Budget 2026 Expectations: Government May Ease TDS Rules on Property Sales to Provide Relief to NRIs
Non-Resident Indians (NRIs) may receive significant tax relief in the Union Budget 2026, as the government is expected to review and simplify Tax Deducted at Source (TDS) rules on property transactions. At present, the tax framework for residents and NRIs selling property in India is quite different, often resulting in higher compliance burden and financial stress for NRIs. Experts believe that rationalising these provisions could bring long-awaited relief to overseas Indians and make property transactions smoother.
Why NRIs Are Seeking Changes in TDS Rules
NRIs have been demanding reforms in property-related tax rules for several years. The biggest concern is that when an NRI sells property in India, a large portion of the sale value gets blocked as TDS, even when the actual tax liability may be much lower. This leads to cash flow issues and delays in accessing funds, especially for NRIs who rely on the proceeds for investments or personal needs abroad.
In contrast, resident Indians face much simpler and more predictable rules when selling property. The disparity between the two systems has often discouraged buyers from purchasing property from NRIs due to increased compliance requirements.
Different Tax Treatment for Residents and NRIs
Currently, when a resident Indian sells a property, the TDS rules are straightforward. If the property value is ₹50 lakh or more, the buyer is required to deduct 1 percent TDS on the sale value and deposit it with the government. The buyer does not need to obtain a Tax Deduction Account Number (TAN), and compliance is relatively simple through a challan-cum-statement.
However, the situation is very different when an NRI sells property. In such cases, the buyer must deduct TDS at much higher rates, obtain a TAN, deposit the tax separately, and file an e-TDS return. This increases paperwork, compliance costs, and procedural complexity for both the buyer and the seller.
Higher TDS Rates Increase Financial Burden
The TDS rates applicable to NRIs are significantly higher than those for residents. If an NRI sells property after holding it for more than 24 months, the buyer must deduct TDS at 12.5 percent on long-term capital gains (LTCG). If the property is sold within 24 months, the transaction is treated as a short-term capital gain, and TDS is deducted at a steep 30 percent rate.
Importantly, this TDS is deducted on the entire sale consideration, not just on the actual capital gains. As a result, a substantial amount of money gets withheld upfront, even though the final tax payable may be much lower after indexation and exemptions. Experts say this not only increases the tax burden on NRIs but also makes such transactions unattractive for buyers.
Complex Process for Lower or Nil TDS Certificates
While NRIs can apply for a Lower or Nil TDS Certificate from the Income Tax Department to reduce excessive tax deduction, the process is often time-consuming and complicated. It involves detailed documentation, multiple verifications, and long waiting periods. In many cases, property deals get delayed or even cancelled due to uncertainty around tax clearance.
Tax professionals believe that this process can be simplified significantly to improve ease of doing business in the real estate sector and enhance confidence among overseas investors.
Possible Changes Expected in Budget 2026
Experts suggest that the government could narrow the gap between tax rules for residents and NRIs in property transactions. One key expectation is that NRIs may be allowed to follow a simplified challan-cum-statement system, similar to resident sellers. This would reduce compliance pressure on buyers and ensure faster completion of transactions.
There is also hope that TDS rates could be rationalised or linked more closely to actual capital gains rather than the full sale value. Such a move would unlock funds faster for NRIs and make Indian real estate more attractive to overseas Indians.
Government’s Focus on Tax Simplification
Finance Minister Nirmala Sitharaman has consistently emphasised tax simplification. The introduction of the new income tax regime in Union Budget 2020 was a major step in this direction. Since then, the government has been working to make tax laws more transparent, efficient, and taxpayer-friendly.
In Budget 2026, experts believe the government may extend this approach to other areas of taxation, including property-related TDS rules for NRIs. Simplifying these regulations would not only benefit NRIs but also improve liquidity and participation in the real estate market.
Conclusion
If the government announces reforms to TDS rules on property sales by NRIs in Budget 2026, it could provide meaningful relief to lakhs of overseas Indians. Easier compliance, lower upfront tax deductions, and faster access to sale proceeds would make property transactions smoother and more attractive. All eyes are now on the upcoming budget to see whether long-standing concerns of NRIs finally receive policy-level attention.
