NRI Property Tax Issue: Indian (NRI), a non-resident of America, faced a lot of tax difficulties after selling his property in Pune. The Income Tax Department issued a huge tax-tax notice of ₹ 46 lakh to him. Interestingly, NRI had followed tax rules, yet they had trouble. Actually, the reason for this is the technical mistake of the buyer.
What is the whole matter of tax
According to the Delhi High Court’s order of 27 May 2025, the buyer deducted ₹ 18.68 lakh (20% TDS) out of the sale amount and deposited it to the tax department. But the form he used was wrong. NRI vendors have to use the prescribed form 27Q, but he used Form 26QB. This is for the resident vendors. Due to this, the stored TDS was not recorded in the vendor’s annual information statement (AIS) and he could not show it as a credit in his ITR.
Income tax notice of 26 lakhs
Unknown by the buyer’s mistake, NRI estimated its real capital gains tax liability ₹ 1.91 lakh and deposited it as Advance Tax. But the Income Tax Department considered him a non-manual due to not showing TDS credit in AIS and not filing ITRs that year. In March 2023, the department issued a notice under section 148 (b), stating that their income could not be evaluated.
NRI gave information about the submission of advance tax and the entire deal, but the tax department refused to accept it. In March 2025, the tax officer issued an order demanding more than ₹ 46 lakh tax and started the process of imposing a fine under Section 270A.
Even when the buyer confirmed the submission of TDS by showing the bank challan, the department did not give any concession by citing procedures related obstacles. According to his Standard Operating Procedure (SOP), the buyer’s written consent, an index bond, and other documents were needed to improve the form. At the same time, the bank was also delaying in converting the buyer’s request into the correct form.
Delhi High Court gives relief to NRI
Troubled by this, NRI approached the Delhi High Court. In the court, the Income Tax Department admitted that the tax had been deposited, but also said that under the procedure, there could not be a record improvement without the buyer’s consent.
The High Court asked that when the TDS deduction and its payment is not disputed, then why is the buyer’s consent? The department argued that doing so is necessary to avoid the refund claim of TDS by the buyer in future.
But the court, while giving a verdict in favor of NRI, said, “In this particular case we instruct the revenue department to improve the records and show the TDS deposited under Form 26QB in the credit of the seller (petitioner), when it was deposited from the date when it was deposited.”
The court also ordered that if the Income Tax Department is made a refund, it should be issued and all the old -contradictory orders and correspondence are canceled.
TDS dispute timeline
- 1998: NRI bought property in Pune.
- March 2015: The buyer signed an agreement to buy property for ₹ 2 crore.
- September 2015: The buyer deducted ₹ 18.68 lakh TDS and the remaining amount is given to NRI.
- October 2015: NRI assessed ₹ 1.91 lakh tax and submitted advance tax. But ITR did not file.
- March 2023: Income tax department issues notice under Section 148.
- March 2025: The department issued an order for ₹ 46.8 lakh tax demand, while NRI had given evidence.
- The AIS featured only ₹ 1.91 lakh advance tax entry, not TDS deposited by the buyer.
Take care of these things while selling NRI property
- Submit 20% TDS from the buyer only through Form 27Q. Form 26QB is only for resident vendors. Wrong form can become a huge problem.
- After the tax deduction, take its challan number and details and make sure that it is visible correctly in your AIS (Annual Information Statement).
- If you are paying tax in India, then file the income tax return of the concerned financial year on time. Not doing so can become ‘Non-Compliance’ in the eyes of the Income Tax Department.
- TDS deduction receipt, bank statement, sales agreement, receipt of advance tax payment- all these are made to explain to the court or department.
- If there is a technical or procedural disturbance, seek the help of a court or tax professional before the dispute escalations. Action at the right time can save your tax liability of crores.
Also read: SIP vs Home Loan: Buy a house or put money in SIP? Which option is better