Budget 2026 Simplifies Property Tax Rules for Non-Resident Transactions
The Union Budget 2026-27 has introduced a significant simplification in tax compliance procedures for property transactions involving non-resident sellers. In a move aimed at reducing bureaucratic hurdles, the budget proposes allowing resident buyers to deduct and deposit Tax Deducted at Source (TDS) using their Permanent Account Number (PAN)-based challan, eliminating the need to obtain a separate Tax Deduction and Collection Account Number (TAN).
Current System vs. Proposed Changes
Under the existing framework, resident individuals or Hindu Undivided Families (HUFs) purchasing immovable property from non-resident sellers are mandated to obtain a TAN specifically for deducting tax at source. This requirement has long been criticized as creating unnecessary compliance burden for what are often one-time transactions.
The budget proposal seeks to amend Section 397(1)(c) of the Income Tax Act to exempt resident individuals and HUFs from obtaining TAN when deducting tax on consideration paid for property transfers involving non-resident sellers under Section 393(2). This change is scheduled to take effect from October 1, 2026.
Expert Reactions and Practical Implications
Chartered Accountant Jigar Suba welcomed the proposed change, noting that "TAN has no alternative use except for this single transaction. Now, buyers will deduct and deposit tax using their PAN, which simplifies the entire process significantly."
The modification is expected to deliver multiple benefits:
- Reduced compliance burden for resident buyers engaged in one-time property transactions
- Faster transaction cycles by eliminating the TAN application and processing time
- Streamlined documentation requirements for property registration
- Maintained tax compliance through PAN-linked reporting and payment systems
Broader Context and Implementation Timeline
This proposal forms part of the government's broader efforts to simplify property-related tax compliance and ease procedural requirements for resident buyers transacting with non-resident sellers. Currently, Section 397(1)(a) of the Income Tax Act requires every person deducting or collecting tax to apply for TAN allotment, with clause (c) providing exceptions.
It's important to note that under existing rules, buyers purchasing property from resident sellers are not required to obtain TAN for TDS deduction. The disparity created additional compliance burden specifically for transactions involving non-resident sellers.
Experts anticipate that the amendment will not only reduce documentation hurdles but also accelerate transaction timelines, making property deals involving non-resident sellers smoother while maintaining robust tax compliance through established PAN-based systems.
