NRI Property Sales from 1 October 2026: Form 141 Without TAN, Form 128 for Lower Deduction and & New Compliance Rules
Summary: The introduction of the Income-tax Act, 2025 and Income-tax Rules, 2026, effective from 1 April 2026, has changed the statutory references and compliance forms governing Indian property transactions involving non-resident sellers. A further significant development came through CBDT Notification No. 121/2026, dated 22 September 2026, which introduced a simplified PAN-based TDS compliance mechanism effective from 1 October 2026. Resident individuals and Hindu Undivided Families purchasing immovable property from non-residents can now use Form 141, Schedule E, without obtaining a Tax Deduction and Collection Account Number (TAN) for the covered transaction. The underlying withholding obligation continues under Section 393(2) of the new Act, corresponding to Section 195 of the Income-tax Act, 1961. Non-resident sellers seeking lower or nil deduction may apply through Form 128 under Section 395(1). Other changes include Forms 144, 131, 132, 149, 145 and 146 for reporting, certificates and remittances. This article examines the new compliance routes, transitional arrangements, form mappings and practical issues concerning buyer identification, payment timing and documentation for property transactions during tax year 2026-27.
Introduction
Two changes have rewritten the paperwork on every sale of Indian property by a non-resident. First, the Income-tax Act 2025 and the Income-tax Rules 2026 took effect on 1 April 2026, renumbering the sections and forms that practitioners have used for decades. Second, CBDT Notification No. 121/2026 (G.S.R. 830(E), dated 22 September 2026) removed the need for a TAN where a resident individual or HUF buys immovable property from a non-resident, with effect from 1 October 2026. This note maps what changed, what did not, and the questions that remain open.
What has not changed
The economics are untouched. A buyer paying a non-resident seller must still deduct tax at source on the whole sale consideration, not on the gain. For a long-term capital asset that is 12.5% plus surcharge and cess, an effective 13% to 14.95% depending on the size of the payment. The seller’s actual liability remains tax on the gain, which is why the lower-deduction certificate and the refund route continue to matter. What has changed is the provision, the forms and, for individual buyers, the mechanics of deposit.
Section 195 becomes section 393(2)
For payments made on or after 1 April 2026, the obligation that sat in section 195 of the Income-tax Act 1961 is found in section 393(2) of the Income-tax Act 2025, where the residual entry for sums paid to non-residents is Serial No. 17 of the Table. Payments made up to 31 March 2026 remain governed by section 195. Where an agreement straddles the date, the trigger for each instalment, the earlier of payment or credit, is the natural test for which Act applies to that instalment.
The no-TAN route for individual and HUF buyers
Notification 121/2026 brings non-resident property sales into the challan-cum-statement system that resident sales have used for years (Form 26QB, now Form 141). From 1 October 2026, a resident individual or HUF buying immovable property from a non-resident does not need a TAN. The buyer deducts the tax, deposits it through Form 141 using its new Schedule E, quoting PAN, and issues the seller a TDS certificate in Form 132.
Buyers who are companies, firms or other non-individual persons stay on the TAN route: deposit by challan, the quarterly statement in Form 144 (earlier Form 27Q) and the certificate to the seller in Form 131 (earlier Form 16A).
The change removes the most common practical failure in these transactions: individual buyers who either never obtained a TAN or deducted 1% through the resident form. It does not change the rate, the base, or the buyer’s exposure as an assessee in default if the deduction is not made.
The seller’s side: Form 13 is now Form 128
A non-resident who wants deduction at a rate matched to the actual gain applies for a lower or nil deduction certificate. For applications from 1 April 2026 the form is Form 128 under section 395(1) of the Income-tax Act 2025, read with Rule 213 of the Income-tax Rules 2026; it replaces Form 13 under section 197. The application is filed on TRACES, asks for the payer’s details and the returns of the last four years, and results in a certificate valid for the period it states. Certificates already issued under the 1961 Act remain good for their period.
The sequencing point is unchanged and still decisive: the certificate protects only payments made after it is issued. An advance paid before the certificate suffers deduction on the full amount.
An open question: identifying a buyer who has no TAN
Form 128 asks for the payer’s details, including TAN. Where the buyer is an individual using the new no-TAN route, how the certificate identifies that buyer remains to be settled in practice. Until it is, a seller applying for a certificate should agree with the buyer, before filing, how the buyer will be identified, and keep the agreement, the buyer’s PAN and the payment schedule consistent across the application and the eventual Form 141.
The rest of the trail, renamed
| Purpose | Until 31 March 2026 | From 1 April 2026 |
|---|---|---|
| Lower or nil deduction certificate | Form 13 (s.197) | Form 128 (s.395(1), Rule 213) |
| Deposit and statement, individual or HUF buyer from NRI | TAN + challan + Form 27Q | Form 141, Schedule E (from 1 October 2026) |
| Quarterly statement, TAN-route buyer | Form 27Q | Form 144 |
| TDS certificate to the seller | Form 16A | Form 131 (TAN route) / Form 132 (Form 141 route) |
| Annual tax credit statement | Form 26AS | Form 168 (from tax year 2026-27) |
| Accountant’s certificate where the buyer did not deduct | Form 26A | Form 149 (s.398(2)) |
| Remittance of sale proceeds abroad | Forms 15CA / 15CB | Forms 145 / 146 |
A working sequence for sales in 2026-27
- Before the agreement, confirm the buyer’s category. An individual or HUF buyer and a company buyer now follow different deposit routes.
- File Form 128 early. The certificate protects only payments made after it is issued.
- At each payment, an individual or HUF buyer deposits through Form 141 with Schedule E and issues Form 132; other buyers deposit by challan, file Form 144 and issue Form 131.
- After the sale, the seller checks the credit in Form 168, files the return for tax year 2026-27 under the Income-tax Act 2025, and for repatriation uses Form 145 with the accountant’s certificate in Form 146.
- If the buyer failed to deduct, the buyer faces the consequences of default; the seller’s own tax is unaffected, and an accountant’s certificate in Form 149 can confirm that the seller has returned the income and paid the tax.
Conclusion
For individual buyers, 1 October 2026 removes a compliance barrier that produced more defaults than any rate question ever did. For sellers, the economics are unchanged but every form name in the file is new. The practical risk now is mismatch: a certificate, a deposit and a return that describe the same transaction in different vocabularies. Settling the buyer’s category and identification at the agreement stage avoids most of it.
Sources: CBDT Notification No. 121/2026 (G.S.R. 830(E)) dated 22 September 2026; Income-tax Act 2025, sections 393, 395 and 398; Income-tax Rules 2026, Rule 213; CBDT FAQs and guidance notes on forms under the Income-tax Rules 2026, including the guidance note on Form 128.
The views expressed are personal and the note is for general information only. Readers should refer to the notification, the Act and the Rules and take advice on their own facts.
