Buying a Hyderabad Home From an NRI Seller: the TDS You Must Deduct

A buyer in Kompally had a resale flat almost closed. The price was agreed, the loan was sanctioned, and the plan was to deduct one percent tax and file the usual online form, the way friends had done. Then the seller mentioned, almost in passing, that he had been living in Dubai for six years and flew in only for the registration. That one sentence changed the entire tax process. The flat was the same, but the seller was a non resident, and the simple one percent route no longer applied.

The short answer. When you buy a Hyderabad property from a resident seller for 50 lakh rupees or more, you deduct one percent tax under Section 194-IA and pay it with Form 26QB. When the seller is a non resident, none of that applies. Under Section 195 of the Income Tax Act you deduct tax on the entire sale price, not just the gain, you must hold a TAN, and you file Form 27Q. The trade-off is real. The Section 195 route means more paperwork and a larger sum parked as tax, but the duty and the penalty for getting it wrong sit on you, the buyer, so the paperwork is protection, not red tape.

Why does the seller's residential status change everything?

The tax law treats a payment to a non resident completely differently from a payment to a resident. For a resident seller, the law assumes the tax office can reach the person later, so it asks the buyer to deduct only a small one percent under Section 194-IA and deposit it through a simple challan cum statement, Form 26QB. For a non resident seller, the law cannot rely on later recovery, so it front loads the deduction under Section 195 and puts the full duty on the buyer.

This is why the first question in any resale deal is not the price. It is the seller's residential status. Status here is a tax concept tied to how many days the person spent in India, not to their passport or citizenship. A person can hold an Indian passport and still be a non resident for the year. Ask for the status in writing and look at the passport and travel history rather than assuming from an Aadhaar address.

Getting this wrong at the start poisons everything downstream. If you treat an NRI seller as a resident and deduct only one percent, the deduction is short, the wrong form is filed, and the shortfall becomes your liability the moment the department notices. Correcting it later means chasing a seller who is abroad and reopening a deal that felt closed. It is far cheaper to establish status on day one and route the deal correctly than to unwind an error after the money has moved.

What exactly must a buyer deduct under Section 195?

Under Section 195 you deduct tax on the full sale consideration, not merely on the seller's profit. That is the single biggest surprise for buyers who expected a one percent figure. The deduction is meant to cover the tax on the seller's capital gain, and because the buyer cannot compute that gain reliably, the default is to deduct against the whole amount unless the seller brings a certificate that says otherwise.

Because the exact rate depends on the seller's holding period, surcharge, and cess, do not rely on a number a broker quotes. Confirm the current rate on the official income tax portal at incometax.gov.in or with a tax professional, and treat the certificate route below as the clean way to fix the amount. What is not in doubt is the structure. Full consideration, Section 195, a TAN in the buyer's name, and Form 27Q.

The size of the difference is easy to underestimate. On a resident sale, the one percent deduction on a one crore flat is a manageable one lakh rupees. On an NRI sale with no lower deduction certificate, the tax is computed on the whole one crore, so the amount held back runs to many times that figure and stays with the department until the seller claims a refund in their own return. A seller who insists you skip the certificate and simply deduct one percent is asking you to carry their tax exposure, and the request itself should make you cautious.

How do resident and non resident purchases compare?

The two routes share a goal, collecting tax at source, but almost nothing else. The table below lines them up so you can see at a glance which process your deal falls under and what each step demands of you.

What is the lower deduction certificate, and why does it matter?

The lower or nil deduction certificate under Section 197 is how an NRI seller avoids tax being deducted on the full price. The seller applies to the income tax officer using Form 13, usually through the TRACES system, before the sale is signed. The officer looks at the actual purchase cost, improvements, and any exemption the seller intends to claim, then issues a certificate directing the buyer to deduct only on the real capital gain, or in some cases nothing at all.

For a buyer, this certificate is the difference between parking a large sum with the tax department and deducting a modest, accurate amount. Insist that the seller obtains it before you sign, and deduct strictly according to what the certificate says. If the seller has no certificate, you are legally safer deducting on the full consideration than guessing a lower figure to keep the seller happy.

What are the steps a Hyderabad buyer should follow?

Run these in order once you know the seller is a non resident. Each protects you from a shortfall the department could later recover from you with interest.

1. Confirm the seller's residential status in writing and keep copies of the passport and travel record.
2. Apply for a TAN in the buyer's name if you do not already hold one, because Section 195 needs it.
3. Ask the seller to obtain a Section 197 lower or nil deduction certificate using Form 13 before signing.
4. Confirm the current applicable rate on incometax.gov.in or with a tax professional, not from a broker.
5. Deduct the tax at the time of payment, on the full price or on the certified amount if a certificate exists.
6. Deposit the tax within the prescribed time, then file Form 27Q for the quarter.
7. Issue the TDS certificate, Form 16A, to the seller and keep every challan and acknowledgement.

Where the seller is a resident, the process collapses back to a single one percent deduction and Form 26QB, which we cover in our guide on the one percent TDS a buyer must deduct under Section 194-IA. Either way, budget for it alongside your stamp duty and registration charges in Hyderabad so the closing costs hold no surprises.

Why does the buyer carry the risk if the seller owes the tax?

The law makes the buyer the collection agent, so the buyer carries the risk. The tax is the seller's, but the duty to deduct and deposit it is yours. If you deduct too little or skip it, the income tax department can recover the shortfall, plus interest and penalty, from you, not from a seller who has already moved the money abroad. This is not a theoretical risk in NRI deals, because the seller is often outside the country by the time any notice arrives.

That is the real reason to treat the paperwork as protection. A TAN, a Section 197 certificate, a correct deduction, a timely deposit, and Form 27Q together mean that even if the department reviews the deal, your position is clean. Skipping steps to speed up a closing simply moves the seller's tax problem onto your file. Slow the deal down, get the certificate, and pay only what the law and the certificate require.

One practical habit helps more than any other. Write the tax mechanics into the sale agreement itself. State the seller's declared residential status, the section under which tax will be deducted, whether a Section 197 certificate will be produced, and the amount that will be withheld at each payment. When the process is on paper before money changes hands, neither side can renegotiate the tax treatment at the registration desk, and your record is complete if a question ever arises.

What do Hyderabad buyers ask most about NRI seller TDS?

Does the 1 percent TDS rule apply when the seller is an NRI?

No. The simple 1 percent deduction and the Form 26QB route apply only when the seller is a resident. When the seller is a non resident, the buyer deducts tax under Section 195 on the full sale price, needs a TAN, and files Form 27Q, so treat an NRI sale as a different process from the start.

How does an NRI seller reduce the high TDS on the full sale price?

The seller applies to the income tax officer for a lower or nil deduction certificate under Section 197, using Form 13, before the sale is signed. The officer certifies the tax on the actual capital gain, and the buyer then deducts only that certified amount. Without the certificate, deduction is on the entire consideration.

Why does the buyer, not the seller, carry the TDS risk?

The law puts the duty to deduct and deposit tax on the buyer. If you underdeduct or skip it, the income tax department can recover the shortfall, interest, and penalty from you, not from the NRI who has left the country. That is why buyers insist on a Section 197 certificate and proper paperwork.

How do I confirm whether my Hyderabad seller is an NRI?

Ask for the seller's residential status in writing and check their passport, visa, and the number of days spent in India, because status depends on physical presence, not on citizenship or the address on a document. If there is any doubt, treat the sale as an NRI transaction and take professional tax advice before you pay.

Last updated 2026-09-13. PropNewz Team.