You can say that you have deducted in good faith as per information received by you. You can claim the balance tds from the seller now

Obtain an affidavit from seller that he is resident Indian and only 1 per cent TDS be deducted 

Under Section 271 C a person who fails to deduct the whole or any part of tds is liable to pay sum equal to the amout of which  such person failed to deduct. But under Section 273B in case the person proves that there was some reasonable cause for failure to deduct the penalty under Section 271C waived. In you case you can establish that the fact of seller being nri is concealed from you. That is valid cause.  

You may verify the documentary proof he has submitted to prove his residential status.

If you are satisfied by the documents he submitted then you don't have any reason to suspect him.

If he is found to indulge in fraudulent activity for wrongful gains at a later stage then he only is liable for the consequences.

You cannot be held responsible for any such act because you have exercised due diligence about his residential status at the time of buying the property hence you cannot be held liable for the consequences for suppressing the facts material to the purchase of this property.

Dear sir/ma'am,

Instead of relying upon an oral statement made by the seller to assure you that he is an Indian resident, it is advised that you ask him to make an affidavit stating that he is resident of India.

You can also refer to other legal documents given to you at the time of purchase to satisfy that there you had no reason to believe he was not an NRI and that he is a resident of India.

If these conditions are met, you can easily defend yourself in any future legal scenario. This is because you did not have any reasonable ground to suspect that he was an NRI and it was his fault that he suppressed material facts from you. Your actions will be completely justified and valid as you have done in them in good faith and in accordance with the law. Thank you.

A NRI if not a foreign passport holder can declare to be Indian and having temporary residence in India.

There is no legal hindrance in it. 

- As per law , An NRI can only sell residential or commercial property in India to a person residing in India or to an NRI or a PIO (Person of Indian Origin). 

- Further, when an NRI sells property, the purchaser is liable to deduct TDS @ 20%.

- Hence, if that person is living abroad i.e. NRI , then you should deduct TDS at the rate of 20 percent and not 1.

- However, if he already residing in India , then you can purchase the house from him.