Chartered Accountant · ICAI M.No. 153926 · FRN 136869W · Reviewed on 12 October 2026
Rural or urban: the test that decides everything
Land is rural — and outside the capital-asset net — if it sits outside a municipality/cantonment, or beyond the notified distance from one: broadly 2 km from a municipality of 10,000+, 6 km from 1 lakh+, 8 km from 10 lakh+, measured aerially, with population taken from the last published census. Get the municipal certificate and the distance evidence before the sale — this single classification decides whether any Indian tax arises at all.
Why NRIs can’t borrow the 194-IA exemption
Resident-to-resident sales use section 194-IA, which expressly excludes agricultural land. A purchase from a non-resident is governed by section 195 instead (section 393(2) of the Income-tax Act 2025, for payments from 1 April 2026) — TDS on any sum chargeable to tax, no threshold. So: urban agri land sold by an NRI → the buyer deducts in full — TAN plus Form 27Q (Form 144 from 1 April 2026), or, for an individual or HUF buyer from 1 October 2026, Form 141 with its Schedule E and no TAN (CBDT Notification 121/2026). Rural agri land → the gain itself is not chargeable, so in principle there is nothing to deduct — but the buyer carries the risk of that call.
Giving the buyer comfort — and keeping the proof
Buyers’ lawyers dislike relying on the seller’s say-so. The clean solutions: a nil-deduction certificate (Form 13 under section 197; from 1 April 2026, Form 128 under section 395(1) of the 2025 Act) from the International Taxation AO, or a documented file (census population, tehsil distance certificate, land records showing agricultural use) backing a chartered accountant’s opinion. Remember the state side too — agricultural-land purchase by NRIs is restricted under FEMA; selling inherited agri land is permitted, with sale proceeds routed through NRO. Our NRI property practice runs the classification, the certificate and the repatriation as one file.