Section 195 - TDS on income of non-resident or a foreign company - Sale of Property by NRI - Income Tax - Ready Reckoner - Income Tax

TDS on sale of property by NRI In India, whenever a property is bought or sold, TDS (Tax Deducted at Source) must be deducted. The buyer is responsible for deducting the TDS from the payment made to the seller and then depositing the deducted amount with the Income Tax Department. TDS deduction under section 195 Notwithstanding anything contained in section 195(1) and (2), the Board may, by notification in the Official Gazette, specify a class of persons or cases, where the person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall make an application in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed, the appropriate proportion of sum chargeable, and upon such determination, tax shall be deducted u/s 195(1)(i.e. deduct income-tax thereon at the rates in force) on that proportion of the sum which is so chargeable . [ Section 195(7) ] Threshold limit TDS on purchase of Property from NRI is required to be deducted irrespective of the Transaction Value of the Property. Even if the value of property is less than Rs. 50 Lakhs TDS is required to be deducted. Deduct income-tax thereon at the rates in force [ Section 195(1) read with section 112(1)(c) ] In case of LTCG - Where a non-resident (not being a company) or a foreign company, - (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and (ii) the amount of income-tax calculated on long-term capital gains (A) at the rate of 20% for any transfer which takes place before the 23rd day of July, 2024 ; and (B) at the rate of 12.5% for any transfer which takes place on or after the 23rd day of July, 2024 ; In case of STCG - The short-term gains would be taxed with the subjected income tax slab rates for the NRI established on the total income which is taxable in India towards NRI Payment of TDS deducted TDS deducted should have been deposited within 7 days from the end of the month in which TDS is deducted. For example, if TDS is deducted on 28 th June then the deposit due date is 07 th of July. TDS deducted is required to be deposited using Challan No./ITNS 281. To make the payment of TDS, the purchaser is required to obtain a TAN. If the purchaser does not have a TAN, they should apply for one using Form 49B. Furnishing statement of TDS [ Rule 31A ] TDS return is required to be submitted within 31 days from the end of the quarter in which TDS is deducted using TDS Form 27Q . TDS certificate(i.e. Form 16A) is required to be generated after filing TDS return within 15 days from the due date of submission of TDS return. Important Point must be remembered by the NRI seller Attempt to obtain the certificate from the income tax department to calculate the capital gains that would diminish the TDS to be deducted. Various documents such as Purchase Price, Date of Purchase, any expenses on Renovation/ Construction, and others need to be submitted including Form 13. The income tax officer would review these documents and if he accepted then he would provide a certificate for the lesser TDS deduction. When the seller is not able to get the certificate then the TDS shall be deducted from the sale value and will be rendered towards the surplus deduction of TDS. The seller must collect Form 16A from the Buyer. The seller would lower his capital gains that pointed towards the lower TDS and the tax liability if the seller has the intention to reinvest in the capital gains in India. If the seller does not choose this certificate then he would indeed apply towards the refund of the surplus TDS deducted during the finish of the year. If there are two sellers that are co-owners then both of them shall be needed to furnish Form 13 respectively to diminish the TDS cost. Important Point must be remembered by the Buyer Deduct the TDS during the time of every payment and not during the Registration of Property. The concern is that if the late TDS payment is furnished then the interest levied will be 1%/1.5% per month. Towards the case when the late filing of a TDS return is furnished Rs 200 penalty would be imposed under section 234E.