26 October 202611 min read

TDS on Property Purchase in India: A Guide for UK Buyers

How tax deducted at source (TDS) works when you buy property in India from the UK: the 1% and non-resident seller rules, forms, penalties and checks before you pay.

Buyer calculating tax during an Indian property purchase

When you buy property in India, you may be the person who has to deduct and pay the seller's tax, not the seller. Tax Deducted at Source (TDS) means the buyer withholds a share of the price and pays it to the Indian Income Tax Department in the seller's name.

The rate is 1% if the seller is an Indian resident and the deal is large enough. It can be many times higher if the seller is a non-resident Indian (NRI).

Getting this wrong is the buyer's liability, so the seller's residency status is the first thing to confirm.

TL;DR

If the seller is a resident of India and the price or stamp duty value is ₹50 lakh (₹50,00,000) or more, the buyer deducts 1% under Section 194-IA of the Income-tax Act, 1961.
If the seller is a non-resident, Section 195 applies instead. There is no minimum threshold, and the rate on long-term gains starts at 12.5% before surcharge and cess.
Applying the 1% rate to an NRI seller is the costly mistake: the buyer becomes responsible for the shortfall, with interest and possible penalties.
The deducted tax is reported on a challan-cum-statement (Form 141, formerly Form 26QB) within 30 days of the end of the month of deduction.
As a UK buyer, you should also plan for HMRC (His Majesty's Revenue and Customs) reporting on any Indian rent or later gain.

Who pays TDS, and why it falls on the buyer

Indian tax law treats the buyer as a collection point. The seller owes tax on any gain, but the law requires the buyer to withhold part of the price at the time of payment and pay it to the government. The seller then claims credit for it when filing their own Indian return.

For a UK-based buyer this has two practical consequences. First, you cannot simply wire the full price and leave the tax to the seller. Second, the amount you withhold depends on facts you do not control: who the seller is, where they live for tax purposes, and how the price is defined. Each needs evidence before money moves.

Two regimes cover almost every residential purchase:

	Resident seller	Non-resident seller
Legal basis	Section 194-IA	Section 195
Threshold	Consideration or stamp duty value of ₹50 lakh or more	None: applies to every transaction
Rate	1%	Long-term gains: 12.5% plus surcharge and cess. Short-term gains: 30% for individuals and firms, 35% for foreign companies
Applied to	Total consideration	Total consideration, unless a lower-deduction certificate is issued

The resident-seller rule and its threshold are set out by the Income Tax Department's page on TDS on purchase of immovable property. The non-resident rates and the absence of a threshold come from the department's guidance on TDS when a non-resident sells immovable property.

Buying from a resident seller: the 1% rule

Section 194-IA applies when the sale consideration, or the stamp duty value if higher, reaches ₹50 lakh. Below that, no TDS arises under this section. The tax is 1% of the payment, and it applies to immovable property other than agricultural land.

A worked example. You agree to buy an apartment from a resident Indian seller for ₹1,20,00,000 (₹1.2 crore). The stamp duty value is lower, so the consideration governs. TDS at 1% is ₹1,20,000. You pay the seller ₹1,18,80,000 and deposit ₹1,20,000 with the department, reporting it against the seller's Permanent Account Number (PAN). The seller sees the credit in their tax record.

Three details trip up buyers:

"Sale consideration" is wider than the headline price. The department's own guidance on TDS from sums paid to buy immovable property indicates that charges such as club membership, car parking, and electricity or water facility charges can fall within it, however the agreement labels them. If your agreement splits the price into "base price" and "other charges", test the 1% against the total.
No Tax Deduction and Collection Account Number (TAN) was needed for this section. The department confirms that, for a resident-seller purchase, the buyer's own PAN is sufficient.
Staged payments. On under-construction purchases you pay in tranches. Ask your Indian adviser how deduction is applied to each stage payment in your contract, and keep a challan record against every one.

Buying from an NRI seller: Section 195

Many Indian properties are owned by people who now live abroad, including in the UK. If your seller is a non-resident, the 1% rule does not apply. Section 195 requires you to deduct tax at the rate that matches the seller's capital gain, with no minimum value.

The department's guidance gives the base rate for long-term capital gains as 12.5% plus applicable surcharge and cess, and 30% for short-term gains for individuals and firms. Surcharge depends on the size of the amount, so the effective percentage is higher than the base and must be calculated for your transaction by a chartered accountant.

The arithmetic matters.

What a buyer should ask for

A written declaration of residential status for the relevant tax year, supported by passport entries, visa or residence documents, and the seller's recent Indian tax returns.
The seller's PAN and, where relevant, evidence of when and at what cost the property was acquired, which determines long-term or short-term treatment.
Any lower or nil deduction certificate, discussed next.

The lower-deduction certificate (Form 13)

Withholding 12.5% or more on the gross price can far exceed the seller's actual tax, which is charged on the gain. An NRI seller can apply to the Income Tax Department for a certificate permitting a lower or nil rate. SBI's NRI guidance on TDS when NRIs sell property describes this Form 13 route, and Mint reports that the buyer can apply the reduced rate in the certificate provided it was obtained before the deduction.

For you, the order of events matters. A buyer who has already deducted at the standard rate cannot assume a later certificate will rewrite the position. Make the certificate a condition in the agreement for sale, with completion dates that allow for processing time.

Treaty relief

India's double taxation avoidance agreements (DTAA) can reduce the final tax a non-resident seller bears, as SBI's guidance notes. The practical point for you is narrower: your withholding obligation is set by the Indian rules and any certificate, not by the seller's opinion of what a treaty allows. Leave treaty arguments to the seller's adviser and the certificate process.

The mistake that costs the most

The most expensive error is applying the 1% resident rate to a seller who turns out to be an NRI. Because the duty to deduct the correct amount lies with the buyer, Mint reports that the shortfall makes the buyer an "assessee in default", with interest at 1% per month on the unpaid tax until it is rectified, and a possible penalty equal to the shortfall if the authorities pursue it.

A second, smaller cost is lateness. The challan-cum-statement must be filed electronically within 30 days of the end of the month in which tax was deducted.

Paperwork: Form 141, PAN and TAN

The challan-cum-statement that reports property TDS is now Form 141, which replaced Form 26QB. Mint reports that the administrative step of obtaining a TAN has been removed for resident individual and Hindu Undivided Family buyers purchasing from an NRI, who can pay using their own PAN.

That relief is described for resident buyers. If you are buying from the UK as a non-resident, do not assume it covers you. Ask an Indian chartered accountant to confirm in writing which identifiers and which form route apply to your status before the first payment, and whether you need an Indian PAN. Getting a PAN can take time, so start before you sign.

A step-by-step sequence for UK buyers

Establish the seller's residential status with documents, not statements.
Define the full consideration, including parking, club and facility charges, and the stamp duty value.
Choose the section: 194-IA at 1% for a resident seller of ₹50 lakh or more, Section 195 for any non-resident.
Ask whether a lower-deduction certificate exists or is being sought, and write it into the agreement.
Deduct at each payment as your adviser confirms, and pay the tax within the deadlines.
File Form 141 within 30 days of the end of the month of deduction.
Give the seller their tax credit evidence and keep copies of every challan for your own records.

Tax is only one of the checks before you pay. Confirm the project is registered, as covered in our guide to RERA verification for international buyers in India, look at the developer's background, and read the title history through encumbrance certificate red flags. If the seller is an NRI living in the UK, the funds-routing questions in our note on NRI property purchase rules and remittance checks are worth reading alongside this.

What TDS does not settle: your UK position

TDS is an Indian collection mechanism. It says nothing about what you owe HMRC. As a UK tax resident, foreign income such as rent from an Indian flat is reportable on your Self Assessment return. HMRC's foreign notes for the SA106 form explain how to report overseas property income and claim relief for foreign tax, and they mention the property income allowance, which has limits that can matter for small rentals. Foreign tax credit relief is how many landlords avoid paying twice on the same income, but it is subject to conditions and caps, so a UK-qualified tax adviser should confirm your figures.

The same logic applies when you eventually sell: Indian tax on the gain, with TDS withheld from you as an NRI seller under Section 195, and a UK reporting question alongside it. Our guide on UK tax on foreign rental income covers the rental side in more detail.

Our perspective

We review property for buyers, not for developers or agents, and TDS shows why that distinction matters. A seller's agent has little reason to raise the point that the seller's residency status could move the withholding from 1% to a figure many times larger. The buyer then discovers it at the moment of payment, or years later in a notice.

Our approach is to treat tax withholding as an evidence question. Before a deposit leaves the UK, we want the seller's residency proof, the full consideration as it will actually be invoiced, and a clear view of whether a certificate is in play.

Across the more than 380 property decisions we have reviewed, one in three reviews identified an issue serious enough to change the deal. Tax mechanics are rarely the only cause, but they are among the few that can be fixed cheaply before payment and expensively afterwards.

Our advice to a UK buyer is simple: settle the seller's status first, put the tax mechanics in the contract, and do not pay on trust.

— Neerraj

Getting the file checked before you pay

If you have shortlisted a property and want the seller, the developer, the title and the tax obligations reviewed independently of the sales side, our India property due diligence service produces a documented decision file coordinated by legal, technical and market specialists. It is designed for buyers who are ready to commit capital and want the missing evidence made visible first.

FAQ

Does TDS apply if I am buying from India while living in the UK?

The obligation attaches to the payment for the property, not to where you live. If the seller is an Indian resident and the consideration or stamp duty value is ₹50 lakh or more, 1% applies under Section 194-IA. If the seller is a non-resident, Section 195 applies with no threshold. Ask an Indian chartered accountant how your own non-resident status affects registration and filing.

What TDS rate applies when I buy from an NRI?

The base rate for a long-term capital gain is 12.5% plus applicable surcharge and cess, and 30% for a short-term gain by an individual or firm. It is normally applied to the whole consideration unless the seller holds a lower or nil deduction certificate. Your adviser should compute the exact figure for your deal.

What happens if I deduct the wrong amount?

The shortfall is treated as the buyer's default. Mint reports interest at 1% per month on the unpaid tax and possible penalties equal to the shortfall. Late filing of the statement also carries a fee of ₹200 per day under Section 234E, up to the TDS amount.

Does HMRC need to know about my Indian property?

If you are UK resident, rent or gains from the property are generally reportable on Self Assessment, with possible relief for Indian tax paid. HMRC's SA106 notes explain the foreign pages. Take advice from a UK tax adviser on how credit relief applies to your income.