TL;DR: TDS on property sale under the Income-tax Act, 2025 splits into two completely different regimes depending on whether the seller is a resident or a non-resident. For resident sellers, the buyer deducts 1% under Section 393(1) [Sl. No. 3(i)] when the sale consideration or stamp duty value (whichever higher) is Rs. 50 lakh or more — that is the renumbered successor to Section 194-IA of the 1961 Act. For non-resident sellers, Section 393(2) [Sl. No. 17] governs (successor to Section 195) — no threshold, TDS on the full consideration at 12.5% LTCG / slab STCG plus surcharge and cess, which can effectively top out at ~17%. The form furniture has changed too: Form 141 replaces Form 26QB (challan-cum-statement) and Form 128 replaces Form 13 (lower-TDS certificate application under Section 395, successor to Section 197).

The 30-Second Summary

If you are buying a property: ask the seller's residential status before you fund the deal. A resident seller means a clean 1% deduction, no TAN, Form 141 filing within 30 days, done. An NRI seller means a structurally different transaction — full-consideration TDS at LTCG / STCG rates, TAN historically required (waived from 1 October 2026 for individuals/HUFs), Form 144 (was Form 27Q) quarterly filing, Form 132 (was Form 16B / 27D) certificate to the seller, and very often a Section 395 lower-TDS certificate request from the seller via Form 128 to avoid having 14-17% of the gross sale value frozen with the government for 12-18 months.

1. Why the Two Regimes Are Completely Different

The 1% TDS on resident-seller property transactions (old §194-IA, now Section 393(1) [Sl. No. 3(i)]) is a compliance trail mechanism — small percentage, easy form, the seller's actual capital-gains tax is settled separately on the ITR. The NRI-seller TDS (old §195, now Section 393(2) [Sl. No. 17]) is a tax-collection at source mechanism — the buyer is essentially paying the seller's full Indian capital-gains tax up front, on behalf of the seller, because once the money leaves Indian shores, recovery is impractical.

This difference in design is why every other detail differs — threshold, rate, form, TAN, certificate, refund mechanics. If you treat both regimes as variations on the same theme, you will under-deduct on an NRI sale and trigger penalty-and-interest exposure that easily exceeds the underlying capital-gains tax.

2. Resident Seller — Section 393(1) [Sl. No. 3(i)]

A. When does it apply?

Section 393(1) [Sl. No. 3(i)] of the Income-tax Act, 2025 (successor to Section 194-IA of the 1961 Act) applies when:

  • The transferee (buyer) is any person other than (broadly) the categories specifically excluded.
  • The transferor (seller) is a resident in India.
  • The asset is immovable property other than agricultural land.
  • The consideration OR the stamp duty value (whichever is higher) is Rs. 50,00,000 or more.

The "higher of consideration / SDV" test is critical and was tightened in the 1961-Act regime in 2024 to plug the under-valuation gap. The 2025 Act preserves it.

B. Rate

1% on the higher of sale consideration or stamp duty value. No surcharge, no cess on top of this 1% (TDS itself is a flat-rate deduction; the seller's actual liability is computed on the ITR).

C. The buyer's compliance steps

  1. No TAN required. The buyer files on PAN basis, exactly as under §194-IA earlier.
  2. Deduct 1% at the time of credit or payment, whichever earlier.
  3. File Form 141 (Schedule B) within 30 days from the end of the month in which the deduction is made. Form 141 is the new unified challan-cum-statement — it replaces Form 26QB (property), Form 26QC (rent), Form 26QD (contractor), and Form 26QE (VDA) under the 1961 Act, all consolidated into one PAN-based form with separate schedules A-D.
  4. Pay the deducted TDS along with Form 141.
  5. Issue Form 132 (successor to Form 16B) to the seller within 15 days from the due date of Form 141 filing.

D. Common buyer mistakes

  • Buyer ignoring stamp duty value. If consideration is Rs. 48 lakh but stamp duty value is Rs. 52 lakh, TDS applies on the higher figure, and the threshold is breached.
  • Multiple buyers / multiple sellers. The Rs. 50 lakh threshold is on the property (the total consideration), not the per-buyer or per-seller share. Two buyers paying Rs. 30 lakh each on a Rs. 60-lakh property still need to deduct 1% on their respective shares.
  • Instalment payments. Each instalment that is part of a Rs. 50 lakh-or-higher overall transaction attracts TDS at the time it is paid, even if individual instalments are less than Rs. 50 lakh.
  • Filing Form 26QB instead of Form 141 for transactions on or after 1 April 2026. The 1961-Act forms continue only for transactions before that date.

3. NRI Seller — Section 393(2) [Sl. No. 17]

A. When does it apply?

Section 393(2) [Sl. No. 17] of the Income-tax Act, 2025 (successor to Section 195 of the 1961 Act) applies when:

  • The buyer is paying any sum to a non-resident seller.
  • The sum is chargeable to tax under the Act — in property sale, this is the capital gains.
  • No threshold — every rupee of consideration is subject to TDS, unless a lower / nil deduction certificate has been obtained.

Note: The TDS is technically on the chargeable sum (i.e., capital gains), but in practice buyers deduct on the full sale consideration unless the seller obtains a Section 395 certificate specifying gains-only deduction. This is the single biggest cash-flow issue in NRI property sales.

B. Rate

Holding period Type Base rate Surcharge Effective TDS (incl. 4% cess)
More than 24 months LTCG 12.5% (Section 197 of 2025 Act, was Section 112) 10% / 15% / 25% (graduated by income; 25% cap under new regime) ~13% (no surcharge) to ~16.25% (25% surcharge bracket)
24 months or less STCG Slab rates (typically deducted at 30% maximum slab) 10% / 15% / 25% / 37% (37% capped at 25% under new regime) ~31.2% (no surcharge) to ~42.74% (37% surcharge bracket, old regime)

The Rs. 14.95% effective rate often quoted for NRI LTCG = 12.5% × 1.15 surcharge × 1.04 cess ≈ 14.95%. That is the rate when the NRI seller's income falls in the Rs. 1 crore to Rs. 2 crore bracket, which is the most common bracket for property sales. For consideration below Rs. 50 lakh, it is 12.5% × 1.04 = 13%; for between Rs. 50 lakh and Rs. 1 crore, 12.5% × 1.10 × 1.04 = 14.30%; for Rs. 2-5 crore, 12.5% × 1.25 × 1.04 = 16.25%.

C. The buyer's compliance steps

  1. TAN historically required. Section 195 (now §393(2)) carried the standard TAN-based mechanism. Major upcoming change: from 1 October 2026, resident individual / HUF buyers of property from NRI sellers no longer need a TAN — they can file Form 144 on PAN basis. This is one of the most welcome compliance simplifications under the 2025 Act.
  2. Deduct TDS at the rate above at the time of credit or payment, whichever earlier.
  3. Pay the deducted TDS by the 7th of the next month.
  4. File Form 144 (was Form 27Q) quarterly — this is the TDS return for non-resident payments.
  5. Issue Form 132 (was Form 16A under §195) as the TDS certificate to the seller.
  6. Foreign-remittance compliance: if the seller wants to repatriate the proceeds, Form 145 (declaration by remitter, was Form 15CA) and, where required, Form 146 (certificate by a chartered accountant, was Form 15CB) must accompany the bank's outward remittance.

D. The cash-flow problem — and the Section 395 fix

If a property is being sold for Rs. 3 crore by an NRI whose actual capital gains are, say, Rs. 80 lakh, default TDS at ~14.95-16.25% on the full Rs. 3 crore works out to Rs. 45-49 lakh frozen with the government — against an actual tax liability of about Rs. 10 lakh. The seller waits 12-18 months to get the refund after filing the ITR.

The fix is the Lower / Nil TDS Certificate under Section 395 of the Income-tax Act, 2025 (successor to Section 197). The NRI seller applies in Form 128 (was Form 13), submits the cost-base proofs (purchase deed, indexation under 1961-Act regime if grandfathered, capital expenditure proofs, exemption claims under §54 / §54EC successor), and obtains a certificate specifying TDS on the actual gains rather than the full consideration. The buyer then deducts at the certified rate.

Timing: apply for the certificate at least 30-40 days before the registry / payment date. The Assessing Officer takes time. Existing §197 certificates issued under the 1961 Act remain valid for payments on or after 1 April 2026 if the certificate covers projected receivables for Tax Year 2026-27 (transitional rule).

E. Common buyer mistakes

  • Treating NRI seller like a resident. The 1% threshold-based deduction does not apply. Skipping TDS on a Rs. 30 lakh NRI sale (which would have been below the §393(1) threshold) creates full Section 393(2) liability, plus interest under Section 398 (was §201) and penalty under Section 448 (was §271C).
  • Deducting 1% under §393(1) when seller is NRI. Under-deduction of ~13-16% creates buyer liability for the shortfall.
  • Assuming the seller's PAN status equals residency. An OCI / NRI can hold a PAN. Residential status is determined under the Section 6 (now Section 6) residency rules — not by whether the seller has a PAN.
  • Not asking for the Section 395 / Form 128 certificate. Deducting on full consideration where the seller could have provided a certificate locks the seller's funds for over a year.
  • Treating Form 26QB filing as enough. §393(1) Form 141 is for resident sellers only; NRI seller transactions need Form 144 quarterly.

4. Worked Examples

Example A — Resident-to-Resident, Below Threshold

Buyer Vikram pays Rs. 48 lakh consideration to resident seller Anjali for a flat. Stamp duty value is Rs. 46 lakh. Both are below Rs. 50 lakh ⇒ no TDS under Section 393(1). No Form 141. Capital gains tax is settled by Anjali on her ITR.

Example B — Resident-to-Resident, SDV Trigger

Buyer Sameer pays Rs. 48 lakh to resident seller Rahul. Stamp duty value is Rs. 55 lakh. Higher of the two is Rs. 55 lakh ⇒ threshold breached ⇒ 1% TDS on Rs. 55 lakh = Rs. 55,000. Sameer files Form 141 within 30 days, issues Form 132 to Rahul.

Example C — Resident Buyer, NRI Seller, Default TDS

Buyer Pooja (resident) pays Rs. 3 crore to NRI seller Akash for a Mumbai apartment held by Akash for 8 years. No Section 395 certificate obtained. Akash's overall income for the year falls in the Rs. 2-5 crore bracket. TDS = 12.5% × 1.25 × 1.04 = 16.25% on Rs. 3 crore = Rs. 48.75 lakh. Pooja deducts, deposits within 7 days, files Form 144 quarterly, issues Form 132 to Akash. (Pooja must obtain a TAN if the registry is before 1 October 2026; from that date, individuals/HUFs are exempt and can file on PAN.)

Example D — Resident Buyer, NRI Seller, with Section 395 Certificate

Same facts as C, but Akash has applied via Form 128 and obtained a Section 395 certificate specifying TDS on Rs. 80 lakh of capital gains rather than full consideration. TDS = 12.5% × 1.25 × 1.04 × Rs. 80 lakh = Rs. 13 lakh. Akash gets ~Rs. 36 lakh more cash in hand on the deal close. ITR-stage refund is minimal.

Example E — STCG NRI Sale

NRI Rajeev sells an apartment held for 18 months to resident Maya for Rs. 1.2 crore. Holding <= 24 months ⇒ STCG. Default deduction at 30% slab + applicable surcharge + cess. For the Rs. 1-2 crore bracket: 30% × 1.15 × 1.04 = 35.88% TDS on Rs. 1.2 crore = Rs. 43 lakh. Without a Section 395 certificate, Maya deducts at this rate; Rajeev's actual STCG liability is computed on his ITR and any excess is refundable.

5. Special Cases and Edge Tests

  • Joint property (both sellers resident): 1% TDS on each seller's share, separately reported in Form 141 (or in two filings if the buyer prefers).
  • Joint property (one resident, one NRI): The NRI seller's share is under §393(2); the resident seller's share is under §393(1). Two separate compliance trails are needed.
  • Sale by builder to first allottee: If the seller is a builder (not the original allottee selling on resale), the transaction may be a transfer in commercial nature, and the §393(1) [Sl. 3(i)] compliance still applies if the buyer-side conditions are met. The threshold and rate are the same.
  • NRI seller becoming resident before sale: Residential status is tested at the time the income arises — for capital gains, that is the date of transfer. If the seller has migrated back and qualifies as a resident in the year of sale, §393(1) applies, not §393(2).
  • RNOR seller: An RNOR is "resident" for purposes of the residency tests, so §393(1) applies (not §393(2)). Confirm the RNOR claim with documents before applying the lower regime — misclassification costs.
  • Booking before 1 April 2026, registration after: Transactions where the date of transfer falls on or after 1 April 2026 use the 2025 Act / Form 141 / Section 395. Transfers completed before that date use the 1961 Act / Form 26QB / Section 197.
  • Power-of-attorney sales: The legal seller is whoever holds the title and is transferring it, regardless of who acts on the POA. Residency test applies to the actual title-holder.

6. The Lower-TDS Certificate Workflow (Section 395 / Form 128)

For high-value NRI property sales, this is often the single most important step before the registry date.

  1. Application by NRI seller in Form 128 — submitted online on the income-tax portal.
  2. Documents: purchase deed, registered sale agreement (or draft if pre-execution), PAN, passport / OCI proof, evidence of cost of acquisition, capital improvement bills, indexation calculation if grandfather route applies, brokerage/legal/registration cost evidence, any §54 / §54EC / §54F successor exemption plans (under-construction property purchase, capital-gains bonds, etc.), bank statement for advance receipts.
  3. AO scrutiny: the Jurisdictional Assessing Officer (international taxation circle for NRIs) reviews the application, verifies the cost base, and applies any disallowance. May ask for a personal hearing or additional documents.
  4. Certificate issued: specifies the rate / amount on which TDS is to be deducted. Valid for the financial year and the specific transaction described.
  5. Buyer applies the certified rate: deducts TDS at the lower amount. Files Form 144 referencing the certificate.

Timing: Apply at least 30-40 days before the expected registry / payment date. The certificate is not retroactive — payments before the certificate's effective date attract default TDS.

7. Practitioner Checklist

  • Confirm the seller's residential status under the Section 6 residency tests — not by PAN, not by passport, not by NRI bank account, but by the day-count tests for the relevant tax year.
  • Identify the right TDS regime — §393(1) [Sl. 3(i)] for resident, §393(2) [Sl. 17] for non-resident.
  • If resident: confirm threshold (Rs. 50 lakh on consideration OR SDV, whichever higher); deduct 1%; file Form 141 within 30 days; issue Form 132 within 15 days of Form 141 due date.
  • If NRI: assess capital gain (LTCG vs STCG by 24-month holding period); determine surcharge bracket from the seller's income; compute the effective TDS rate; advise the seller to obtain a Section 395 / Form 128 certificate if the gross-vs-net gap is material.
  • Check whether the buyer needs a TAN (yes, until 1 October 2026 even for NRI seller transactions if buyer is non-individual; from 1 October 2026 individual / HUF buyers are exempt).
  • For NRI sales, plan Form 145 / 146 (was Form 15CA / 15CB) for outward remittance well before the registry date.
  • Build a written communication trail with the seller confirming residency status, gains computation, and certificate-applied TDS rate. Disputes about under-deduction often turn on what was disclosed and when.
  • Use Form 141 (resident) and Form 144 (NRI) for transfers on or after 1 April 2026; Form 26QB / Form 27Q only for transfers up to 31 March 2026.

8. Bottom Line

The 1% buyer's TDS for resident-seller property sales is the cleanest TDS provision in Indian tax law — a flat rate, no threshold gymnastics, no TAN, one form, done. The NRI-seller TDS regime is the opposite: full-consideration deduction, surcharge layering, TAN historically required, ITR-refund delays of a year or more, and a Form 128 / Section 395 certificate that practitioners must build into the deal timeline before the registry, not after.

The 2025 Act has not changed any of the substantive rules — rates, thresholds, allowability, exemptions are all preserved. What has changed is the section numbering, the forms, and the welcome simplification for individual / HUF buyers of NRI property who, from 1 October 2026, no longer need a TAN. Get the seller's residency status right at the start, build the right form / TAN / certificate stack, and the rest of the compliance writes itself.

9. Legal References

  • Income-tax Act, 2025 — effective Tax Year 2026-27 (1 April 2026); 1961-Act provisions continue for transactions up to 31 March 2026.
  • Section 393(1) [Table: Sl. No. 3(i)], Income-tax Act, 2025 — 1% buyer's TDS on transfer of immovable property (other than agricultural land) by a resident seller, where consideration or stamp duty value (whichever higher) is Rs. 50 lakh or more. Successor to Section 194-IA of the 1961 Act.
  • Section 393(2) [Table: Sl. No. 17], Income-tax Act, 2025 — TDS on payments to non-resident sellers; no threshold; rate aligned with the chargeable income's character (LTCG / STCG). Successor to Section 195 of the 1961 Act.
  • Section 395, Income-tax Act, 2025 — Lower / Nil TDS certificate; Form 128 application. Successor to Section 197 of the 1961 Act / Form 13. Existing §197 certificates remain valid for payments on or after 1 April 2026 if issued for projected receivable for TY 2026-27.
  • Section 197, Income-tax Act, 2025 — LTCG at 12.5% on land/buildings (no indexation post 23 July 2024 transfer); resident individuals/HUFs holding pre-23-July-2024 land/buildings can elect 20% with indexation under the §197(3) carve-out (lower-of-the-two principle). Successor to Section 112 of the 1961 Act.
  • Form 141, Income-tax Rules, 2026 — unified challan-cum-statement under §393(1); Schedule B covers transfer of immovable property. Replaces Forms 26QB / 26QC / 26QD / 26QE.
  • Form 144, Income-tax Rules, 2026 — quarterly TDS return for non-resident payments. Successor to Form 27Q.
  • Form 132, Income-tax Rules, 2026 — TDS certificate issued by deductor. Successor to Form 16B / 16C / 16D / 16E / 27D.
  • Form 128, Income-tax Rules, 2026 — application for lower / nil TDS certificate under §395. Successor to Form 13.
  • Finance (No. 2) Act, 2024 and CBDT FAQ on the new capital gains regime (PIB Press Release dated 23 July 2024) — LTCG on land/building reduced from 20% to 12.5%; indexation removed; threshold and holding-period rules.
  • FEMA / RBI compliance: Form 145 (declaration, was Form 15CA) and Form 146 (CA certificate, was Form 15CB), where required, for outward remittance of NRI sale proceeds.
  • Old-Act anchors: Section 194-IA, Section 195, Section 197 of the Income-tax Act, 1961; Forms 26QB, 27Q, 13, 16B, 16A; Rule 30 / 31 / 31A of the Income-tax Rules, 1962.

For high-value or cross-border property transactions — NRI sellers, joint resident-NRI ownership, RNOR borderline cases, builder-allottee resale, exemption claims under §54 / §54EC / §54F successor sections, and Section 395 / Form 128 lower-TDS applications — consult an experienced practising chartered accountant. Confirm exact section text, Schedule entries, and the latest CBDT FAQs and forms before relying on this summary for a specific engagement.