It is a primary responsibility of the buyer to make sure that before purchasing a property from a resident or a nonresident, an appropriate amount of TDS as applicable as per Income Tax act is deducted and paid to the government well within time.
As per Income Tax Act, TDS at the rate of 1% of the sale value is to be deducted by the buyer where the value of the property sold by a resident seller is Rs 50 lakhs or above.
The scenario changes when the seller of the property is a non-resident Indian. Income Tax Act has an altogether separate section for this case. As there is a lot of confusion on tax applicability on selling of property by a resident and a non-resident Indian, we in this article shall cover the complex part of the transaction involving a non-resident seller.
Therefore, any person being NRI who wants to sell a property in India would be interested to know as to what will be the tax implications upon selling the property which located in India and what are the provisions that helps in tax savings and other procedures that needs to be compiled so as to be compliant with the procedures and the provisions of the Act.
Related Post – FAQ on Buying a Property from NRI
TDS Rates on the sale of Immovable property in India by a non-resident Indian
1. Option I
Deduct TDS under section 195 as per below-mentioned table – applicable for FY 2018-19 onwards
| Particulars | Where Income of the NRI Seller is Below Rs. 50 Lakhs | Where Income of the NRI seller is between Rs. 50 Lakhs to Rs 1 Crore | Where Income of the NRI seller is above Rs 1 Crore. |
| TDS Rate | 20% | 20% | 20% |
| Add: Surcharge | NIL | 10% on above Rate | 15% on above Rate |
| Total Tax | 20% | 22% | 23% |
| Add Health & Ed.Cess @ 4% | 4% on above Rate | 4% on above Rate | 4% on above Rate |
| Total TDS Rate | 20.8% | 22.88% | 23.92% |
When the seller opts for this option the following points are to be noted
1. The above TDS rates are applicable on entire sale value/agreement value and not on capital gain value.
2. Long term capital gains are taxed as per above table and short term gains shall be taxed at the applicable income tax slab rates for the NRI based on the total income which is taxable in India for the NRI.
3. The TDS as per the above table shall be deducted even when the transaction value is less than Rs 50 lakhs.
2. Option II-
Apply for a certificate for deducting TDS at a lower rate.
In this option, an NRI can apply for a lower TDS deduction certificate from Jurisdictional Assessing Officer in Income Tax department for allowing the residential buyer to deduct tax at a rate lower than TDS Rates as mentioned above. In this application, a TDS rate shall be arrived at by calculating the capital gains.
This certificate shall be issued by the Assessing Officer within 30 working. After this certificate is received by the NRI seller, the buyer can deduct TDS at the agreed rate and deposit the same with the government and file a TDS return.
When the seller opts for this option the following points are to be noted
- Application for the certificate should be made before an agreement to sell and not after the agreement is done.
- For advances/token amount received before application for lower deduction certificate TDS rate will be applicable as per the table mentioned above and not as per the certificate provided.
The penalty for non Compliances with the above-mentioned provision
As mentioned earlier, the primary responsibility of deducting TDS and depositing the same with the government is of the buyer. Therefore when the above provision has not complied, the penalty shall be imposed on the buyer.
Late filing fee
Under Section 234E, the buyer will have to pay a fine of Rs 200 per day (two hundred) until TDS return is filed. This penalty shall be levied for every day of delay until the fine amount is equal to the amount of TDS.
Interest
| Nature of Default | Interest subject to TDS amount | A period for which interest is to be paid |
| Non-deduction of tax at source, either in whole or in part | 1% of the TDS amount per month | From the date on which tax is deductible to the date on which tax is actually deducted. |
| After deduction of tax, nonpayment of tax either in whole or in part | 1.5% of the TDS amount per month | From the date of deduction to the date of payment |
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Author Bio
Dear Sir,
i have planned to purchase a flat in Noida and My owner are NRI staying in USA. Broker need my TAN no so they are applying for TDS certificate but i am working in company there i am already filling ITR yearly. Kindly suggest me what can i do for this matter. can i apply for TAN no and in this no any other legal issue for my future income and sources.
thanks
Sandeep Sharma
i am buying a property from an NRI for Amount Less than 50 Lakh and i have duly deducted TDS @20.80% and duly filed TDS return but still i got a short deduction notice from Department in which they are calculating TDS by 30%
pls guide me how can i reply the notice
My husband passed away and left me his vacant land in India. It is agricultural land so I’m wondering what the tax ramifications for me as a seller? I live in the US and I believe I have tax ramification for my US tax return. Thank you for your help.
I am Marine engineer having NRE account. Wanted to sell my immovable property How I do transactions to save tax?
We need to know the tax implication on selling the agriculture land. My husband passed away and he owns land which is worth 1.4 cr and as per his legal hire his wife that is me and my daughter are the beneficiaries. I have a POA from my daughter to sell this and wanted to know the tax implication. Can you please guide me.
Hi
I am NRI and sold my property. Being joint holder my share of sale amount is Rs 50 lakhs +
The buyer has submitted TDS but it is reflecting in
Part A of 26AS under 195. Is this correct or should it reflect on Part A2 of 26AS form which is TDS on immovable property?
Hi, I am buying a property from NRI, the agreement value is Rs. 58 lakhs. Please let me know hat will be the TDS rate applicable? 20.8 % or 22.88%.
NRI joint owners want to sell a flat. The second owner gives in writing that sale proceeds should be paid to first owner. Can TDS be from first owner, since he has received sale amount or must the TDS be split equally amongst both?
Hi Jitesh,
I think you should clarify the need for submitting surcharge on top of TDS calculated amount here in this article, to avoid getting an intimation from the tad department.
If the purchase is from a NRI, TDS shall be @ 20.08% inclusive of HEC., even it is less than Rs 50 lakhs.
I AM NRI SALES OF PROPERTY AT 1.50 ON APRIL2019 AND PURCASE PROPERTY 2 FEB.2012 AT 1.61 CR. (Long term capital loss) not profit APROX. 96.LAC, TDS DEDUCTED AMT. 34 LAC. WHAT THE BEST WE CAN DO TO SAVE A TAX/ TDS AMT OR GET THE TDS CERTIFICATE FROM THE DEPT. IF IT IS POSSIBLE. WHAT U SUGGESTION / GUIDE US. ???
I Intend to sell a property which i booked in the year 2010 and got possession in 2015. The sale agreement value of the property is well below 50 Lacs. When I calculate the property value with indexation , it shows a LTCL (Long term capital loss) not profit. In this case is deducting a TDS @20% and depositing by uyer mandatory ? Must I apply for a Zero Tax Certificate in this case ?
How to establish the correctness of the NRI Seller’s income. Here clarity is required taxable income or Gross income. What documents Buyer should ask .
Thanks for the article , i want to know if we buy property or site from non-NRI and the value is 20 lakhs then we need to deduct TDS?? please clarify.