For NRIs who own coastal Karnataka land — often inherited from a family holding in Udupi, Uttara Kannada, or Dakshina Kannada — the sale process has historically carried an administrative burden that had nothing to do with the property itself. Any resident buyer purchasing NRI-owned property valued above ₹50 lakh has been required to apply for a Tax Deduction Account Number (TAN) simply to deduct and deposit the applicable TDS. For a routine plot purchase in Kundapur or Marvante between two individuals, that meant one more bureaucratic step, additional professional fees, and typically a seven to fifteen working day delay to source and process the TAN before the transaction could complete.
Finance Minister Nirmala Sitharaman’s Union Budget 2026-27 removes this requirement. From October 1, 2026, resident buyers can deduct TDS on property purchases from NRIs using their own PAN, without a separate TAN. The change is administrative rather than economic — the TDS rate itself does not change — but the friction reduction is meaningful for a market where NRI ownership is common and buyer patience is finite.
What is not changing
Several rules remain intact and should not be confused with the TAN removal.
TDS rates are unchanged. The buyer must still deduct 20% TDS on long-term capital gains (property held for more than two years) and 30% on short-term gains. On non-agricultural land transactions above ₹50 lakh, the TDS obligation continues to rest with the buyer, not the seller.
The RBI Portfolio Investment Scheme changes affect equities, not real estate. The Budget also raised the individual Person Resident Outside India (PROI) investment limit from 5% to 10% and the aggregate limit from 10% to 24% — but that applies to listed equity holdings, not to direct real estate. If any news coverage suggests that real estate has been further liberalised for NRIs by these limit changes, verify the underlying rule before drawing a conclusion.
FEMA and RBI rules on repatriation still govern. An NRI seller who receives sale proceeds still needs a Foreign Inward Remittance Certificate (FIRC) at the time of original purchase and Form 15CA/15CB before repatriation. The TAN removal has no bearing on either.
What the change means for a Kundapur or Karwar land transaction
Consider a common scenario on the Karavali coast. An NRI in the UAE inherits a two-cent Marvante plot from a Tulu Nadu family holding. A resident buyer in Bengaluru or Manipal wants to acquire the land at market rate. Under the old rule:
- The buyer must apply for a TAN (typically 7-15 working days).
- Once obtained, the buyer deducts TDS (20% on the long-term capital gain), deposits it, and issues Form 16A to the NRI.
- The transaction completes.
Under the new rule, effective October 1, 2026:
- The buyer uses their existing PAN to deduct TDS at the same rate.
- Deposit and Form 16A issuance follow the standard PAN-based process.
- The 7-15 working days spent obtaining the TAN are eliminated.
For NRI sellers, this reduces the number of transactions that stall or get renegotiated during the TAN wait. For resident buyers who previously avoided NRI-owned property because of the added compliance, the choice widens.
The specific coastal Karnataka context
Coastal Karnataka has a higher-than-average concentration of NRI-owned land. This is a function of the diaspora — significant Tulu Nadu and Uttara Kannada populations in the UAE, Saudi Arabia, Qatar, Kuwait, Oman, and Bahrain have retained ancestral holdings across Kundapur, Marvante, Byndoor, Murudeshwar, Bhatkal, Gokarna, and Karwar. A substantial share of the buyer-facing plot inventory at any given time carries an NRI seller.
The TAN removal is therefore likely to have a proportionally larger impact on this coast than on markets with fewer NRI holdings. It does not, on its own, change asking prices or transaction volumes. But it removes one specific reason for a buyer to walk away or ask for a discount to compensate for the administrative burden.
What NRI sellers should do before October 1
- If a transaction is currently in progress and the buyer has not yet obtained a TAN, it may be worth aligning the closing date with the October 1 change if the buyer prefers to avoid the TAN process. This is a scheduling choice, not a tax planning strategy.
- The tax obligation on your capital gain does not change. Do not delay a sale in the expectation of a lower TDS rate — the rate itself is unchanged.
- Documentation still matters. Title, mutation, latest khata extract, CRZ classification certificate for coastal plots, RTC/Pahani for agricultural land, and encumbrance certificate are still what determines whether a sale can complete promptly — well before the TDS step.
What resident buyers should do
If you have been holding back from an NRI-owned plot because of the TAN process, that specific barrier lifts on October 1. Beyond the compliance change, standard buyer diligence continues to apply: RERA verification where the transaction is under-construction, CRZ certificate, HTL survey documentation for beachfront plots, and confirmation that the seller’s Overseas Citizen of India (OCI) or Non-Resident Indian (NRI) status is current — the tax residency status at the date of transaction, not at the date of the property’s original purchase, determines the applicable TDS rate.
The bottom line
The Budget 2026 change is not a tax cut. It is a compliance simplification that removes a specific administrative bottleneck. For coastal Karnataka’s NRI-seller / resident-buyer flow, that bottleneck has been meaningful for years. Its removal, on its own, will not shift the market — but combined with the ongoing NH-66 six-lane widening and the Mangaluru port connectivity flyover, it reduces the small stack of frictions that have historically slowed transactions on the coast.
If you are considering a coastal Karnataka land transaction that involves an NRI counterparty and want a source-referenced view of the current position — or a documentation checklist tailored to the specific plot and the timing — talk to an advisor.