prpri TDS implication on purchase of property from NRI TDS implication on purchase of property from NRI

It is essential to note that in case of purchase of property, the buyer is responsible for deducting the applicable tax at source (i.e. TDS) and deposit the same with the Government. Since the buyer is required to deduct the TDS, he would obviously be required to fulfil all the relevant compliance like TDS payment; TDS return filing and issuance of TDS certificate.

It is important to mention here that based on the type of seller of the property the applicability of the TDS provisions changes and the same is explained here under –

Sr. No. Category of seller Applicable TDS provisions
1. Resident Section 194-IA

TDS is to be deducted @ 1% only when consideration is more than INR 50 Lakhs.

Note: The above-mentioned rate i.e. 1% will be reduced to 0.75% during the period starting from 14th May, 2020 to 31st March, 2021.

2. Non-resident Indian (NRI) Section 195 – TDS deductible as –

1. Long Term Capital Gain Tax – 20% (However, the effective TDS rate is explained below); or

2. Short Term Capital Gain Tax – as per the income tax slab of the seller

The present article provides exhaustive information on the applicability of TDS provisions on purchase of property from NRI. The article covers various aspects like TDS rates; deduction of TDS at lower rates; amount on which TDS is to be deducted; time of deduction and time of deposit of TDS; TDS returns and TDS certificate.

Purchase of Property from NRI

Applicable TDS rates on the purchase of property from NRI –

The Indian resident purchasing a property from Non-resident Indian is required to deduct TDS as follows –

1. TDS is to be deducted by the buyer as per provisions of Section 195.

2. In case the property is held for more than two years, then there would be ‘Long Term Capital Gain’ and TDS would be deducted at the rate of 20%. However, the effective TDS rates in case of ‘Long Term Capital Gain’ is tabulated here under –

Particulars Effective TDS rate
Income is less than INR 50 Lakhs Income is INR 50 Lakhs to INR 1 Crore Income is more than INR 1 Crore
Long Term Capital Gain Tax Rate 20% 20% 20%
Add – Surcharge 0% 10%

(on above rate)

15%

(on above rate)

Total Tax including surcharge 20% 22%

(20% + 2%)

23%

(20% + 3%)

Add – Health and education cess 4% 4%

(on above rate)

4%

(on above rate)

Effective TDS Rates 20.80% 22.88% 23.92%

Note: Please keep in mind the Marginal Relief factor at the time of calculation of final tax liability in case of seller of property

The surcharge shall be subject to marginal relief:

    • Where income exceeds Rs. 50 lakhs, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 50 lakhs by more than the amount of income that exceeds Rs. 50 lakhs.
    • Where income exceeds Rs. 1 crore, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore
    • Where income exceeds Rs. 2 crore, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 2 crore by more than the amount of income that exceeds Rs. 2 crore
    • Where income exceeds Rs. 5 crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 5 crore rupees by more than the amount of income that exceeds Rs. 5 crore rupees

3. There would be a Short Term Capital Gain in case the property is held for less than two years.

In the case of Short Term Capital Gain, TDS would be deducted at the applicable Income Tax Rates slab [based on the total taxable income of seller (i.e. NRI) in India].

Deduction of TDS at Lower Rates –

The facility of lower TDS rate is also available in case of TDS deduction on the purchase of property from NRI. Following steps are to be followed for claiming the benefit of lower TDS rates –

1. The seller (i.e. NRI) is required to apply for a lower TDS deduction from the Jurisdictional Assessing Officer of Income Tax.

2. The Assessing Officer shall issue a certificate of lower TDS deduction within a period of 30 days.

3. Based on the certificate of lower TDS deduction, the buyer of the property is required to deduct such TDS as mentioned in the certificate.

Format of Certificate for Lower Deduction of TDS Under Section 197

Certificate contains following fields- Sr.N.o., Certificate Number, TAN/PAN,  TAN/PAN Name, Section, Amount
(Rs.), Certificate Rate (%), Valid from Date, Valid till date (as per the original certificate), Valid till (Cancellation Date) and a field for Remarks.

Amount on which TDS is to be deducted –

The amount on which TDS is to be deducted in case of purchase of property from NRI depends on the following two situations –

1. When the certificate of Lower deduction of TDS has been obtained from the Income Tax Officer –

Following process is to be followed for obtaining a certificate of Lower deduction of TDS from the Income Tax Officer –

  • The seller (i.e. NRI) is required to apply for computation of Capital Gain to the Income Tax Officer.
  • On the basis of the documents, the Income Tax Officer would compute the Capital Gain.
  • The capital gain so computed by the Income Tax Officer would be intimated to the seller by way of a certificate.
  • The seller is required to submit the said certificate of Lower deduction of TDS to the buyer.
  • On the basis of the certificate of Lower deduction of TDS, the buyer would deduct TDS on the capital gain so computed by the Income Tax Officer.

2. When the certificate of Lower deduction of TDS has not been obtained from the Income Tax Officer –

As seen above, if the certificate of Lower deduction of TDS is obtained from the Income Tax Officer, the buyer has to deduct TDS on the Capital Gain amount.

However, if the certificate of Lower deduction of TDS has not been obtained, then, the buyer is required to deduct TDS on the entire transaction value. This obviously would result in a higher deduction of TDS, and hence it is advisable to obtain the certificate of Lower deduction of TDS from the Income Tax Officer.

Time of deduction of TDS –

The buyer is obligatory to deduct the TDS within earlier of date of payment or date of credit of income. Meaning thereby that the buyer is required to deduct TDS also in case of an advance payment.

Time of deposit of the TDS with the Government –

The buyer is required to deposit the TDS so deducted to the Government within a period of 7 days from the end of the month in which the TDS has been deducted. The buyer is required to deposit the TDS through Challan No. ITNS 281.

TDS return –

The buyer is required to submit the TDS return in Form 27Q. The return is to be filed for all the quarters in which the TDS is deducted. The due date of furnishing of TDS return is summarized here under –

Period Due date
April – June 31st July
July – September 31st October
October – December 31st January
January – March 31st May

Note: Due to COVID-19 pandemic situation, the due date of TDS Return for Q4 of FY 2019-20 has been extended upto 31st July, 2020.

TDS certificate –

The Deductor (i.e. the buyer) is required to issue TDS certificate to the Deductee (i.e. seller) in Form 16A. The due date for issuing TDS certificate is tabulated here under –

Period Due date
April – June 15th August
July – September 15th November
October – December 15th February
January – March 15th June

Other important points worth highlighting –

  • It is mandatory for the buyer of the property (only when the seller is a non-resident) to obtain Tax Deduction and Collection Account Number (i.e. TAN).
  • The exemption benefits available on Long Term Capital Gain under section 54 and section 54EC is also available to the seller (i.e. NRI).
  • Applicable interest provisions –

The applicable interest provisions for non-deduction or non-payment of TDS is explained here under –

Particulars Amount of interest payable
Non-deduction of TDS (either wholly or partly) 1% per month from the date on which TDS is deductible to the date of actual deduction.
TDS deducted, however, not deposited (either wholly or partly) 1.5% per month from the date of deduction to the date of payment.

Applicable late fee and penalty provisions –

In case the buyer fails to deduct the TDS (wholly or partly) or fails to deposit the TDS with the Government, then the buyer (i.e. Deductor) would be liable to pay penalty under section 271C.

Here, the defaulter would be required to pay penalty amounting to sum equal to the TDS not deducted or TDS not paid.

The buyer of the property is required to file the TDS return within the prescribed due date. If the buyer fails to file the TDS return, then as per section 234E of the Income Tax Act he would be liable to pay late fee of INR 200 per day till the failure continues.

(Republished with amendments)

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55 Comments

  1. Bhavesh Joshi says:

    As per new section of 206AB and as per reporting portal we come to know seller are specified person, but today we file return cum challan of 26QB we not had option of paying at higher rate and Goa registrar want this return before registration. We have to pay it and for that we paid 1% but how the difference we can pay because site not permit to pay 5 percent. Need guidance

  2. Gupta says:

    When an NRI sells property, long term CG is applicable at 20%. Now I suppose the method of calculating CG is same for NRI as for resident indian that is, cost of sale including expenses – (indexed cost of acquisition +indexed cost of improvement).
    Pl confirm.

  3. saptarshi says:

    Sale consideration 80 Lakhs
    3 sellers, Mother, Father (Both resident Indian) & Son ( RI) Son has issued registered GPA in favor of Father & transfer all rights of Sale, receive Money etc to father

    There are 2 buyers, both husband & wife
    Wat will be TDS to Indian Resident?? Amount wise
    Wat will be TDS to 3rd Selller (NRI)?? Amount wise

    Awaits reply on mail

  4. Rajiv Shirole says:

    Hello,

    I am purchasing flat from one NRI owner with Deal 71,00,000/-, as per Government rule, we have signed MOU on 5th March 2021, and after that I submitted my TDS (16,24,480) 22.88% to government on 10th March 2021. Now i am trying to deposit the TDS and generate the 27Q… but seems portal says late payment…

    I am not much expert on it and verymuch tense now..with this amount…..

    Can you guide me .. about whether i have to pay any penalty or extra amount to government to get this done?

    Once the TDS certificate generate then only seller party is going to do part registration.

  5. KD says:

    Dear Sir,
    We are currently in talks with a buyer to buy our agricultural land – we would like to know the following:
    • We have received 50% Advance payment for the sale of the Agricultural land in February 2020

    • Second payment was to be paid in April 2020 and the last final payment at the time of Registration i.e. after TDS deductions – which got delayed due to various reasons.

    • Now he would like to conclude the deal, nevertheless he claims that as he missed deducting TDS at 1st payment he needs to deduct TDS on 2nd payment and adjust the balance at the time of Registration.

    • As the deal is still inconclusive we want him to pay the TDS only at the time of Final payment and not when paying advance payments. Only at the time of Registration of the land should he pay TDS. Please advise. Its a joint property owned and we are both NRIs.
    • The Buyer wants to proceed with the deal and pay second payment and balance Final payment in May 2021 after TDS deductions at the time of Registration of Land,
    Please advise if we can get the TDS deduction adjusted at the time of Final payment instead of Now as we are unsure till we get the final payment! Can we apply of Lower TDS deduction 30 days before the date of Registration?
    Thanks

  6. RAJESH says:

    i purchase one SRA property in 2012 who work in dubai. Now i need to transfer this property to my name. The purchase amount is 12 lacs. i need to PAY THE TDS on RS. 12 lac.pl. advise.

  7. maheswari says:

    I paid the tds 22.88% for purchasing house propery from nri and filed the tds now demand raised for short deduction of amount. the tds was calculated for 30% how can solve the problem easily

  8. Ashwini daporkar says:

    While purchasing property from multiple sellers one seller is NRi and other is RI.How will tds b deducted?seller is sayinv that 1 % tds shud be deducted as Capital gain will be opened in name of RI.NRI seller will bd filjng for lower tax certificate.They want sale deed to be done by deducting 1 % tds.please guide

  9. vishal darji says:

    What if there are more than 2 co-buyers for a property purchase from NRI and amount of property is 1.30Cr
    1. Let’s Say there are 3 co-buyers than How many TAN number should be taken for deduction & deposition of TDS deducted, how many return to be filed? is it of if obtained only one TAN in anyone name, deduct TDS & file return.?
    2. What is Rate of TDS to deducted
    3. what if there are more than Two seller.

  10. Amara Sai Sandeep says:

    Sir, Applicable tds rate for purchase of property from NRI would be 10% + SC as applicable + HEC(4%).{ For LTCG covered in 115E or 112(1)(c)(iii) }

    20%+SC+4% is applicable on OTHER LTCG { other than those covered u/s 10(33) or 10(36) or sec 112A }

    Source : taxman ready reckoner for. AY 20-21 , Referencer 1, TDS rates table for section 195.

  11. Niladri Bhattacharya says:

    NRI seller of property applied in Form 13 and got TDS deduction certificate u/s197 which says Buyer will deduct 11% . Property valued more that 1.50Cr . Buyer wants to deduct 13.16% . What’s the logic . Is he adding surcharge , Can he do it .What’s the section that explains this .

  12. Nitesh says:

    In case buyer doesn’t deduct TDS and seller does his part and pay applicable taxes, will buyer be still penalized for not deducting TDS?

  13. Chaitali N says:

    I am purchasing a flat. The seller of the flat are co-owners (brothers) one of which is NRI. He granted power of attorney to his resident brother. They purchased the flat in September 2011 for Rs.22,50,000 and now the sale consideration is Rs.33,00,000 for FY 2020-21. Kindly let me know the TDS implications.

  14. Amit Banerjee says:

    My friend is buying 2 plots worth 2.15 cr each from NRI seller. Please clarify how much TDS to be deducted including surcharges? Property purchased in 2006. Thanks, Amit Banerjee

  15. palak says:

    Sir, we are about to purchase property from NRI. Sale consideration will be paid in his NRI account of 1.05cr. Is form 15CA and 15CB are applicable?

  16. K Sathish Shenoy says:

    I am purchasing a property in India from an NRI for 45 Lakhs.The seller is insisting for not to deduct tds as the proceeds ar being invested full for purchasing new property in India. As a buyer what is my obligation and what certificate should I obtain from the NRI seller for not deducting tds.Whether I should generate TAN even if tds is not made Please enlighten me

  17. Vineet Kapoor says:

    Very detailed and informative article. How the return will be filed if the buyers are Joint buyers ( Husband & Wife). Do they need to file two returns?

  18. Ankita says:

    What would be surcharge rate for non- resident individuals in case property value exceeds Rs. 2 cr or Rs. 5 cr. In my view the enhanced surcharge rate is applicable to non-resident individual as well and hence it would we 25% or 37% respectively. Please confirm.

  19. Deepa says:

    Buyers have deducted 20 lakhs from r properly price towards TDS 3 months back n agreed of paying it and providing the TDS certificate by 31st Aug 2020 but have paid ONLY 10 lakhs tax yet and have not yet provided a certificate…. Please advice as NRI sellers what legal rights do we hold coz we feel worried of losing such a huge amount

  20. Vidyasagar says:

    Hi Sagar,

    I bought a home on 22 May 2019 for 60 Lakhs and now selling it for 70 Lakhs. I came to UK on 10th Oct 2019 and staying in UK since then. Now the local resident buyer is saying that he will pay around 30 % TDS on whole value of the sale and I can claim the refund later. Since this is short term capital gains how much TDS is applicable for NRI ? Also I stay in India for 192 days during Apr 2019 to Mar 2020 so legally I am ‘Resident’. Do I still applicable for NRI TDS 22.8 % and Edu cess 4 % and 10% surcharge ? What if we go back to India and complete the registration ?

  21. Monarch says:

    Property purchased from joint owners a and B
    Value of flat 90L
    Ratio 50:50 so owners will get 45each
    Purchaser also joint owner so what will be tax and is there any relaxation in pendamic of paying late

  22. Vineet Kapur says:

    Hi
    In my case I have made payment of 15 Lacs as advance to nri seller and deducted 5% tds amount which should have been 20% in March 20 , now got demand from IT department basis 10% tds , don’t know why have they not issued demand of 20%…any idea if there are some changes due to covid

  23. Vineet Kapur says:

    Hi
    In my case I have made payment of 15 Lacs as advance to nri seller and deducted 5% tds amount which should have been 20% in March 20 , now got demand from IT department basis 10% tds , don’t know why have they not issued demand of 20%

  24. subhashchander says:

    Property purchase on 11/11/1994 worth rupees 62000 and sold worth rupees 870000 on 06/07/2020 ..what amount will be of LONG TERM CAPITAL GAIN ?

  25. manish says:

    i am buying a flat from NRI, he had bought this flat for 60Lakh in 2014 excluding VAT and water electricity charges, including these things amount comes to 67L, now i am buying it from nri for 65L only.
    what would be the TDS amount in this case? Thanks.

  26. Yash says:

    Hello Sir,
    My wife and my mother are in process of buying a plot from NRI for Rs. 1.20 crores and after the agreement was prepared they made advance payment of Rs 12 lakhs. After getting the token money the seller has provided Nil TDS certificate to us as the NRI bought it for 1.35 crores in 2012 and now selling to us in loss for 1.20 crores.
    My question is that in TDS certificate the amount is mentioned as 1.08 crores only and seller is saying that it is because you have already paid 12 lakhs advance and same agreement was presented in Income tax department and hence you do not have to pay any TDS on upcoming payment and 12 lakhs also.

    Please guide so that we do not have any tax implications in future.

  27. Dayanand says:

    What about applicability of obtaining Form 15CB and filing declaration in Form 15CA since transaction falls within the ambit of Sec. 195?

  28. Harsha says:

    Hello Sir, the buyer deducted tds under section 195 as property purchased from an nri.
    Total value of property is 2.15 cr and the individual value of all 3 sellers is 71.67 lakhs.
    What should be the rate at which tds should be deducted

  29. N.mahesh Mahesh says:

    sir i want your advise i have planned to buy NRI property at value 98,22,000.0 and paid @ 22.88% to income tax department after obtain TAN no
    the property is still not registered due lock down and other reasons . as i am not interested now to buy property can i get back the amount paid to income tax department

  30. Hema Dudeja says:

    1. There are two more slabs in the rates, income exceeding 1 crore but less than 2 crore with surcharge rate as 15% and income exceeding 2 crores but less than 5 crores with surcharge rate as 25% and income exceeding 5 crores with surcharge rate of 37%.
    2. Even though certificate is obtained from the AO, TDS is deducted on the sale consideration amount at the rate mentioned in the certificate.
    3. Please advise on the below issue:
    In the 197 certificate, the AO mentions balance sale consideration payable after deducting advance payment. Now. the buyer shall deduct TDS on balance sale consideration at the rate mentioned in the certificate. But what about the TDS on advance payment made earlier. Please advise.

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