Buying property from NRIs: How can Budget 2025 end complications?

Finance Minister Nirmala Sitharaman will present the Union Budget 2025 on February 1, 2025, just six months after presenting the interim budget in July 2024.

One such compliance is related to the taxation of NRI properties. Currently, a lot of tax complexities are involved when buying residential properties from NRIs compared to buying from resident Indians.

As per the income-tax rules, homebuyers are required to withhold 1% of the purchase value as Tax Deducted at Source (TDS) when the cost of the property is ₹50 lakh or more. The process of depositing the TDS is simple and convenient when the seller is a resident Indian. One can deposit the TDS in this case with Form 26QB (challan-cum-statement).

However, the rules get complicated when the seller is an NRI. In this case, tax is withheld at a higher rate and the buyer is also required to obtain a Tax Deduction and Collection Account Number (TAN), deposit the tax deducted, and file e-TDS returns, according to Divya Baweja, partner at Deloitte.

Baweja says obtaining TAN only for buying a home from an NRI may result in more inactive TANs as the purchase and sale of the property is not a recurring transaction.

To address this issue, Deloitte suggests that the upcoming budget should ease the TDS process applicable for cases where the seller is an NRI. This may be done by introducing the challan-cum-statements similar to those applicable to resident home sellers.

Other expectations for NRIs

Deloitte experts further expect the upcoming budget to enable NRIs to make tax payments from their overseas bank accounts.

Currently, one can pay tax through modes such as net banking, debit cards, NEFT/RTGS, and over-the-bank counter. However, taxpayers need to have an account with an Indian bank only to pay their taxes. This creates difficulty for some NRIs when paying taxes.

Non-resident taxpayers residing overseas would benefit if they were allowed to make tax payments from their overseas bank accounts.