Understand TDS provisions for buyers and sellers in the sale of property in India by an NRI. Get insights into tax rates, implications, and advice for seamless transactions.
When a person purchases immovable property from a Non-Resident in India, He or She is liable to deduct TDS on the entire Sale Consideration (on every payment made to the seller, irrespective of the value of the Property) as provided under section 195 of the Indian Income Tax Act, 1961.
Let us first understand who is an NRI for Income Tax Purposes:-
1. If a person has resided in India for less than 182 days in the F.Y.
OR,
- If a person has resided in India for less than 60 days in the F.Y. AND less than 365 days in the immediately 4 F.Ys (Both conditions should be fulfilled)
- If an Indian citizen who leaves India in any FY for the purposes of employment or who leaves India as a member of the crew of an ‘Indian Ship” has resided in India for less than 182 days in that F.Y. AND less than 365 days in the immediately 4 F.Ys (Both conditions should be fulfilled)
- If a Citizen of India or POI (Person of India Origin), visiting India in any FY, having a total Indian Income lesser than Rs. 15 Lakh, other than income from foreign sources has resided in India for less than 182 days in that F.Y. AND less than 365 days in the immediately 4 F.Ys (Both conditions should be fulfilled).
- If a Citizen of India or POI (Person of India Origin), visiting India in any FY, having a total Indian Income of more than Rs. 15 Lakh, other than income from foreign sources has resided in India for less than 120 days in that F.Y. AND less than 365 days in the immediately 4 F.Ys (Both conditions should be fulfilled.
- It is advisable for every buyer who intends to purchase any Property, to ensure the Tax Residency Status of the Seller as the TDS provisions are totally different for a Resident Indian Seller and an NRI Seller.
In the case of the Resident Indian Seller, the TDS rate is @ 1% on the Sale Consideration above Rs. 50 Lakh, whereas in the case of NRI Seller, the minimum limit of Rs. 50 Lakh is not applicable. All property transactions, irrespective of the Sale consideration, attract TDS provisions u/s 195 of the Income Tax Act. The TDS rates prescribed by the Govt. of India for payment to an NRI for the acquisition of their property, which is held by the Seller for more than 2 years, come under the purview of Long-Term Capital Gains. The rate of TDS, Surcharge, and Education cess on transfer of immovable properties till 23.07.2024 is detailed in the following table for ready reference:
TDS rates on the Sale of property by NRIs, the transfer of which took place before 23.07.2024
| Particulars | Sale Consideration of the Immovable Property held by an NRI | ||||
| Less than
Rs. 50 Lakhs |
Between Rs. 50 Lakhs to Rs. 1 Crores | Between Rs. 1 Crore to Rs.2 Crores | Between Rs. 2 Crore to Rs. 5 Crore | Above Rs. 5 Crore | |
| TDS | 20% | 20% | 20% | 20% | 20% |
| Surcharge | Nil | 10% of above | 15% of above | 15% of above | 15% of above |
| Total Tax (Including Surcharge) | 20% | 22% | 23% |
23.% |
23.% |
| Health & Ed. Cess
|
4% of above | 4% of above | 4% of above |
4% of above |
4% of above |
| Effective TDS Rate | 20.8% | 22.88% | 23.92% |
23.92% |
23.92% |
Example: If an NRI person held the property for more than 2 years and is selling for a consideration of Rs. 1,50,00,000/- before 23.07.2024, then the buyer shall deduct TDS at the rate mentioned in the above chart. The same is worked out as under:-
| Sale Consideration | Rs. 1,50,00,000/- | |
| TDS @ 20% | Rs.30,00,000/- | |
| Surcharge @ 15% on
Rs. 30,00,000/- |
Rs. 4,50,000/-
|
34,50,000/- |
| Education Cess @4% on 34,50,000/- | Rs. 1,38,000/- | |
| Total TDS to be deducted | 35,88,000/-/- |
Hence the Seller will get only Rs. 1,14,12,000/- out of Rs. 1,50,00,000/- and the balance Rs. 35,88,000/- will be deducted by the buyer to deposit with the Income Tax Department as TDS.
In the Finance Bill 2024, the TDS rates on the sale of properties in India by an NRI have been changed in respect of the properties transferred on or after 23.07.2024.
The revised TDS rate effective from 23.07.2024 on the Sale of property by NRIs, the transfer of which took place on or after 23.07.2024
| Particulars | Sale Consideration of the Immovable Property held by an NRI | ||||
| Less than
Rs. 50 Lakhs |
Between Rs. 50 Lakhs to Rs. 1 Crores | Between Rs. 1 Crore to Rs.2 Crores | Between Rs. 2 Crore to Rs. 5 Crore | Above Rs. 5 Crore | |
| TDS | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 |
| Surcharge | Nil | 10% of above | 15% of above | 15% of above | 15% of above |
| Total Tax (Including Surcharge) | 12.5% | 13.75 | 14.375% | 14.375% | 14.375% |
| Health & Ed. Cess
|
4% of above | 4% of above | 4% of above | 4% of above | 4% of above |
| Effective TDS Rate | 13% | 14.3% | 14.95% | 14.95% | 14.95% |
Example: If an NRI person held the property for more than 2 years and is selling for a consideration of Rs. 1,50,00,000/- on or after 23.07.2024, then the buyer shall deduct TDS at the rate mentioned in the above chart. The same is worked out as under: –
| Sale Consideration | Rs. 1,50,00,000/- | |
| TDS @ 12.5% | Rs. 18,75,000/- | |
| Surcharge @ 15% on
Rs. 18,75,000/- |
Rs. 2,81,250/-
|
21,56,250/- |
| Education Cess @4% on 21,56,250/- | Rs. 86,250/- | |
| Total TDS to be deducted | 22,42,500/-/- |
Hence the Seller will get only Rs. 1,27,57,500/- out of Rs. 1,50,00,000/- and the balance Rs. 22,42,500/- will be deducted by the buyer to deposit with the Income Tax Department as TDS.
Here it is pertinent to mention that whether any Capital Gain Tax liability for the aforesaid transactions comes to the NRI Seller or not, the buyer is dutybound to deduct TDS on the entire sale consideration as per the above-prescribed rates or the rare prescribed in Lower/Nil Deduction Certificate issued by the Income Tax Department.
The obligation of the Buyer, if buying property from an NRI:- The buyer/s is duty bound to deduct the entire TDS amount as per the rate prescribed above ( The rate of TDS is different for the property transferred before 23.07.2024 and on or after 23.07.2024) on every occasion of making payment to the Seller (Or as per the rate prescribed in the Lower/NIL deduction Certificate obtained by the Seller from the Income Tax Department, which will be discussed in subsequent para).
The buyer has to apply for TAN (Tax Deduction Account No.) and get TAN in his/her name. If the purchases are made jointly and all persons are investing money from their own sources or by way of joint loans, all the persons have to obtain TAN. If the purchases are made jointly but only one person is making all investments and the names of other persons are included only for the sake of convenience, then TAN has to be applied only by the person, who is making the entire investment.
Once the TAN is obtained, the buyer is required to deduct TDS on every occasion of making payment to the NRI Seller and deposit the TDS amount with the Income Tax Department through e-challan latest by the 7th day of the next month which the payment is made to the Seller. After depositing the TDS, the buyer shall file TDS Return in the next quarter. Once the TDS return is filed, the buyer shall download form 16A and handover to the Seller. (It is advisable for the buyer to get the services of a Tax Advisor for proper deduction and payment of TDS).
Implication on the Buyer if the TDS is not deducted as per the prescribed Rate:- Many times the Seller does not disclose their Tax Residency Status to the buyer and completes the property transaction as a Resident Indian. This is illegal and has adverse ramifications for the Buyer. As discussed above, it is the legal responsibility of the buyer to deduct and deposit the TDS as per the prescribed rate or the rate prescribed in the Lower/Nil Deduction Certificate issued by the Income Tax Department. However, in a case, if the buyer did not deduct the TDS as per prescribed rates, the buyer shall be liable for a penalty for the equal amount of TDS, which was not deducted, u/s 271C of the Income Tax Act. The buyer shall also will be liable to pay interest u/s 201 of the Income Tax Act on the default sum.
Example:- Let us assume that the buyer purchases a property from an NRI, who held the property for more than 2 years, for a consideration of Rs. 1,50,00,000/- and deducts TDS @ 1% (As in the case of Resident Indian) i.e. Rs. 1,50,000/- and paid remaining Rs. 1,48,50,000/- to the Seller. However as discussed above, the TDS was to be deducted @ 23.92% i.e. Rs. 35,88,000/-. In this case, the buyer will have to pay the balance of Rs. 34,38,000/- (Rs.35,88,000/- less Rs. 1,50,000/-) by way of penalty to the Income Tax Department over and above the payments made to the Seller. Further interest u/s 201 will be charged on Rs. 34,38,000/- from the date of payment to the seller till the date of payment of Rs. 34,38,000/- to the Govt. account.
Advice to the buyers :- The Buyer is advised to make sure of the Tax Residency of the Seller before entering into the property transaction. If the Seller is Non-Resident, the TDS must be deducted at the prescribed rates on every payment made to the Seller. In case the Seller produces the Nil/Lower Deduction Certificate, deduct the TDS at the rate as given in the certificate.
Implication on the NRI Seller if the TDS is not deducted as per the prescribed Rate:- In most of cases the NRI person sells their property to get the funds abroad for utilisation. In the event of non-deduction of TDS as per rules, the Seller will not be in a position to repatriate the amount of Sale Consideration received to his foreign bank account/NRE account. Further, when the said transaction comes to the notice of the Income-Tax Department, the Seller can be prosecuted for misrepresentation of facts of his/her Tax Residency.
Advice to the NRI Seller:- It is advised to hire an Expert Tax Advisor if you are planning to Sell property anywhere in India, before entering into any negotiation, it will help you with proper Tax Planning. Always declare your Tax Residency Status to the prospective buyer and follow the Tax Laws of India. The proper TDS deduction shall in turn help you to repatriate the money seamlessly to your foreign bank account. In many cases, the actual Capital Gain Taxes are minimal or do not arise at all, depending upon the facts of the case. You can always make an application for a Lower/Nil Deduction of TDS with the Income Tax Department. In this scenario, the buyer will deduct the TDS only to the extent of the rate of TDS prescribed in the certificate (which shall save a good amount of liquidity and Taxes). Since obtaining a Lower/NIL deduction certificate is a complex procedure and requires professional expertise, it is advised to seek help from an expert Tax Advisor.
*****
We give consultation to NRIs who intend to Sell property anywhere in India, right from the beginning of the negotiation till the repatriation of funds in their NRE/Foreign Bank account. The Author may be contacted through email- [email protected] or through WhatsApp #9967745680.
(Republished with Amendments)
Author Bio
Sir
I am buying a property which is owned by 3 people one happens to be an NRI.
Question 1.
The property value is 2 Crores, do I deduct 14.95% from the total sale consideration or from the portion he is entitled to ?
Question 2.
Since he is entitled to only 1/3rd of share the value the NRI is entitled is less than 1 Crore in such case do I deduct 14.3 % or 14.95% considering the whole sale value ?
Thanks
Dear Team,
Need a quick help. I and my wife are joint owners of a property planned to purchase in Bangalore India. seller is NRI and had bought the flat in 2014 at 62 lakhs and is selling now at almost no price gain to us at 65 lakhs.
what is the TDS amount to be paid in this scenario? Seller has a TAN and Indian Aadhar but has BRITISH CITIZENSHIP.
After TDS clarity, please throw some light on BUYER TAN REQUIREMENT is needed or not?
Please specify the applicable TDS for Seller of an immovable property is an Overseas Citizen of India holding Canadian Passport. Regards,
Respected Sir, Kindly confirm whether the maximum surcharge which has been levied has been capped at 15% as per Budget 2022 discontinued in this Budget 2024. Since in your examples difference rate of surcharge was levied. Also confirm if some one has executed Agreement to sell before 23rd July 2024 but registry of such property suppose to be happen in after 23rd July 2024, then what would be the TDS rate either 20% or 12.5%. Sir also confirm even transfer took place after 23rd July 2024 buyer has deducted TDS at the rate 23.92%, then what is its repercussion. Thanks
Dear Sir
I am and NRI..selling one old apartment in Sept 24 to resident INDIAN and using this funds to settle loan amount taken by me for the purchase of new apartment which i acquired in March 24. What is my tax exposure sir ?
Dear Sanjeevi,
First, you should get the working of Capital Gains on the proposed sale of the old house. as the indexation is not available to NRI sellers now. If the LTCG on the sale of the old house is less than the amount invested in acquiring the new house, you may claim exemption under section 54 of the Income-tax Act as the new house was purchased within one year from the proposed date of sale. If there is no capital gains arising out from the sale of the old house or exempt u/s 54, you may utilise the funds received as per your wish, there is no restriction on settling the loan account. You may refer to my article on exemption u/s 54 also.
You may contact me with the details of the property purchased and the property proposed to be sold for personal consultation through email or WhatsApp, details of which is as under:-
email- [email protected]
WhastApp- 91-9967745680
Sir
Have a question and would be really appreciate it you can advise.
Non-resident equal owners (husband and wife) selling an apartment in India, that they owned for more than 5 years, for between INR 60L and INR 70L to a resident in late August 2024. What % TDS will the buyer have to withhold and submit (in total and for each owner), in case there is no Form 13 exemption or approval available in a timely manner?
Thank you very much
Would the ITO still entertain Form 13 for a lower deduction sir ? Thanks for the informative tables given on new vs old
Yes, the provision of lower TDS certificate is still in force and will remain so. You may apply the same in Form 13.
Moreover, the facility of obtaining lower TDS certificate has been extended for sale of properties by Residents also has been proposed in this budget with effect from 01.10.2024.
Yes, the Lower deduction certificate can be applied in Form 13.
After the budget announcement on 23 July, TDS on sale of property by an NRI should be 12.5% basic. Is it confirmed as I cannot find it anywhere on government website and I have a sale coming in next week. ideally it should be but can you point me in the right direction.
Yes, it is clearly mentioned on page no. 6 and 7 of “Memorandum explaining finance bill, 2024”. You may search on Google and download in pdf form. The new rate of TDS are proposed to be effective from 23.07.2024.
I have sent the memo on your email, kindly go through.
With best regards
Deorath
📞9967745680
Hi Sir, I am buying a house property from NRI but not sure on the rates on which TDS needs to be deducted 23.92 or 14.95 (Consideration value is between 1-1.99 Cr). I am very much confused with this. Memo explaining finance bill refers to sections 112,112A,111A,115 are pertaining to LTCG from Transfer of equity, mutual funds etc. But it do not specify TDS on property sale. Request if you can clarify this. Thank you.
Can the TDS return be filed before the end of the quarter? For e.g. if the agreement is made in Apr and TDS deposited, will the return be filed only after June? And why would the parties wait for 3 months for registration of the property?
The TDS return in form 27Q can be filed only in the next quarter. You may put a clause in the Sale agreement about payment of TDS and filing of TDS return by the buyer within due date. Once the TDS is deposited u/s 195 of the Income-tax Act, you may go ahead with the registration. Once the TDS return is filed by the buyer, the TDS amount will reflect in the 26AS statement.
At what amount TDS is to be deducted as transacion value is 1.62 CR and guideline value is 1.80 CR.
We bought a plot from an NRI. We are two buyers and made Advance payment of 10 Lakhs each to the seller in October 2023. We were not aware of the TDS rules and did not have TAN number as well. Now, we registered the property in March 2024 and deducted tds at 20.8% ( Sale consideration is 40L and the seller held the property for close to 20 years). Sellers PAN is inoperative.
1) Is the deduction rate correct?
2) should we be paying any interest or penalty for not deducting tds for advance payment?
3) Advance Payments were made from bank accounts of different people other than we two buyers. Will this have any impact on over all tds payment and filing?
Please help with the queries and Thanks in advance
I am purchasing a property in Pune from NRI, the government valuation of the property is 45Lac, So How Many % TDS applicable ?
I am buying a property in Pune from NRI, the government valuation of the property is 45Lac, So How May % TDS applicable ?
I have a question. NRI selling property to an resident. Aware that TDS will be 23% but want to apply for lower TDS as the seller wishes to pay of the FULL capital gains tax and not re- invest.
Here is my question.
Day 1: Agreement of sale for say 1 cr. Buyer gives 25 Lakh advance. Technically 23% has to be deducted. But he has time upto end following month to remit TDS.
Day 2. Seller applies to IT for lower TDS stating he wishes to pay full capital gains tax. He says Sale value 1 Crore. Lets say capital gains tax is Rs 7 lakhs ( appx). TDS already deducted Rs 5.75 lakhs. Lower TDS applied is for sale consideration of Rs 1 crore.
Question. Will the IT calculate for lower TDS on 1 Crore, and approve . say if on 1 cr its 7 Lakhs. and TDS deducted on advance paid is 5,75 and therefore prior to regn the TDS is only differential of 7 lakhs minus 5,75
OR will IT calculate lower TDS on 1 Crore minus on already advance paid. Keeping in mind that the buyer has time to remit TDS upto end of the succeeding month. Thanks
The buyer is a Resident but the sellers are 3 family members who hold the home jointly, one of them is NRI.
Buyer is also taking a loan for payments and will pay the down payment 1st with the sale agreement and then the final payment from the bank payment on registration.
How much and who should deduct the TDS in each payment step?
Please help, Thank you!
The buyer is duty bound to deduct the TDS. Since you have not provided the details of the transaction, the general opinion is being given. The consideration has to be divided into three parts as equal shares. In the case of the two shares of the resident Indians, TDS @ 1% is to be deducted by the buyers and in the case of NRI, TDS as per the rates prescribed in the article is applicable with relevant surcharge and cess.
For personal consultation, please share the documents and amount of consideration to my mail id- [email protected] or through whatsapp 9967745680.
I am buying a property from NRI, the government valuation of the property is 1.51cr and my sale consideration is 1.01cr in this case TDS should be deducted on 1.51cr or 1.01cr?
The TDS has to be deducted on the stamp duty value i.e. Rs.1.51 Cr. with relevant surcharge and Cess. Further since you are purchasing the property for a value less than 10% of the stamp duty value, you will have to pay taxes on the difference of Rs. 1.51 Cr. and Rs. 1.01 Cr. i.e. Rs. 50 lakh as Income from Other Sources u/s 56(2)(x) of the Income Tax Act, 1961.
You may refer to my article on the topic of 56(2(x) for more information.
If the buyer is taking a home loan while purchasing property from NRI, and payment to the seller is to be made by bank, how can he deduct tax on full rate of lower rate (when seller is able to give a LDC)
This situation arises in most of the cases where purchaser intends to avail housing loan and the banks/financial institutions insist on making payment of TDS by the buyers. Since the amount of TDS on full rate with surcharge and cess is huge, the buyers finds themselves in catch 22 situation in between the deal. In this scenario it will be wise to request the seller to obtain Lower TDS Certificate so that the TDS amount may be minimised.
Further it is once again advised to all the buyers, who intend to purchase any immovable property from an NRI to pay the Token/Advance payment only after proper deduction of TDS, surcharge and cess irrespective of the fact that whether the seller is obtaining Lower TDS certificate or not.
if there were 2 buyers, but TDS was paid by one buyer’s TAN and the seller has already claimed the entire amount by ITR filing. How can we handle such situations. Can 2nd buyer ask for exception or is there some process.
In case of joint purchase of property, the TDS has to be deducted and paid by the person who is paying the sellers. In many instances, entire payment is made by one person only and the name of other person is added in the purchase document for sake of convenience and security. In this case only the person, who is making entire payment has to deduct and pay TDS from his or her TAN. In case where both the persons are contributing towards purchase consideration and making payments separately to the sellers, both the persons are duty bound to deduct and pay the TDS. The ratio of ownership in the property is reckoned with in proportion of the investment made by each buyer.
In your question, it is not clear as to who has made payments and the ratio of payment. Since one persons has deducted and paid the entire TDS, and the seller has already claimed it in the return of income, the chain in complete and is difficult to redo the entire process.
For an inherited property the reference start date of CGT is the date of purchase or date of inheritance?
I am an NRI My local buyer says that he has to deduct @26% is that correct rate for Tamil Nadu.
What are the maximum other deductions allowed.
Also this sis the only deduction that they have to make Am I Right ?
Thanks in advance
In the case of inherited property, the cost is taken either the cost paid by the original owners or the Stamp duty value as on 01.04.2001 and indexation benefits are also available to you. As regards TDS rates, it is not 26%. The detailed TDS rate chart is given in the present article and is the same for all over India. You may opt for a Lower TDS certificate, through which the TDS shall be restricted to the actual tax liability, which saves a good amount of liquidity.
For personalised consultation, kindly contact on WhatsApp+ 91 9967745680 or through email to [email protected].
I deducted and paid TDS @ 20% plus cess and surcharge, but I get a notice u/s 200A/206CB, to pay almost 10% more of tax. Could it be more than 20%?
Have you verified the holding period of the property by your seller? If its less than 2 years, then the capital gains shall be Short-Term and attract 30% TDS. For personalised consultation, please send property documents, TDS challan and notice received either on WhatsApp+ 91 9967745680 or through email to [email protected].
is your query solved, that why you received intimation/notice u/s 200 despite deducting tds @20%. if yes, plz reply. I also received same kind of notice?
if possible plz reply on whatsapp 999 98 87 199
The reason is not proper selection of head while filing the 27Q TDS return. The correct head is Long Term Capital Gains(others). But in my opinion you must have selected other payments. The remedy is to file correction statement through your TRACES portal. For personalised consultancy please contact on +91 9967745680 or [email protected]
Regards
The other reason may be not proper selection of head while filing the 27Q TDS return. The correct head is Long Term Capital Gains(others). But in my opinion you must have selected other payments. The remedy is to file correction statement through your TRACES portal. For personalised consultancy please contact on +91 9967745680 or [email protected]
Pl guide if both buyer and seller are NRI residing in same country and want to get / pay consideration amount in that country’s currency though making sale deed in India ?
Since the property is situated in India, the law of the land is applicable regarding taxation. The Sale proceeds should be transferred to the NRO account of the Seller and yes the TDS and taxation provisions are applicable to him.
Property is in joint names and husband is an NRI but wife is resident indian. The credit of sales proceed would go in the accounts of husband & wife as 50/50. What would be the TDS rate in this case ?
TDS is applicable on payment. For NRI, there is no cap on the minimum amount, so irrespective of amounts, TDS will be deductible from the consideration payable to the NRI husband. As regards the wife, who is a resident Indian, If the amount of consideration payable to her is more than Rs. 50 Lakh, then 1% TDS will be deductible from the amounts payable to her.
Property is in joint names and both owners are NRIs (Husband and wife). Wife requested for credit of sales proceed in the single account of Husband. She gave written consent for that. Can TDS Return be generated for single name (Husband’s name) or it must be 50% each. Please reply.
It is advisable to pay an equal amount of 50% to both the owners and deduct TDS accordingly. If the 100% ownership is with the husband and the wife has given undertaking, please incorporate the same in the Sale deed and deduct the TDS in the hands of the husband.
Crisp and practical and easy to understand
Thank you very much Sir for appreciation.
What if the seller says he is not a NRI and all the transactions happened to his Indian bank account. He comes to the agreement. What are the steps need to be taken by buyer for future as Buyer cannot confirm if the seller is NRI or not, he has to believe the seller’s oath.
Read more at: https://taxguru.in/income-tax/sale-property-india-nri-tds-provisions-buyers-sellers.html
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While purchasing any property, the buyer must exercise due diligence and enquire about the seller as the burden of deduction of correct TDS is on the buyers.
Any NRI Person Sales A Property To Resident Person The Propery Is Agriculture land In rular Area in India Then Tds Applicable Or Not
If all conditions as laid down in the Income-Tax Act for identification of Rural Agriculture land is satisfied, then the same does not come under the purview of the asset and in turn the income arising out of the transaction is not taxable, hence No TDS is applicable. However, it is advisable for the prospective buyers to verify the land revenue records and whether Agriculture activities are being carried out on the said land or not.
Explained in a Short n Crispy way. It’s a very good information for taxpayers especially NRIs.As many Indians move out of India when they get good opportunities in the form of employment n settle down there.But when they sell their earned assets in India they will face problems w.r.t. Capital gains.
Hence for such Assessees it’s a very useful
Thank you everyone for the overwhelming response to my first article on the Tax Guru, Please stay tuned for many more interesting articles.
Brilliant as ever. Crisp lucid and clear. And yet so simple.
Sincere appreciation
Very informative. Thanks