As the real estate market in India continues to attract investments from Non-Resident Indians (NRIs), it’s imperative for both buyers and sellers to navigate the intricate web of compliance regulations. Here, we delve into the compliance requirements for both parties involved in the sale of property by NRIs.

Compliance by Buyer:

Buyers engaging in property transactions with NRIs must adhere to the following compliance guidelines:

1. TDS Deduction: Regardless of the property’s transaction value, buyers are obligated to deduct Tax Deducted at Source (TDS) when purchasing property from NRIs. Even if the property’s value is below Rs. 50 lakhs, TDS deduction is mandatory. To facilitate TDS deduction, buyers must obtain a Tax Deduction and Collection Account Number (TAN) by filling Form 49B.

2. Timely Deduction and Documentation: TDS must be deducted at the time of making the sales consideration payment to the NRI seller. It’s crucial to document the details of TDS deduction, including the deducted amount and the applicable rate, in the sale deed between the buyer and the NRI seller.

3. Prompt Deposit of TDS: The TDS amount deducted by the buyer should be promptly deposited through Challan No. ITNS-281 on or before the 7th of the subsequent month in which the deduction was made.

4. TDS Return Filing: Buyers must file the TDS return within 30/31 days from the end of the quarter in which the TDS was deducted.

5. Consideration of Lower Deduction Certificate: If the NRI seller provides a Lower Deduction Certificate, the TDS will be deducted at the rate prescribed in the certificate, ensuring compliance with applicable regulations.

6. Rate of TDS: The rate of TDS depends on the duration for which the property has been held by the seller. If held for more than 2 years, the TDS rate is 20%, plus surcharges if any; otherwise, it’s 30% plus surcharges.

7. TDS on Advance Payments: TDS should also be deducted on advance payments made towards the property also.

Compliance by Seller:

NRIs selling property in India must fulfill the following compliance obligations:

1. Application for Lower Deduction Certificate: Sellers can apply for a Lower Deduction Certificate by filing Form 13with the Income Tax Department. This certificate enables TDS deduction at a reduced rate, based on the computed Capital Gains.

2. Capital Gains and Tax Liability: Sellers can reduce their Capital Gains and consequent TDS liability by reinvesting the proceeds in another property.

3. Form 15CA & Form 15CB: To repatriate the sale proceeds outside India, NRIs must submit Form 15CA and Form 15CB to the bank, which can only be generated by a Chartered Accountant.

4. DTAA Benefit: Sellers can claim benefits under Double Taxation Avoidance Agreements (DTAA) if the prescribed rates for Capital Gains taxation are lower. This requires a Tax Residency Certificate (TRC).

In conclusion, both buyers and sellers must meticulously adhere to these compliance guidelines to ensure smooth and legally compliant property transactions. By staying informed and proactive, parties can navigate the regulatory landscape with confidence and integrity.

Author Bio

Qualification: CA in Practice
Company: A D A M & CO
Location: Delhi, Delhi, India
Member Since: 08 Feb 2024 | Total Posts: 1
Chartered Accountant having vast experience of Taxation and Litigation matter ....Worked with BPCL , Blinkit , Fujifilm in past and currently associated as partner with A D A M & CO View Full Profile

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February 2024