If you are planning to purchase a property from a resident Indian and if the sale consideration exceeds the specified limit then TDS is deducted u/s 194IA. However, when a resident purchases a property from NRI, the procedure, TDS rates, and compliances are different. Further, TDS is deducted on Capital Gain Income from such property and not on the sale consideration. Also, the rate of TDS is as per section 195 of the Income Tax Act.
What is the TDS Rate on the sale of property by NRI?
As per section 195(1), the person has to deduct the tax at the rates in force. The rate in force means the rate at which a particular type of income is taxable under the provisions of the Income Tax Act. Hence TDS rate is the same as applicable to capital gain income.
In the case of Long Term Capital Gains (if the property is held for more than 24 months), then the rate of TDS will be 20% and in the case of Short Term Capital Gains (if the property is held for less than 24 months) the rate of TDS will be 30%.
Following are effective rates of TDS in case of Long Term Capital Gains(LTCG) on property purchases from NRI Individual/ HUF :
| Particulars | LTCG is less than INR 50 Lakhs | LTCG is from INR 50 Lakhs to INR 1 Cr | LTCG is more than INR 1 Cr |
| Capital Gain Tax Rate | 20% | 20% | 20% |
| Add: Surcharge | NIL | 10% of the above tax rate | 15% of the above tax rate |
| Total Tax Rate | 20% | 22% | 23% |
| Add: Health & Education Cess (w.e.f. 01/04/2018) | 4% of the total tax rate | 4% of the total tax rate |
4% of the total tax rate |
| Effective TDS Rate | 20.8% | 22.88% | 23.92% |
Similarly, In the case of Short Term Capital Gains (STCG), the surcharge and health & education cess are added to the applicable income tax slab rate.
On what amount of property TDS is required to be deducted?
TDS is required to be deducted from the capital gains. The seller will be able to determine the amount of capital gain arising in his hand from the sale of the property. Moreover, the seller needs to intimate the capital gain amount to the buyer for deduction of TDS at the effective applicable rate. Also, if the buyer is unable to get the capital gain amount then it is advisable to deduct TDS on the entire sale consideration to avoid lesser deduction of TDS, interest and penalties thereon.
Repatriation of Proceeds of Sale of Property by NRI
NRI’s are permitted to repatriate a total amount of USD 1 Million per financial year out of the total balance held in their NRO account. Also, the remitter is required to furnish information to the authorised dealer in Form 15CA or 15CB while sending the remittance to a non-resident. Form 15CA is to be filled by the remitter whereas Form 15CB is a certificate given by the Chartered Accountant.
What are the compliance requirements?
Following compliance to be taken care of:
- The buyer needs to obtain a TAN (Tax Deduction and Collection Account Number) which is different from PAN. Also, the buyer needs to apply for TAN before the deduction of TDS.
- TDS is deducted at the time of making payment to the NRI.
- The TDS deducted by the buyer is required to be deposited with the government within 7 days from the end of the month in which the TDS has been deducted.
- Once TDS is deposited, the buyer is required to furnish a quarterly TDS Return in Form 27Q.
- The buyer is also required to furnish Form 16A to the seller of the property within 15 days from the date of filing the TDS Return. Further, the buyer can download the certificate from the TRACES.
FAQs
Yes, NRI can also apply for tax deductions at lower rates to the assessing officer of income tax. The seller can apply in Form 13 to obtain a Nil/lower rate TDS certificate.
In case the buyer fails to deduct or deposit TDS within the time period they will liable to pay a penalty under section 271C. Here, the buyer or defaulter would be required to pay a penalty amounting to a sum equal to the TDS not deducted or TDS not paid.
If the seller of the property is an Indian resident and the consideration exceeds INR 50,00,000 then the buyer is required to deduct TDS and file form 26QB. While if the seller is NRI, the buyer is required to deduct TDS from the capital gain amount and file form 27Q.
Property was never completed, in the process of getting refund through RERA. Looks like they are only going to refund the amount paid to builder, not the TDS paid to Income Tax department, not sure how it works. Does TDS eventually goes to the builder? I was paying 1% of demand amount to IT department. Is it possible to get the TDS back?
No worries. The TDS will reflect in your 26AS and AIS / TIS. Based on that you can file ITR and get back your TDS amount. Ensure you collect the challan for TDS payment and Form 27Q (after respective Quarter finished). You are entitled to keep the records.
Thanks @Srikanth Last TDS was paid July 2018, paid around Rs. 40k total in TDS since Oct 2013. How do I file ITR? Can I still claim starting from 2013?
I think you need professional help. Wait for Quicko response.
ok thanks I managed to log in to income tax e filing but it’s not very user friendly.
Hi @khadanja
As rightly said by @Srikanth, the TDS will be reflected in your form 26AS for AY 2023-24, so you can claim the same as tax credits while filing your ITR.
However, you cannot claim the TDS since 2013.
In case you want more clarity, you can Ask an Expert.
Hope this helps.
Do I need to log in to TRACES to claim TDS refund for last year or income tax e filing portal. Do I require a physical token for traces?
Hi @khadanja
You can claim the TDS while filing your ITR.
Hey @Ankit_Gupta1,
The nature of remittance will be long-term capital gains. Moreover, the filing of Form 15CA/CB depends on the transaction amount.
You can connect with the respective bank to confirm the requirement of Form 15CA/CB.
You can also Book a MEET, if you want our assistance in filing Form 27Q.
Hope this helps!
Hey @Prem_shivaprasad,
This seems like a case-specific query and more details would be required to help on the same.
You may connect with one of our tax experts who can help you with this by booking a MEET.