The concept of TDS was introduced with the aim to collect tax from various sources of income. As per this concept, a person (deductor) who is liable to make a payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government (Through Challan). The deductee from whose income tax has been deducted at source would be entitled to get a Tax credit. This Tax Credit is shown in Form 26AS and the deductee gets a Tax certificate as well. This Tax credit is just like an advance tax which can be used while setting off the Net Tax liability at the time of filing the Income Tax Return.

Section 195 of the Income Tax Act, 1961 mandates Buyer to deduct TDS on the purchase of a property from NRI in India.

In case the seller is a resident Indian, then the buyer should deduct the TDS of the seller at the rate of 1% of the Sale price.

The residential status of the buyer would not be considered and only the residential status of the seller would be considered for computing the amount of TDS to be deducted.

If the TDS is wrongly deducted or not deducted, the Income Tax Dept will not do anything to the seller but will catch hold of the buyer of the property to deposit the TDS. If the buyer forgot to deduct the TDS or deducted less TDS – the Income Tax Dept will recover the TDS from the buyer.

It is also to be noted that, the Registrar registers the property without seeing the fact that TDS is deducted or not. It is the sole responsibility of the Buyer to do this compliance. Generally, Property is taken on Loan, Banks advised buyers to deduct TDS and provide them TDS Challan.

Residential status based on the number of days of stay in India –

Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies any one of the following conditions:

• He has been in India during the previous year for a total period of 182 days or more, or
• He has been in India during the 4 years immediately preceding the previous year for a total period of 365 days or more and has been in India for at least 60 days in the relevant previous year.

If the individual satisfies any one of the conditions mentioned above, he is a resident. If both the above conditions are not satisfied, the individual is a non-resident.

Exceptions:

Condition (b) is not applicable in the following cases

(1)        Indian citizen, who leaves India during the relevant previous year as a member of the crew of an Indian ship or for purposes of employment outside India, or

(2)        Indian citizen or a person of Indian origin who, being outside India comes on a visit to India during the relevant previous year.

However, such a person having a total income, other than the income from foreign sources [i.e., income which accrues or arises outside India (except income from a business controlled from or profession set up in India) and which is not deemed to accrue or arise in India], exceeding Rs. 15 lakhs during the previous year will be treated as resident in India if –

–           the period of his stay during the relevant previous year amounts to 182 days or more, or

–           he has been in India during the 4 years immediately preceding the previous year for a total period of 365 days or more and has been in India for at least 120 days in the previous year

TDS on the Sale of Property by NRI is required to be deducted as per the rates mentioned below: –

The above Rates are exclusive of the Surcharge (Depends on Income) and Education Cess (4%).

Therefore, the effective rate of TDS on the sale of property by NRI in case of Long-Term Capital Gains would be as follows:

If the Property Sale Price exceeds Rs. 2 crores, then the surcharge has been capped at 15%. So TDS rates will remain the same i.e. 23.92%

In case of Short Term Capital Gains (i.e. if the Property has been held for less than 2 years by the seller), this Surcharge and Cess would be added to the applicable Tax Rate as per the Income Tax Slabs in the same manner as explained above for Long Term Capital Gains.

This TDS is required to be deducted whenever any payment is made to the NRI for the purchase of the property. Even if any advance is being paid for the purchase of property – TDS is required to be deducted.

This TDS is required to be deposited by the buyer with the Income Tax Dept stating that this is the TDS that he has deducted from the payment made to NRI.

Moreover, this TDS on the purchase of Property from NRI is required to be deducted irrespective of the Transaction Value of the Property. Even if the value of the property is less than Rs. 50 Lakhs – this TDS is required to be deducted.

Yes, the rate of TDS can be lowered by filing an application in Form 13 with the Income Tax Department. and request the Assessing officer to compute his Capital Gains and issue a Certificate of a lower rate of deduction. The procedure for filing this form is quite lengthy and complicated, we suggest seller take the help of a chartered accountant for filing Form 13.

While Filing Form 13 with the Income Tax department following things to be done:

• Buyer must apply TAN for deduction of TDS. (in case of more than one buyer, TAN should be applied by all Buyer)
• Estimated Computation of Income for the previous year in which property is to be sold.
• Computation of Capital Gain to be shown.
• Upload the Last Four-Year Income Tax return with Computation (if any).
• Upload Buyer Seller KYC Documents. (Passport is mandatory for Seller).
• Upload Registry Papers and Agreement to Sell.

There may be other documents that will be demanded by the Income Tax department while scrutinizing the Form 13 application.

When the Income Tax department is satisfied, they will issue a certificate for a Nil/ Lower deduction of TDS depending on the capital gains arising on the sale of the property.

Once the certificate is issued by the Income Tax department, the seller is required to give this certificate to the buyer and the buyer will deduct the TDS as per the rates mentioned in the income tax certificate.

In case the Income Tax department rejects the application of Form 13 then TDS should be deducted from the Total Sale Price and not on the Capital Gains at the rate of 20% in case of Long term capital gain. Therefore, it is very important for the seller to obtain this certificate from the Income Tax Officer.

This is to note that the rate mentioned in the certificate Issued by Income-tax Department is excluding Surcharge and Cess. We must add on as per the above calculation while deducting TDS.

(We also help NRI’s file Form 13 for reducing the TDS Rates and you can hire us for filing application for lower deduction of TDS through this link: https://www.itrfiling.co.in/request-for-quote/

One TDS lower deduction certificate will issue, Buyer pay TDS as per the rate specified and deposit the TDS to the government. Generally, TDS is to be paid within 7 days from the end of the month in which the TDS has been deducted. For example: If TDS is deducted in the month of August, then the TDS should be deposited with the Income Tax Dept on or before 7^th Sep.

Once TDS is paid then TDS Challan is generated on the Bank portal from where the TDS is deposited. TDS challan has essential details like TAN, Tax, interest, cess, surcharge, BSR Code, Challan No, and Date of deposit.

All the details mentioned in the challan will be required in filing the TDS return Form 27 Q. One thing is to be noted the TDS return will be submitted on a quarterly basis. Suppose you have deducted TDS on the month of August, then the TDS return is to be submitted after the end of September Month within 31 days.

But it doesn’t impact on Registry, as on the registered deed only challan is mentioned. For the safer side, Seller demanded a declaration that the Buyer will file the return and gives them a declaration that mentioned challan will be deposited on the PAN in the TDS return.

After the deposit of TDS and filing of the TDS Return, the buyer is also required to furnish Form 16A to the seller of the property, it is downloaded from the Traces portal of TDS CPC.

Link for payment of tax: https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp

or if your choice of bank is not in list then use this link:https://eportal.incometax.gov.in/iec/foservices/#/e-pay-tax-prelogin/user-details

• Try to get the Certificate from the Income Tax Department for the computation of Capital Gains which will lower the TDS to be deducted.
• Several documents like Purchase Price, Date of Purchase, any expenses on Renovation/ Construction, etc. would be required to be submitted along with Form 13. The Income Tax Officer will review these documents and if he is satisfied, he will issue a certificate for a lower deduction of TDS.
• In case the Seller is unable to get the Certificate, the TDS would be deducted on the Sale Value and will lead to excess deduction of TDS.
• Apart from the Property Registration Documents, the seller should also collect Form 16A from the Buyer.
• The seller can reduce his Capital Gains which will lead to lesser TDS and Tax Liability if the seller intends to reinvest the Capital Gains in India.
• In case the seller does not opt for this certificate, he can also apply for a Refund of the excess TDS deducted at the end of the year.
• In case there are 2 sellers (i.e. Co-owners), both of them would be required to file Form 13 separately for reducing the TDS Rates.
• The provisions of lower TDS Certificate apply to both NRI’s as well as OCI Card holders and OCI card holders can also avail of the benefit in the same manner.

• Deduct TDS at the time of each payment and not at the time of Registration of Property.
• The TDS so deducted shall be deposited with the Income Tax Dept as per the schedule for deposit of TDS.
• TDS Return shall also be furnished with the Income Tax Dept as per the schedule for the filing of TDS Return
• The Buyer shall also issue Form 16A to the seller after filing the TDS Return. Form 16A is a TDS Certificate that states that the buyer has deposited the TDS with the seller.
• In case of late payment of TDS – interest would be levied @ 1%/1.5% per month
• In case of late filing of TDS Return – A penalty of Rs. 200 per day would be levied. The Income Tax Officer may also levy a penalty of up to Rs. 1 Lakhs.
• In the case of a Home Loan, TDS is to be deducted when payment is made to the Seller and not when the EMI is paid to the Bank.
• The TDS would be deducted as per the above schedule on advance payments as well. TDS as per the above schedule would be applicable on all payments made before the issuance of the Lower TDS Certificate.

Generally, Countries levy Tax on the sale of property by their Residents irrespective of the location of the property. For eg: If an NRI residing in the UK sells property in India, then both UK and India will levy Tax on this transaction. UK will levy tax because the NRI is residing in the UK and India will levy tax because the property is in India leading to double taxation.

However, to claim the Tax paid in India, India has entered into Double Taxation Avoidance Agreements with several countries. These agreements state that if a person has paid Tax on the sale of property in India, then he can get a tax credit of the taxes paid in India which will reduce his tax liability in the other country.

Proper Disclosures are required to be made in this case in the country where the tax credit is being claimed. For instance, if you are an NRI based in the UK and you sell your property in India, you would be required to declare such gains/losses on the sale of property in your UK Tax Return And while paying taxes to the UK Govt, you can deduct the taxes paid in India since India has a Double Taxation Avoidance Agreement with UK.

NRIs are permitted to repatriate a total of only /up to USD 1 Million or approx. Rs. 7 crores per financial year per person out of the total balance held in their NRO Account.

NRIs would also be required to submit Form 15CA & Form 15CB to the Bank. These forms are required to be generated from the Income Tax Website and then submitted to the Bank.

Form 15CA may be generated by the NRI himself or by his Chartered Accountant but Form 15CB can only be generated by a Chartered Accountant. The Chartered Accountant is also required to sign and stamp the Form 15CB

In these forms, various disclosures including the source of funds to be repatriated is required to be made along with a declaration that all taxes have been paid on such funds in India