Budget 2026 Lets Buyers Use PAN Based Challans Removing TAN Requirement

Filing guide (Tax year 2026, filed in 2027): Buying property from an NRI after Budget 2026—what changes, what still must be filed, and how U.S. taxpayers should report it

Who this affects most: resident Indian buyers purchasing immovable property from a non-resident (NRI) where TDS under Section 195 applies. It also affects U.S. taxpayers who sell Indian property as NRIs, because withholding (TDS) drives the U.S. foreign tax credit paperwork.

Most critical requirement: TDS still must be deducted and deposited on time. Union Budget 2026 removes the TAN requirement for many resident buyers in these NRI deals, but it does not remove the withholding obligation. The big operational change is that buyers can deposit TDS using PAN-based challans instead of first applying for a TAN.

Current as of: February 4, 2026.

1) Overview of the Budget change (TAN eliminated for many NRI-property TDS payments)

Union Budget 2026 removes the need for resident buyers to obtain a Tax Deduction and Collection Account Number (TAN) solely to deduct and deposit TDS on the purchase of property from a non-resident seller.

In practical terms, this means:

• A buyer can use PAN-based challans to deposit TDS for certain Section 195 property transactions.
• The earlier “get TAN first” step no longer blocks the payment and registration timeline for many buyers.

This change targets a common pain point in NRI transactions: buyers were forced into an extra registration process before they could pay TDS properly.

2) What TAN elimination means for buyers (fewer steps, fewer delays)

Before this Budget change, many buyers had to apply for TAN using Form 49B. Processing could take 2–3 days or longer, and timing issues could derail closings.

Now, the buyer can typically proceed with:

• Deducting TDS at the time of payment, and
• Depositing it through PAN-based challans, without waiting for TAN issuance.

This often speeds up seller payouts (especially when banks require proof of TDS handling), and registration and handover, because tax paperwork is less likely to stall the deal.

This is especially helpful for joint buyers, where earlier practice could mean multiple TANs and repeated administrative steps.

3) TDS rates and thresholds that matter in NRI property purchases

The Budget change is procedural. The TDS math remains the hard part.

Commonly cited ranges in NRI property sales

NRI property sales often face higher withholding than resident-to-resident deals. Rates commonly discussed include:

• Long-term capital gains (LTCG): 12.5% (post-Budget 2024 change, without indexation, as commonly cited), plus surcharge and cess where applicable.
• Short-term capital gains (STCG): often aligned to slab rates, which can push effective withholding higher.
• Practical withholding ranges are frequently described as 12.5% to 20%+, and an effective 14.95% on LTCG is often cited in common examples once surcharge/cess are factored.

Also, deals above ₹50 lakhs tend to draw extra attention, because buyers and registrars are used to thresholds in resident-property TDS rules. For NRI sales under Section 195, the compliance focus is typically on correct withholding and deposit mechanics.

⚠️ Warning: In many NRI deals, TDS is applied on the gross sale consideration unless a lower deduction certificate is obtained. That can create cash-flow shock for sellers.

Because rates and applicability depend on facts, many parties use a CA or cross-border tax adviser to confirm the correct section and rate.

4) Administrative benefits and cost savings (what gets easier)

Removing TAN from the buyer’s “must do” list can reduce friction in several places:

• No TAN application step (Form 49B), and fewer identity-document back-and-forths.
• Fewer issuance delays tied to TDS paperwork that parties wait for during closing.
• Joint buyer simplicity, because tracking and payment references can flow through PAN.
• Cleaner visibility in tax records, since credits and deposits can be tracked through information statements like Form 26AS.

The compliance burden drops the most for first-time buyers and salaried residents who do not otherwise have a TAN.

5) Residual obligations: what still must be done (and what can reduce withholding)

Even after TAN removal, these deal steps remain central:

A. Deduct TDS at the time of payment

TDS is typically deducted when payment is made or credited, not later at registration.

B. Deposit TDS promptly

A commonly followed timeline is deposit by the 7th of the next month after deduction. Parties should confirm the exact due date and process under the applicable rules and current notifications.

C. Ensure the transaction reflects correctly in information statements

The deposit should show up for the seller in their records (often through AIS and Form 26AS), because sellers rely on that to claim credit.

D. Verify seller identity and tax details

Expect to verify:

• Seller PAN (and often passport/overseas address proofs), and
• That the PAN is correctly quoted in the deposit flow, because PAN-based challans depend on accurate PAN mapping.

E. Consider lower withholding routes when legally available

If the seller’s real tax liability will be lower, the seller can sometimes seek reduced withholding under:

• Form 13 / Section 197 (lower or nil deduction certificate), often relevant where exemptions may apply, including:
• Section 54 / 54F reinvestment routes, or
• eligible bond investments (commonly discussed in practice for certain reinvestments).

Lower withholding is paperwork-heavy, but it can prevent excessive cash being locked until a return is processed.

6) Practical implications for deal-making (how buyers and NRIs should plan)

This change is meant to reduce friction for “small taxpayers” and routine home purchases. In the market, it can:

• Improve real estate liquidity, because NRI sales often got delayed on compliance mechanics.
• Reduce scrutiny events caused by missing TAN or mismatched payment references.
• Make it easier for buyers to coordinate with lenders, because payment flows can be documented faster.

Still, the best deals are the ones where tax steps are staged early. That means:

• verify the seller’s PAN up front,
• confirm if a lower deduction certificate is feasible, and
• agree in writing who will handle deposit proof and documentation.

Eligibility: who can use the simplified PAN-based process?

Because the Budget change is aimed at resident buyers handling NRI-property TDS, use this checklist before you assume you can skip TAN.

Eligibility checklist (buyer-side)

Step-by-step filing process (India compliance) with key form names

This is a practical sequence used in many NRI transactions. The exact portal steps can vary, so confirm with your Indian tax adviser.

Step 1: Confirm seller’s residency and documentation

Collect seller’s:

• PAN,
• passport and overseas address proof (often requested),
• tax residency facts and contact details.

Step 2: Estimate the correct withholding

Determine whether the gain is treated as LTCG or STCG, and confirm the applicable rate and surcharge/cess assumptions. If withholding is on gross consideration, model the cash impact.

Step 3: Decide if a lower deduction certificate is needed

If the seller expects exemptions or a lower final tax, discuss Form 13 (Section 197) early. This can take time.

Step 4: Deduct TDS at payment time

Deduct TDS from each payment tranche as required. Keep a payment-by-payment worksheet.

Step 5: Deposit TDS using PAN-based challans (post-Budget change)

Instead of first applying for TAN (Form 49B), buyers can deposit using PAN-based challans, where allowed. Keep the challan identification details and payment confirmation.

Step 6: Share deposit proof with the seller

Sellers often need the proof to claim TDS credit and support remittance paperwork and bank queries.

Step 7: Track credit in Form 26AS / AIS

Confirm the deposit reflects properly. Mismatches often come from incorrect PAN entry.

Documents you’ll need (checklist)

Buyer-side (India transaction)

• Buyer PAN
• Seller PAN (plus passport/OCI details often requested)
• Signed agreement to sell and sale deed drafts
• Payment schedule and bank proof for each tranche
• TDS computation note (rate, base amount, surcharge/cess assumptions)
• PAN-based challan payment receipts and reference numbers
• Any lower withholding certificate, if issued (Section 197 / Form 13 outcome)

Seller-side (NRI planning)

• Prior purchase documents and cost records
• Improvement cost records, if relevant
• Evidence to support exemptions claimed (such as reinvestment records)
• Indian tax account access to track AIS / Form 26AS

U.S. tax filing impact (Tax year 2026, filed in 2027): reporting Indian property and claiming foreign tax credits

Many NRIs are also U.S. tax residents (H-1B, L-1, green card holders, and substantial presence filers). If you are a U.S. tax resident, you generally report worldwide income.

Common U.S. forms triggered by an India property sale or rental include:

• Form 1040 (U.S. Individual Income Tax Return) for tax year 2026.
• Form 8949 and Schedule D for capital gain reporting.
• Form 1116 (Foreign Tax Credit) if you want to claim credit for Indian TDS withheld.
• FinCEN Form 114 (FBAR) if your foreign accounts exceeded $10,000 aggregate at any time during 2026.
• Form 8938 (FATCA) if you meet thresholds for specified foreign financial assets.

IRS primary reference: Publication 519 explains residency rules for immigrants and visa holders. See irs.gov/pub/irs-pdf/p519.pdf. Filing rules and forms are at irs.gov/forms-pubs.

Foreign reporting thresholds (quick reference)

FBAR is filed with FinCEN, not the IRS, but the IRS explains it on irs.gov/individuals/international-taxpayers.

Deadlines and extension options (U.S. return + foreign reporting)

For tax year 2026 (filed in 2027), the standard deadlines follow the usual calendar.

If you live outside the U.S. on the regular due date, you may qualify for an automatic filing extension, but interest rules still apply. See IRS guidance at irs.gov/individuals/international-taxpayers.

IRS resources and when to get professional help

Helpful IRS starting points:

• International taxpayer hub: irs.gov/individuals/international-taxpayers
• Forms and instructions: irs.gov/forms-pubs
• Residency and filing status for visa holders: Publication 519 at irs.gov/pub/irs-pdf/p519.pdf

When professional help is worth it:

• You sold Indian property and had large TDS withheld, and need Form 1116 planning.
• You changed U.S. residency status in 2026 (dual-status returns can be tricky).
• You have multiple foreign accounts and may need FBAR plus Form 8938.
• You are coordinating India withholding relief (Form 13 / Section 197) with U.S. filing positions.

Action items before you close or file: confirm the seller’s PAN, confirm the TDS rate basis, keep all PAN-based challan receipts, and align Indian TDS credits with your U.S. foreign tax credit filing for tax year 2026.

⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.