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.

TDS on sale of Immovable property in India by a non-resident Indian NRI

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.

Tax on Capital Gains for NRI

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

Jitesh Telisara & Associates LLP, is a professionally managed firm catering to domestic and international clients with a broad range of services in domestic and international taxation, regulatory and advisory services and crosses border transaction-related services.

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Company: JITESH TELISARA & ASSOCIATES LLP
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9 Comments

  1. nihit agarwal says:

    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%.

  2. Sanjay Misra says:

    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?

  3. Kamal Thadani says:

    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.

  4. ROHIT ANAND says:

    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. ???

  5. Naren shetty says:

    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 ?

  6. MSN Murthy says:

    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 .

  7. Sujay says:

    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.

    1. ANJALI YADAV says:

      No. Threshold limit for deducting tax on purchase of property from a RESIDENT is Rs. 50 lacs. In your case, as property value is less than 50 lac you are not required to deduct 1% tax

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