When there is a purchase of immovable property, the buyer needs to deduct tax (TDS) from the Sale value, pay the balance amount to the Seller and pay the TDS amount to the Government.
As per Indian Income Tax Act, where a resident purchases any property from a Non Resident, he has to deduct tax and pay the balance amount to the Nonresident (Seller).
This article provides a brief description regarding TDS provisions applicable when there is purchase of immovable property from a non resident by a resident.
1. Applicable TDS rates – TDS is to be done as per provisions of Section 195.
2. In case of
- Long term Capital Asset – 20% (Full details given in the below chart)
- Short Term Capital Asset – As per Income Tax Slab rate of Seller (NRI) in India.
The effective TDS rates in case ‘Long Term Capital Gain’ is calculated below:
| 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% |
The surcharges shall be subject to marginal relief.
2. LOWER RATE OF TDS
There is also provision to deduct TDS at lower rate in case of purchase of property from NRI for which the following steps need to be followed:
- The seller (NRI) is required to apply for a lower TDS deduction from the Jurisdictional Assessing officer of Income Tax.
- The Assessing Officer shall issue a Lower rate TDS deduction certificate within a period of 30 days.
- Based on the Certificate the buyer is required to deduct TDS as mentioned in the Certificate.
3. AMOUNT ON WHICH TDS IS TO BE DEDUCTED
This depends on two situations
1. When the Seller has obtained certificate of Lower deduction of TDS, following process needs to be done:
- The seller shall apply for Computation of Capital Gain to Income Tax Officer.
- Based on the documents provided, the Income tax officer shall compute the Capital gains of the Seller.
- The Capital gain so computed by the Income Tax Officer shall be intimated to the Seller by way of a Certificate.
- The seller needs to submit the certificate of Lower Deduction of TDS to the buyer.
- On the basis of the above certificate, the buyer would deduct TDS on the Capital Gain so computed by the Income Tax Officer.
1. When the seller has not obtained the certificate of Lower deduction of TDS:
In this case the TDS is to be deducted on the total Sale Price instead of Capital Gain. So it is very important for the seller to obtain the Certificate from the Income Tax officer to lessen the Tax burden.
4. TIME OF DEDUTION
Earlier of the Following:
1. At the time of payment ; or
2. At the time of credit of income.
5. TDS Payment and Return
- The buyer is required to deposit the TDS with Govt. within 7 days from the end of the month in which the TDS has been deducted. (Challan No – 281)
- The buyer is required to submit the TDS return in Form 27Q.
| Quarter | Quarterly Return- Due Date | TDS Certificate |
| Apr-June | 31st July | 15th August |
| July- Sep | 31st Oct | 15th November |
| Oct- Dec | 31st January | 15th February |
| Jan- Mar | 31st May | 15th June |
Notes: A) In this case It is mandatory for the buyer to obtain TAN (Tax Deduction And Collection Number).
B) The seller (NRI) can avail exemption benefits on Long term capital gain under section 54 and section 54EC.
C) To repatriate the money outside India, the NRI would also be required to submit Form 15CA & Form 15CB to the Bank. These forms are required to be generated from the Income Tax Website and then submitted to the Bank.
D) Form 15CA may be generated by the NRI himself or by his Chartered Accountant but Form 15CB can only be generated by a Chartered Accountant. The Chartered Accountant is also required to sign and stamp the Form 15CB
E) 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. |
Author Bio
Have seen great and quite good articles on TDS for for most assets they hold.
But can some one throw some light or in detail explanation to what happens if the sale is a distress sale for own personal reason the NRI sales the asset (property) at a substantial loss. And this NRI has no income in India.
Nice Article, i have a query, can the seller also deposit TDS from his account if the purchaser fails to deduct TDS.
In case there are two buyers, can they deposit TDS on NRI property by having only one TAN
If the property value is more than 50 lakhs and the there are more than 1 nri sellers, how should the TDS be calculated. For eg 2 nri sellers with 50% share for a 54lakh property will have be taxed at 22% or 20%?
Very well explained
I (Indian) would like to purchase a land from NRI (Australia). Property in Kerala, India.
a) TDS is applicable and on which rate?
TIN registration is necessary? please explain which is very helpful to me.
Yes, TAN No. is mandatory if you are purchasing property from NRI
What is the income to be considered for TDS calculation? if the lower tax certificate is not applicable. Example: sale value is 75L.
so applicable TDS will be 20.8% or 22.88%.
Pls clarify.
If the application for reduction of TDS is not filed, the TDS Rate applicable in this case would be 22.88%
Nice article. But the main problematic area as how to obtain certificate for lower deduction has not been touched at all. Relevant rule and Form Number has been completely left out. It will be nice if one more article is posted to explain this procedure.
File an application in Form 13 for reduction of TDS under Section 197
Very well explained in a simple way.
Good article !! Very well explained in a simple way.
Nice article