dealer reviews your complete documentation.
Before your property is listed or a buyer is engaged, confirm that your PAN is active, correctly classified as an NRI or OCI PAN, and linked to your current UK address via the government of India-Income Tax Portal. This costs very little to resolve before a transaction begins and a great deal more to resolve mid-sale.
PAN application assistance is something our team can provide for the Indian property sale process. View our Foreign Citizen PAN Card 2.0 application assistance if you need assistance applying.
Three Steps to Confirm Before You Sign
Even with TAN removal from the buyer’s checklist from 1 October 2026, the NRI seller’s compliance requirements have several steps that must be confirmed before the Agreement of Sale is executed. Missing any of these can cause delays, fund freezes, or higher-than-necessary tax deductions that take over a year to recover. Working with your Indian legal team and professionals in a multi-disciplinary approach can be helpful.
Factors to Consider Before the Execution of Agreement of Sale
Cost Basis: For property acquired before 1 April 2001, an FMV 2001 Valuation Report from a registered valuer is the legal mechanism for establishing a defensible acquisition cost for capital gains purposes.
TDS withheld at source: A Form 13 application under Section 197 instructs the buyer to deduct TDS only on your actual capital gains rather than the gross sale consideration.
Plan your repatriation. Moving the proceeds to a UK bank account requires your active PAN, an active NRO account routing, and KYC compliance; all necessary forms must be completed sequentially to facilitate the final processes.
Frequently Asked Questions
From 1 October 2026, the buyer will no longer need a TAN. Under the revised PAN-based framework, TDS will be deposited using the buyer’s own PAN and the NRI seller’s PAN through the Income Tax portal. The buyer will need the seller’s active Indian PAN before any payment is made, as this will be required for the TDS deposit and for the credit to appear correctly in the seller’s obligatory documents.
Yes. TAN removal will only simplify the buyer’s administrative process. As an NRI seller, TDS under Section 195 will still be deducted from your sale proceeds, typically on the gross sale consideration, unless legal mechanisms are in place to counter this.
If your PAN is flagged as inoperative, the buyer is legally required to deduct TDS at 20%, regardless of the new PAN-based rules.
No. Repatriation remains governed by FEMA and requires a number of sequential forms to be completed. These requirements are unchanged by the TAN removal.
How Whytecroft Ford Can Help
Our Indian Law team advises UK-based NRIs, OCIs, and Foreign Nationals on Indian property matters. Whether you are at the pre-sale planning stage, mid-transaction, or assessing your position before engaging a buyer, we can provide tailored advice involved in selling Indian property from the UK, depending on your circumstances. For detailed advice, visit our Indian Law Consultation Services.
Disclaimer: The current Long-Term Capital Gains (LTCG) TDS rate for NRIs is 12.5% (without indexation) for properties sold after July 23, 2024, subject to changes. The information on this page is provided for general guidance only and does not constitute legal, tax, or financial advice. Indian tax law, FEMA regulations, and TDS requirements are subject to individual circumstances and frequent legislative change. The position described reflects the regulatory framework as understood at the date of publication and may not reflect subsequent amendments. Always consult a qualified Indian law adviser and a registered Chartered Accountant regarding your specific transaction. Whytecroft Ford does not provide CA services.
Official References
- FAQs on Budget 2026 — Income Tax Department of India
- Finance Bill 2026 — India Budget (indiabudget.gov.in)
