Will Budget 2026 Remove NRI Exit Barriers? TDS Rules in Focus

NRIs selling property in India often face a cash-flow hit because buyers deduct TDS under Section 195 and, in many cases, do it on the gross sale value. 

A Deloitte pre-budget note cited in an Economic Times report says 12.5% to 31.2%of an NRI seller’s sale proceeds can remain blocked with the tax department, affecting reinvestment and tax-saving timelines. 

For resident sellers, the process is simpler, with 1% TDS in many deals. 

Why Budget 2026 Is Being Pushed To Simplify Section 195 Compliance?

The key pain point is not just the rate, it is the buyer-side compliance. The Economic Times article updated on Jan 19, 2026, notes that for resident sellers, buyers use Form 26QB and deposit TDS through a straightforward challan-cum-statement route. 

For NRI sellers, buyers typically need to obtain TAN, deposit the tax, and file quarterly e-TDS returns (Form 27Q), a process many first-time homebuyers find intimidating. 

Here is the compliance gap that experts want narrowed in Budget 2026.
 

The “exit barrier” becomes clearer: the transaction can get delayed because the buyer fears mistakes, while the seller’s funds get held up upfront.

How The Situation Evolved: Rate Cuts Came, But Cash-Flow Pain Stayed

There has been rate movement, but the structural issue remains. An Economic Times piece dated Jan 14, 2026 notes that effective 23 July 2024, the base TDS rate on long-term capital gains for NRI property sales was reduced from 20% to 12.5%, plus surcharge and cess. 

However, it adds that the core problem persists because tax continues to be deducted on the gross transaction value, not the actual capital gain. 

Moneycontrol published on Oct 28, 2025, also explains the holding-period split: 12.5% (plus surcharge and cess) if held for 2 years or more, and 30% (plus surcharge and cess) if held for less than 24 months, with buyers responsible for compliance even if payments route through a bank loan. 

On timelines, CBDT Instruction No. 1/2014 dated Jan 15, 2014 states that as per the Citizen’s Charter, the decision timeline for lower or nil deduction certificates is 1 month. 

Here is what stakeholders are asking Budget 2026 to change.
 

The policy choice is sharp: simplify compliance without weakening tax collection safeguards under Section 195.

As reported by LoanJagat in its June 26, 2025 article, Form 27Q is a quarterly TDS return that must be filed for payments made to non-residents and foreign entities under provisions such as Section 195 of the Income Tax Act. The form is used to report details of tax deducted at source on non-salary payments like interest, dividends, or other sums payable to NRIs or overseas companies.

What Stakeholders Are Saying Ahead Of The Budget?

In the Economic Times report (Jan 19, 2026), Deloitte partner Divya Baweja says, “This long compliance creates challenges for the buyer” and adds that it can burden even sellers who may have no tax liability. CA Dr Suresh Surana warns quarterly filing and TAN requirements raise the compliance load for individual buyers.

Conclusion 

Budget 2026 will be judged on whether it reduces buyer friction and prevents excessive upfront withholding in genuine NRI property sales. Until then, NRIs will continue to rely on Form 13 and refund routes, with timelines remaining the biggest risk.