Of all the reforms announced in Union Budget 2026-27, this one arguably carries the most immediate practical impact. Effective October 1, 2026, resident Indian buyers purchasing immovable property from Non-Resident Indians will no longer be required to obtain a Tax Deduction Account Number (TAN) before deducting TDS.

Under the old framework, every individual or HUF (Hindu Undivided Family) buyer who purchased property from an NRI was required to:

• Apply for and obtain a TAN before the transaction closed
• File quarterly TDS returns using Form 26Q under their TAN
• Deposit TDS via TAN-linked challans
• Ensure the NRI seller received credit via Form 26AS

This process could delay deal closures by two to four weeks — a significant friction point in time-sensitive property markets. Many genuine transactions fell apart simply because buyers were unwilling to navigate TAN bureaucracy for a one-time purchase.

Now, buyers can use their PAN for the entire process — deducting, depositing, and reporting TDS using a simplified Form 26QB-like mechanism. The NRI seller’s credit flows automatically into their AIS (Annual Information Statement) and Form 26AS, eliminating the dependency on TAN-linked filings.

India’s rental market has long operated in a grey zone of under-reporting and informal agreements. The 2025-26 regulatory cycle has changed this substantially. New rules mandate that rental agreements — regardless of whether the landlord is a resident or NRI — must be registered with the local Rent Authority within 60 days of execution.

For NRI landlords specifically, the tax compliance dimension is equally strict. Tenants paying rent to NRI landlords are required to deduct TDS at 30% plus applicable surcharge and education cess (effectively 31.2% for most NRIs) under Section 195, regardless of the monthly rental amount. This contrasts sharply with the 2% TDS applicable under Section 194-IB for resident landlords earning above Rs. 50,000 per month.

Key disclosure and compliance requirements now in effect include:

• Rental agreements must specify the NRI’s NRO account number, since rent received by NRIs must be credited to NRO accounts under FEMA guidelines
• Annual rent receipts and Form 16A must be issued to tenants for TDS compliance
• AIS (Annual Information Statement) now automatically flags rental income discrepancies when registered agreements are cross-referenced with ITR filings
• Security deposits are capped at two months’ rent for residential properties under updated model tenancy frameworks
• Annual rent hikes are limited to one revision per year, and subletting requires written landlord consent

The long-term capital gains (LTCG) tax change introduced in Budget 2024 continues to generate the most debate among NRI property sellers in 2026. Under the revised regime, LTCG on immovable property held for more than 24 months is now taxed at a flat 12.5% without indexation benefit — down from the earlier 20% with indexation.

At first glance, 12.5% sounds dramatically better than 20%. But the removal of indexation — the process that adjusts the original purchase price for inflation using the Cost Inflation Index (CII) — often results in a higher absolute tax liability for properties purchased 10 to 20 years ago.

Consider this practical scenario: An NRI purchased property in 2008 for Rs. 25 lakh. Today, it sells for Rs. 1.2 crore.

For even older properties, the gap widens further. The government has offered partial relief: sellers can opt for the old 20% indexed regime for properties purchased before July 23, 2024, by filing Form 10-IEA.

What NRIs must know:

• Holding period for LTCG on immovable property is 24 months (not 36 months as previously required)
• Section 54 exemption allows reinvestment of LTCG proceeds into a new residential property within 2 years (construction: 3 years) to claim full exemption
• Section 54EC bonds (NHAI, REC) offer up to Rs. 50 lakh exemption if invested within 6 months of sale
• NRIs must pay their capital gains tax before repatriation is permitted; repatriation is capped at USD 1 million per financial year after tax compliance

A quieter but operationally impactful change in the 2026 income tax framework is the revision of mandatory PAN quoting and TDS applicability thresholds for immovable property transactions. The threshold for mandatory PAN quoting has been raised from Rs. 10 lakh to Rs. 20 lakh, easing compliance for small and mid-value property transactions.

TDS under Section 194-IA — applicable when a resident Indian buys property from another resident Indian — is triggered only when the consideration exceeds Rs. 50 lakh (this threshold remains unchanged). However, the PAN threshold change reduces documentation friction for sub-Rs. 20 lakh deals, which are common in Tier-2 and Tier-3 cities and rural land markets.

Additional changes under this heading include:

• The new Income Tax Bill 2025 introduces a unified “Tax Collection at Source (TCS)” framework for high-value property transactions above Rs. 1 crore involving foreign nationals
• Form 26QB filing timelines have been tightened — TDS must now be deposited by the 30th of the following month (previously 7th)
• Mismatches between SRO (Sub-Registrar Office) registration values and ITR-reported values now trigger automatic AIS alerts, reducing under-reporting at the registration stage

This cluster of changes collectively strengthens the paper trail from registration to ITR filing, making it significantly harder to report property sale proceeds inconsistently across different forms and databases.

The Income Tax Bill 2025 — which consolidates and clarifies decades of accumulated amendments — introduces important structural changes to how income from house property is computed and taxed, effective from Assessment Year 2026-27 onwards.

The key clarifications and changes include:

• Standard Deduction: The 30% standard deduction on net annual value (NAV) is retained, but the Bill removes long-standing interpretational ambiguities about whether municipal taxes paid during a different financial year can be deducted in the year of payment. The answer is now explicitly yes — taxes paid during the year are deductible, even if they relate to a prior period.
• Pre-construction Interest: For let-out properties, pre-construction period interest remains deductible in five equal annual installments beginning from the year of possession. The Bill clarifies the definition of “pre-construction period” unambiguously, ending disputes at the AO level.
• Loss Set-Off Cap: Under the new tax regime (which is now the default regime), losses from house property cannot be set off against other income heads beyond Rs. 2 lakh. NRIs who are defaulting into the new regime without conscious opt-out should be particularly attentive, as large rental losses on leveraged properties can no longer shelter other income.
• Deemed Rent Rules: The new Bill retains the “higher of actual rent or municipal valuation” rule for computing annual value, but clarifies that properties genuinely left vacant and unsold — documented with evidence — can claim deemed rent waiver. This is significant for NRIs who have properties sitting empty in India.