Answer Book question
Yes, and it is your liability, not the seller's. When the seller is a non-resident, Section 195 applies: you must obtain a TAN, deduct tax at 12.5% plus surcharge and cess on long-term property (held over two years), or at slab rates for short-term, deposit it within the deadline and file Form 27Q. There is no ₹50 lakh threshold and the 1% rule for residents does not apply. Unless the seller obtains a lower-deduction certificate from the tax department, you must deduct on the whole sale price, not just the gain. Get this wrong and the tax, interest and penalty are recoverable from you.
Yes, and it is your liability, not the seller's. When the seller is a non-resident, Section 195 applies: you must obtain a TAN, deduct tax at 12.5% plus surcharge and cess on long-term property (held over two years), or at slab rates for short-term, deposit it within the deadline and file Form 27Q. There is no ₹50 lakh threshold and the 1% rule for residents does not apply. Unless the seller obtains a lower-deduction certificate from the tax department, you must deduct on the whole sale price, not just the gain. Get this wrong and the tax, interest and penalty are recoverable from you.
A family in Thiruvalla buys a ₹60 lakh flat from a cousin in Abu Dhabi, deducts 1% as they did for a previous purchase from a resident, and files Form 26QB. Two years later a notice arrives: the correct deduction under Section 195 was 12.5% plus cess on ₹60 lakh, about ₹7.8 lakh, and the buyer is the 'assessee in default' for the shortfall, with interest.
Residential status of the seller determines the regime. Resident seller, consideration ₹50 lakh or more: Section 194-IA, 1% TDS, Form 26QB, no TAN needed. Non-resident seller: Section 195, TDS at the applicable rate on the sum 'chargeable to tax', which in practice means the full consideration unless a certificate under Section 197 fixes a lower amount; Form 27Q quarterly; TAN mandatory for each buyer if jointly purchased; deposit by the 7th of the following month.
5%, to which surcharge (depending on the amount) and 4% cess are added. Short-term property (two years or less) is taxed at slab rates, so TDS is at the maximum marginal rate. The seller can apply in Form 13 for a certificate directing you to deduct only on the actual gain; it takes weeks, so start early. The seller also has a separate FEMA step: repatriating the proceeds abroad requires Forms 15CA/15CB through an authorised dealer bank.
Seller's status: an OCI or PIO living abroad is a non-resident for this purpose; an NRI who has returned and become resident is not Holding period: from the seller's purchase deed or allotment date Whether the seller has applied for a lower-deduction certificate; ask for the certificate itself, not a promise Each joint buyer needs a TAN Home loan disbursement: the bank will disburse the net of TDS only if you have told it; coordinate
Treating the seller's NRO account as proof he is 'Indian'. Residential status is about days in India, not passport. Also: deducting on the gain without a certificate. Without a Section 197 certificate the law expects deduction on the full consideration.
A very large share of flat resales in Kerala involve an NRI seller. Builders' resale desks and brokers routinely tell buyers '1% TDS'. That is the resident rule. Kerala buyers using a home loan should tell the bank at sanction that the seller is non-resident so disbursement is structured with the TDS netted.
Sale ₹60 lakh, long-term, no certificate. Base 12.5% = ₹7.5 lakh; add 4% cess = ₹7.8 lakh; surcharge applies if the seller's total income crosses ₹50 lakh, which on a ₹60 lakh sale it may: check with a CA. With a Section 197 certificate showing a gain of ₹20 lakh, TDS falls to 12.5% plus cess on ₹20 lakh, about ₹2.6 lakh.
If the seller has returned to India and qualifies as resident in the year of sale, 194-IA applies. If you are buying agricultural land outside municipal limits, capital gains may not arise at all; take advice. This chapter is not a substitute for a CA.
Obtain TAN (Form 49B) before paying any advance Ask the seller to apply for a Section 197 certificate now Deduct, deposit, file Form 27Q, issue Form 16A; keep everything
Can I pay cash for land? What is 'fair value' and why does it matter? I pay rent of ₹50,000 a month. Must I deduct tax?
Tax & compliance (CA referral)
Income-tax Act, Sections 195, 197, 194-IA, 112, 201 · Finance (No. 2) Act 2024 changes to capital gains effective 23 July 2024 · FEMA rules on repatriation of sale proceeds (Forms 15CA/15CB) Last checked: 22 August 2026. Rates, limits and whether you may qualify change. Confirm with the official source before you act. Ask Kerala Rising: Use only general, non-identifying facts.
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This page is general orientation, not personal insurance, investment, medical, legal, lending, tax, employment, or professional advice. Rules, rates, deadlines, and decisions can change. Confirm the current position with the named official source and use a licensed or qualified professional where your situation requires one. Kerala Rising does not decide whether you may qualify, approve claims, or promise an outcome.