In continuation of our discussion on TDS under section 195. In this post, we will understand How to Deduct TDS on NRI Under Section 195 by resident Indians?. As per Income Tax Act 1961, Any person responsible for paying to Non Resident or Non Resident Indian, neither being a company nor being a foreign company, of any interest or any other sum chargeable under the provisions of Income Tax Act, 1961 (Excluding income chargeable under the head “Salaries”). Any such payment shall at the time of credit of such income to the account of payee or at the time of payment through any mode i.e. Cash, Cheque, Bankers Cheque, Demand Draft or any other mode should deduct TDS at prevailing TDS Rate under section 195. I modified this definition to make it simple but i agree its too complicated to understand. In layman terms, if any NRI is selling property in India to Resident Indian, TDS should be deducted under section 195 by Resident Indian from total consideration value. In some cases, NRI’s insist to deduct TDS only on capital gains but from definition of section 195 it clear that TDS should be deducted on total Sale Value.
TDS Rate
Current TDS Rate under section 195 is 20.66% for Long Term Capital Gain and 33.99% for Short Term Capital Gain. In case of NRI Seller, income tax slab of NRI is not considered for TDS on short term capital gain under section 195 i.e. TDS rate is fixed at 33.99%. Whereas in case of Resident Indian Seller, Short Term Capital Gain Tax is payable at the Marginal rate i.e. as per Income Tax Slab of the individual. If NRI does not have PAN or does not produce PAN then TDS Rate will be 20% even if Assessing office issue NIL / Lower Tax Deduction Certificate under section 195 or Tax Exemption Certificate.
In my previous post, i have explained How NRI’s can lower TDS on Property Sale?. In case NRI seller produce NIL / Lower Tax Deduction Certificate under section 195 or Tax Exemption Certificate the applicable TDS rate will be as per certificate issued by the income tax department. The original certificate will be retained by the buyer. To obtain NIL / Lower Tax Deduction Certificate under section 195 or Tax Exemption Certificate is sole responsibility of NRI Seller. In many cases, i observed that buyer is doing all the running around for this certificate.
How to Deduct TDS on NRI Under Section 195?
I am listing down the steps to be followed to deduct TDS under section 195.
1. TAN (Tax Deduction Account No): Before deduction of TDS under section 195, buyer should obtain TAN under section 203A of the Income Tax Act, 1961. You can apply for TAN online by filing Form 49B. You may click on following link to apply for TAN
Besides TAN, Buyer should have his own PAN and PAN of NRI Seller to deduct TDS under section 195.
2. TDS under section 195 should be deducted at the time of making payment to NRI seller. It should be clearly mentioned in sale deed between NRI seller and buyer that TDS is deducted at specific TDS rate under section 195 and buyer will product TDS certificate to NRI Seller.
3. TDS deducted by buyer should be deposited through Form No / Challan for TDS Payment on or before 7th day of next month in which the TDS is deducted. For example if TDS is deducted during January, 2015 i.e. between 1st Jan 2015 to 31st Jan, 2015 then last date to deposit TDS without any penalty is on or before 7th Feb, 2015.
4. TDS under section 195 can be deposited by the buyer only through banks authorized by Govt of India / Income Tax Department to collect Direct Taxes. To check Bank Branches which are authorized to collect direct taxes, Please click on following link
https://www.tin-nsdl.com/oltas/oltas-bank-branches.php
5. After depositing TDS, the next step for buyer is to electronically file TDS return by submitting form 27Q. The TDS returns are filed quarterly i.e. for TDS deducted during the quarter (If payment is made in installment). The last date for filing the TDS Return is as follows
(a) TDS deducted during 1st Quarter (From 1st April to 30th June): July 15
(b) TDS deducted during 2nd Quarter (From 1st July to 30th Sep): Oct 15
(c) TDS deducted during 3rd Quarter (From 1st Oct to 31st Dec): Jan 15
(d) TDS deducted during 4th Quarter (From 1st Jan to 31st Mar): May 15
6. After filing TDS return, Buyer can issue TDS certificate or more specifically known as Certificate of Deduction of Tax i.e. Form 16A to NRI Seller. This certificate should be issued to NRI Seller within 15 days of due date of TDS returns for the quarter. For example for 1st quarter, the TDS Certificate should be issued on or before July 30.
Penalties for Non Compliance of Section 195
If the Buyer fail to deduct or deposit TDS under section 195 then buyer will be declared as Assessee in Default as per section 201 of Income Tax Act. All the tax dues including interest and penalty will be recovered from buyer by the income tax department. A buyer cannot claim ignorance ref to TDS provisions under section 195 while buying a property from NRI.
There are whole lot of other penalty clauses under section 272 and 271 of income tax act 1961. Some of the common penalties levied are
1. Penalty of Rs 10,000 if buyer fail to obtain or quote TAN by buyer
2. Penalty of Rs 10,000 if buyer fail to quote PAN
3. 100% penalty in case of non-deduction of TDS partially or fully
4. Penalty of Rs 100 per day for delay in filing TDS returns or failure to issue Certificate of Deduction of TDS within 15 days
Interest Penalty for delay in deduction or deposit:
Similar to TDS u/s 194IA, if buyer fail to deduct or deposit TDS under section 195 then he is liable to pay following interest penalty u/s 201(1A) of the income tax act, 1961.
(a) 1% interest for the delay of every month i.e. late deduction of tax from the date the tax was due to date the TDS is deducted
(b) 1.5% penalty for every month on account of late payment of TDS deducted to Govt. from the date TDS deducted till actual date of payment.
* Interest calculated will be simple interest
Punishment for Non Compliance
Any non-compliance is taken vary seriously by income tax department. IT department reserve right to attach properties, salary or any other receivables of the buyer to recover TDS, interest and penalties etc under section 222 and 226 of income tax act 1961.
Even if income tax department is not able to recover the dues from buyer then the buyer can be prosecuted u/s 276B by court of law under which buyer can be imprisoned max upto 7 years with minimum rigorous imprisonment of 3 months along with Fine to be decided by the court.
Hope you liked the Post. It is always advisable to pay all tax dues on time else it may land you in big trouble.
Copyright © Nitin Bhatia. All Rights Reserved.
I find it unreasonable to tax full 33.99% TDS that too on total consideration value. Example, I bought a flat for Rs. 1 Cr + Rs. 50 Lakh (Loan Interest Payments) and if I sell it for Rs. 2 Cr then my taxable capital gain should be only Rs. 2 Cr – Rs. 1.5 Cr = Rs. 50 lakh. And I should be taxed only on this “capital gain” and not entire Rs. 2 Cr.
I do agree and i mentioned in my previous post that it is an anomaly. In the example shared by you, TDS will be deducted on 2 Cr if seller fail to produce low tax deduction certificate.
Secondly, Home Loan interest cannot added in cost of acquisition. Some people have started including it based on order of chennai income tax appellate tribunal (Refer trail link) but just to add that it is not a law. Double tax benefits cannot be availed while computing capital gain tax.
http://articles.economictimes.indiatimes.com/2012-11-22/news/35300677_1_house-property-capital-gains-income-tax-department
Dear Nitin,
Its a wonderful initiative that you have taken. Got most of my queries answered. but i have some doubts regarding buying a property from NRI:
1. How does a buyer establish the residential status of the seller?
2. What if the seller is reluctant to provide his documents for us to establish his residential status? Shall we just deduct 1% as per section 194IA?
3. If the seller does not tell us that he is NRI, what steps can we take to safeguard ourselves?
Request your help.
1. Very difficult. You may include it in sale deed if you doubt that seller is sharing wrong status.
2. No, if he is reluctant then definitely he is sharing wrong info.
3. Take a declaration from him regarding the same.
Hi Nitin
Very helpful post. Can you please mention the Form/Challan no for TDS payment (Refer to#3 under section “How to deduct TDS for NRI under 195)
Regards
You need to file challan no 281. 3 digit challan code will be 195 (other sums payable to a non-resident). Please check following link for copy of challan.
http://www.incometaxindia.gov.in/forms/107010000000345599.pdf
Thank you again.
I have purchased one property from an NRI, I deducted TDS @20%, recently I came to know that TAN is also required in this case. Recently I applied for TAN but not sure when it will come. I believe I need to submit Tax before 7th of next month, given this do I have any alternative? Shall I go ahead and deposite TDS using 26QB Form?
You cannot file challan 26QB. Secondly, without TAN, you cannot deduct TDS.
Thanks Nitin, I got TAN and submitted TAX using Challan 281. Thanks a lot for putting down great article, I must say that Income tax act is quite confusing and very complicated. Your article helped me to take right step, thanks again. Good work :)
Hi Jitendra,
Hope you are doing well. I am about to submit the TDS using Challan 281. Need some guidance from you if you have some time.
How can I download form 16A from TRACES site? I am trying to register myself as a deductor but its not allowing me to register? Called customer care and they are saying for property TDS you need to download 16B, looks like they are not aware of process in case of NRI. Do I need to go to TIN facilitation centre to get certificate as I submitted form 27Q there only.
Please check following tutorial on how to download form 16A.
http://contents.tdscpc.gov.in/en/download-form16a-etutorial.html#
Thanks, but this link assumes that you are registered user. Problem I am getting that how can I register myself. When I try to register as new user with my TAN then its giving me error, looks like I am missing something and probably I can’t do myself online.
Please share the error message…Also check on different laptop or browser.
Dear Nitin,
Kindly help on one point in case where there are two joint owners in a resale property, buying from an NRI seller, then who can pay the TDS, is it mandatory to pay the taxes from both the buyers or it can be paid from either of buyers account.
Regards,
Pankaj Rajani
Both buyers have to pay TDS in proportion of ownership in property. One buyer cannot deduct and deposit on behalf of other.
Dear Nitin,
Instead of deducting 20.66% TDS as LTCG, can I, as a buyer of a property (that has been held for more than 3 years) from an NRI, correctly compute the actual LTGC applicable to the transaction and deduct that amount as TDS.
Thanks in advance.
Regards
Bell.
Only tax authorities have power to calculate/compute the applicable LTCG. As a buyer you have to deduct & deposit 20.66% TDS from payment made to the seller.
HI
My NRI seller is going to invest capital gain amount in Govt Bond, in this scanario, do i need to deduct 20% ?
Yes, TDS should be deducted.
Hi,
My sister is POI living in India for the past few years.She wants to purchase a property in India (from her NRI account) from an NRI. The NRI selling the property is selling the same within 2 years of his purchase. Could you clarify as to how much TDS is to be deducted by my sister. The NRI initially said that he would get TDS exemption certificate from IT . We are holding 30% of sale value for TDS and made agreement accordingly and waiting for certificate. But now the seller is unable to get certificate . As per your article it says 33.99% is to be deducted. What can I do now?
Regards
33.99% TDS should be deducted.
Thanks for your reply. Now the seller got lower TDS certificate indicating 1.55% plus Surcharge and education cess from IT.The sale value is 1 cr. Can you tell me exact amount to be deducted now. Regards
I can only suggest after checking the copy of Lower TDS certificate.
The buyer is a salaried assessee resident of india. Two questions
a) Should he still do the same formalities as provided by you
b) Cant he use 26Qb.
It may pls be noted that, carrying out rigorous compliance like applying for TAN, filing form 27 and providing tds certitifacte is too much expectation from a salaried assessee
Whats your view point?
sathya
1. No
2. Yes. Section 195 is only for NRI seller’s.
Hi Nitin,
My Query is, I am buying Flat from NRI and flat value is 71 Lacs. Property is with joint name of Husband and Wife. One owner has pan card but second owner hasn’t. My Question is :
1) What amount of TDS I have to hold for First Owner (with PanCard) ?
2) What amount of TDS I have to hold for Second Owner (WithOut PanCard) ?
3) Can we do Sale Deed with out Pan Card of second Owner ?
1. 20.66%
2. You can refer section 206AA in this case. TDS will be higher of following 3
(i) at the rate specified in the relevant provision of this Act; or
(ii) at the rate or rates in force; or
(iii) at the rate of twenty per cent
3. You can do that but do mention that one of the seller has not furnished PAN and any future tax liability/penalty will be hers not yours.
Hi Nitin, Thanks for your reply.
1) If I hold 20.66 (which is 14,66,860 rs) before sale deed. Do i need to deduct equal amonut for second holder ? How can I pay TDS online for second owner without mentioning PAN CARD. ?
I have mentioned how to calculate TDS deduction for 2nd holder in my previous comment. You can mention PAN No as PANNOTAVBL in PAN field.
Sir, I am planning to buy a property held by joint owners ( father & daughter ). valued at 90 Lakhs. Father is a resident as per Sec 6 of IT act whereas daughter is a non resident as per the Act. Now, my query is : at what rate the TDS should be deducted for father and the daughter ? Should it be 1% each or should it be 1% for father & 20.66% for daughter ? Both hold overseas passports. Both have PAN. I would be obliged if you can help me on this. Thanks
1% for Father and 20.66% for daughter in the proportion of ownership in property.
Hi Nitin,
I am planning to buy a property @50 Lac from NRI through home loan. How can i deduct TDS from seller? I would pay only 20% and 80% would be financed by bank. Will bank deducts TDS or once he transfers amount from NRI account to NRO, bank will automatically deduct tax from it?
Also, property is not registered yet. Its a transfer case. Possession is not yet given by the construction company.
Bank may or may not deduct TDS. you need to discuss with bank.
Hi Sir,
I am working as an insurance agent, and recently my insurance company deducted TDS @30 % for few of my NRI clients survival benefits ( Money Backs) , the company says that it is as per section 195 of income tax, and my query is that is the TDS applicable for the survival benefits (money backs) attracts TDS, or in maturity the difference between total pay out which has made to the client from the policy and the actual premium paid, if the policy falls in profit, but in this case the client have loss only.Please clarify
Any payment from insurance company to NRI is subject to TDS.
Hi Nitin ,
Thanks for your great articles on Section 195 and TDS for NRIs. I wanted to know if the seller produces NIL/Low TDS Exepemption certificate than is the final TDS to be mentioned in agreement equat to what mentioned in certificate OR Is it as below
[(Total sale value x 20.66%) – TDS mentioned in exemption certificate]
Also do i need a TAN number even if seller produces exemption certificate.
Rgds
Ajay
If you deducting TDS then TAN is required. In the sale deed, you need to mention the TDS applicable, TDS exempted and final deduction.
Im NRI since last 20 year and staying abroad , Im buying the property from NRI, what TDS will be deducted? Please let me know.
if property seller and buyer both are having NRI status what will be the TDS deducted by buyer?
Normally it is same as i shared in my post but it will also depend on country of residence, tax treaty with india and whether money will be repatriated or not.
Hi Nitin.. I am purchasing a property from NRI who is ready for 20% TDS. I however dont have a TAN. Is it compulsory for an individual to have a TAN in order to pay TDS in such a case? I have property registration coming up in a week’s time, appreciate your response.
Without TAN you cannot deduct TDS. TAN is must.
Thanks Nitin for your prompt response. I found 20% as the tax on IT website, while you mentioned 20.66% – is this considering Surchase, Education Cess etc?
Please do not spam the blog by posting same query under different posts. I have already answered this query.
Hi Nitin,Am buying property from Mother, Son daughter who are settled abroad.Mother holds indian passport but have been away from India for last 4 years now and and Son/Daughter holds foreign passports.What will be the applicable TDS to be deducted..Son and Daughter in their Power of attorney have informed that the entire sale consideration can be in favour of Mother ‘s bank account which is in India.Is it just 20.66% on sale consideration or it is 20.66% each for Monther/Son and daughter ?
20.66% for each seller in proportion of ownership.
Hi NItin, I found 20% as the TDS for Sec. 195 on IT website, while you mentioned 20.66% – is this considering Surcharge, Education Cess etc? As I gather Surcharge = Zero and Cess is 3% on tax = which comes to 20.6%. Would like to be run through you, in case am missing something. Thanks in advance
Thats correct
It is true.
So does that mean even for payment to non-resident for purchase of immovable property, the TAN is not required since June 1, 2015? In that case should form 281 be used or can 26QB be used even though it is u/s 195.
TAN is not required for specific case of one time or single transaction. At the same time you cannot file challan 281 without TAN. Challan 26QB is used only in case of Resident Indian Seller.
Hi Nitin,
I am an NRI. In 2010 I have taken an Aviva New Pension Elite and paid 300.000 per year untill now (5×300.000=15 Lacs) The value at the moment is around 1800000.
The policy was for ten years, but after 5 payments I can surrender without charges.
I did that, asked for surender, but they only credited into my NRE account INR1235889
There is a big difference on this ammount, I asked them and and the only answer was …”it is for TDS section 195”
I don´t have any income in India, even I dont have any NRO account…is this correct ??
(the fund allocated was Pension Index Fund II ).
My PAN card is also uploaded in the insurance.
Or can I deduct this amount ??
Thanking you in advance, please help me this matter.
Rgds
NIshal Gokaldas
Though i have not seen your policy documents but TDS u/s 195 is deducted from maturity amount towards payment to NRI’s.
You can explore possibility to claim refund depending on tax status.
Hi Nitin,
I am currently residing in USA from past 1.5 years. I still get a part of my Indian salary (Basic) and file my Indian tax returns. I am not intending to settle in US
I am planning to sell my apartment in Bangalore and the buyer is insisting that he will cut 20% of TDS on the whole transaction amount and pay me the rest, as per section 195. I have two questions for you.
1. Would section 195 be still applicable to me even though I file my taxes in India and I have no intention of bringing the deal amount to US?
2. If answer to question 1 is yes, how do I get exemption under section 195 (2) by filing Form 13? What are all the conditions associated with it? Can I apply for it even though I am not physically present in India?
Please let me know.
Regds,
Kishore
1. In your case TDS will be 20%.
2. It depends. You can hire a local CA who can help you. You can apply even if you are not present in India through CA.
Hi Nitin
we are purchasing a flat owned by son and mother as joint owner for 1cr. So there are two owner of the flat out of which son is NRI and mother is resident. We as a purchaser are two in number(husband+wife).
a)How should the TDS be deducted in this case?
b)How should the tds challan be filled in terms of tds amount and applicable rate(for each combination of seller-buyer)?
c) Should I and my wife apply for TAN individually or one is sufficient?
d) Should TDS be deducted on capital gain or sale price of the property
-Rajiv
1. TDS will be deducted in proportion of ownership. For NRI son it will be 20.66% and from mother, it will be 1%
2. For personalized consultation you may contact me directly
3. Both buyers should have TAN
4. Sale Price of the property
Thanks Nitin for the clarification. This confirmed my understanding after going through your article.
1. Is it true that buyer needs to fill form 15ca/15cb from 1st june, 2015 if he makes payment to NRI(in this case payment for buying house) ? Is there any article of yours that talks about this
-Rajiv
That’s correct. You may hire a CA who can file on your behalf.
Hi Nitin,
I am buying a property from an NRI and would be deducting tax @ 20.66 % from the contribution that I am making. Now my query is
Can i file up the form 281 for TDS deduction online and pay the same via TIN NSDL site.
Also after deducting the tax do I need to file the Form 27Q for getting the Form 16A from IT department to be issued to Seller.
Also not sure what is Form 15C …. as I am paying the seller to his NRO account and not the NRE account .
Regards
Shishir
Please go through the post on this page.
It depends on case to case basis i.e. nature and other details of transaction. There is no standard answer.
Okay but here I am talking about the specific case where in I have to deduct the TDS , on buying property from an NRI.
So would like to know the TDS Rate and also does it vary if the consideration amount is above 1 crore ?
Please guide.
Hey Harish,
Did you get your answer? Even I am considering purchase of property from NRI which is above 1 Cr. Do you have any idea how much TDS should be deducted on that?
TDS is mentioned in the post and may vary from case to case basis as i explained in my post.
Okay but here I am talking about the specific case where in I have to deduct the TDS , on buying property from an NRI.
So would like to know the TDS Rate and also does it vary if the consideration amount is above 1 crore ?
Please guide.
TDS u/s 195 is standard for each case. TDS rate is mentioned in my post which vary case to case basis as explained.
Dear Nitin,
the procedure for NRI payment was very clear,TDs has been deposited with bank and challan obtained u/sec 195 but online submitting form 27q is becoming a problem
As Fuv is required to be generated kindly advise.
Rao
I need to check complete details to answer this query.
Hi nitin
we are purchasing a flat owned by father and son as joint owner for 5646000,so there are two owner of the flat out of which father is resident and son is N R I.we as a purchaser are two in number(husband+wife).the N R I selling the property with in two years of his purchase .
how much tds is to be deducted by us
20.66%
in mahesh query you told that 33.99% for us how it is 20.66%
Please check my post. 33.99% is for short term capital gain.
thank you sir,
after we complete the process of tds should we maintain tan account or should we close it
if we maintain it what are the problems ?
if we want to close it what are the problems?
please explain in detail.
There are no issues if you surrender TAN after completing all the formalities. But i personally suggest to retain for 5-6 years after the transaction as you might need to answer a query from IT department in case of purchase from NRI.
Please advise. A foreign company branch in India. Registered in India having a Tin Number. If you purchase goods from such a company, are we required to deduct tax? Please explain how this section is applicable?
It is subjective. I cannot comment without going through all the details.
Hello Nitin,
Thanks for the article. I am an NRI selling my apartment to a Indian resident. I understand that 20.6% is the TDS, but is this applied on the whole amount or just the Capital Gains portion of the sale amount? And how can we have the buyer from deducting the actual TDS that is applicable to me? I have a CA and know how much my Capital gains amount.
Thank you,
Shyam
TDS is applicable on total consideration value. TDS is mutually exclusive of actual capital gain. You may obtain lower tax deduction certificate from IT department, if you can convince the department about your lower capital gain tax liability.
Thank you!
Hi, Mr. Nitin…
Thanks for the info provided…
I got in touch with 2 different CA’s after reading this post… They did speak about an interest of 1.5% (here it says 1%) for delayed payment of tds (per month) but not of the 1.5% penalty (as mentioned here). And a penalty of Rs. 200 per day for delay in filing tds (not Rs. 100 as mentioned here)… Is there any new development or change in income tax laws recently ?? Can you clear it for me ??
Regards,
Siddhartha
I cannot comment on opinion provided by others. My post on this subject is updated one.
Hi Sir,
I m buying property fro NRI.
The property is in joint name of two brothers.
One brother is NRI and second resident Indian.
NRI brother has given power of attorney to his father.
So in this case how TDs is to be deducted.
For resident Indian brother deduct 1% and for NRI brother deduct 20.66% in proportion of ownership in property.
Dear Sir,
In case of assignment agreement sale by NRI (seller) where the property is not registered even once still the buyer needs to deduct 20.66% TDS for LTCG ? or is it only applicable if the property is going for registration with NRI as the seller ?
TDS of 20.66% is still applicable.
Thanks Sir.. Which form should we use to file TDS ( Form 26 QB or Challan 281 with option 195) ?
TDS u/s 195
hi nitin
i got tan number but bank manager told that it will take atleast one week to pay tds in that tan number
Once TAN is issued, you can deduct and deposit TDS instantly.
how many days it will take to activate in banks
It can be done instantly.
I understand that like sale of immovable property to Resident Indians, in the case of sale by an NRI also there was change to do away with the TAN no requirement by buyer
Has this been notifified by Central Government by any chance or is it still necesary to have TAN no by tghe buyer of property from NRI
If you are buying a property from NRI then you need to deduct TDS u/s 195 and TAN is required for same.
Thanks. I got a doubt since some changes were announced in the last budget whereby Central Govt could notify exceptions and in fact as part of the Budget Memorandum there was specific mention abt easing of this provision for NRI ‘s property sale. But I don’t think anything has been notified till date
Appreciate your response.
The key change was that capital gain can only be invested in single property. Hope that rules will be eased in coming budgets.
Hi Nitin,
I also came across this link which talks about “one time transactions such as single transaction of acquisition of immovable property from non-residents on which tax is deductible under Section 195, it is proposed to amend Section 203A to the effect that the requirement of obtaining and
quoting of TAN shall not apply”. and that this amendment is effective from 1st June,
2015. I however tried searching on IT or Finance Budget website, but no luck as yet. Looking for your insights for info on the above. Thanks!
Hi Nitin,
Thanks for such a wonderfull article and the pain you are taking to respond to each queries being raised further, I too have following queries which I checked might not be raised and mentioned in article:
=>You mentioned TDS rate as 20.66% but on checking the http://www.incometaxindia.gov.in/Pages/tools/tds-calculator.aspx
But what I can see is TDS is either 20% or 20.6% based on the section “Select Option “?
As either its showing TDS as 20.6% (under section 10 ) or showing 20% (under section 115E or 112)
So please advise which section is applicable for either of the two mentioned (10 or 115E/112)
Thanks
Rgds
Harish
Dear sir in case of a bank loan can we ask bank for complete disbursal and then ask seller to give back the TDS amount as bank is not ready to fund TDS amount to me
It is not a standard process. Bank should deduct TDS and deposit in buyers account for challan payment.
Dear Nitin, My seller is an NRI and has a Pan card and also a regulary file his returns every year in India. I am looking at buying a prroperty from him in India. Does the buyer deduct TDS at 1% or at 20.66%
20.66%
Hi Mr Nitin,
Thanks for great article. I had a question.
If NRI is selling property and buyer pays the money into NRO account of seller (not NRE), will the 15ca/15cb still be required? The money will stay in NRO account only and not repratriated outside India.
Thanks,
Ratna
Form 15CA is not required if the remittance is not chargeable to tax in India. It is advisable to obtain 15CB from a CA even if 15CA is not mandatory.
Dear Sir,
My Company in the process of executing open offer and i’m asking this question on behalf of acquirer of the open offer. If the shares are tendered by the NRI shareholder, how do we have to deduct the TDS over it? How do we ascertain as to what amount of capital gain/business income, if any, the shareholder is having?
Thanks in advance,
Priyanka
It is subjective and depend on multiple factors i.e. whether stocks are ESOP, current country of residence, whether India has ADTT with your country of residence etc etc.
The tax liabilities of NRI and resident Indian are same. In short, LTCG is NIL and STCG will be taxed at 15%. Only difference is in TDS. TDS of 15% will be deducted in case of STCG and in case of LTCG, TDS will be NIL.
Dear Sir,
Thanks for your reply.
Further, I would like to clarify that I have asked this question on behalf of the Acquirer of the Open Offer and not on behalf of a NRI Shareholder.
The shares being acquired are normal shares issued in IPO. Now the question is, in Open Offer, the acquirer is supposed to acquire shares from the NRI shareholder on which TDS has to be deducted as per Sec 195(1) of IT Act. The confusion here is at what percentage the TDS should be deducted? (Assuming NRI doesn’t provide us with any DTAA documents) Are we expected to compute Capital Gain of all the NRI shareholders on individual basis in order to determine the LT/ST Capital Gain earned and then deduct TDS accordingly on the same or a flat rate can be applied to payments made to all NRI. Also, as this is a off market sale, LTCG @ 20% is applicable.
Thanks,
Priyanka
Ok. Please let me know whether the company is listed or non-listed entity in India. The rules vary.
Sir. Last month I bought a property from a Singapore based NRI with whom India has a DTAA. I have forgotten to deduct 20.66% from the total payment u/s 195 as per your post above. When I informed this to the buyer, the buyer has post the sale agreement and post the payment applied for a NIL TDS certificate which he expects to get in a couple of months. While I still be liable for penalty or action by the authorities even I get the nil TDS certificate and give it to the IT authorities.
Rohan
TDS is applicable. Now there is NO Relevance of NIL deduction certificate as the transaction is already completed. You have to pay all the applicable penalties.
I bought a property from an Overseas Citizen of India having active PAN number. I deducted 1% and paid TDS in SBI. Sale proceeds were deposited by Seller in his NRO account. I am not sure if lesser TDS for this case. If lesser, how will this issue be resolved. Will IT officer attach the funds in NRO account of Seller ?
TDS of 20.60% is applicable. TDS is the responsibility of a buyer and all the applicable penalties will be imposed on buyer as i shared in my post.
Dear Mr. Bhatia,
Thank you for the great article and the pains taken by you to answer each query.
I intend to buy a property in Mumbai from an NRI based abroad. I have an income based pre-sanction letter from a nationalized back, who has in principle agreed to loan me for this particular property.
The property was owned by his father and mother and after thier deaths, by nomination the society has registered the same to his name. He has 5 other siblings all over the world.
I intened to deposit a 1% token amount to his NRO account and have him sign a MOU and scan it back over email. He has agreed to furnish the property papers along with the NOC of all his siblings on recipt of the token. Once the back gives a sanction letter, he is willing to fly down and sign the agreement and register it.
I have the following queries:
1. Is a MOU signed by him aborad valid for any remedy incase the deal fails?
2. Is an NOC enough from his siblings?
3. The propoerty has been transferred by the society from the parents after thier death to the son by nomination. Is this adequate proof of ownership of the existing seller?
Thank you in advance.
1. No
2. No
3. It seems to be co-operative society and title transfer was initiated through change in society share certificate as per Maharashtra co-operative societies Act. In my opinion, it is not right way. As per ruling of supreme court of India, the title transfer can be done only through registered conveyance deed.
Dear Mr. Nitinji,
If in case the property is a joint property of NRI with husband not having a PAN and wife having one. Can the tax liability be paid by one having PAN and then transfer the money from NRO a/c to NRE A/c after obtaining 15 CB from a CA.
Or, do we need to get the PAN applied for the other person and then pay LTCG in both PAN Nos?
Thanks a lot.
It is advisable to apply for PAN before sale of property.
Hi Nitin,
NRI seller is not having PAN. Me( Buyer) and seller are planning to register the sale deed with Registrar without PAN.
I will deduct the TDS at 20.6% and deposit it by due date.
Will it be ok , if he applies for PAN later on ( after selling the property) and I furnish the PAN in TDS returns, so that he can claim the refund ?
Thanks in Advance
I will suggest to wait till he gets PAN. PAN is normally issued within 2-3 weeks.
Hi,
I am buying a NRI property, So do i need to hire a CA for submitting the TDS at 20.6% . Also I dont have TAN right now, I have applied today. Not sure if it can come in 15 days when we have decided for registration. Any other alternative ?
You will get TAN in 2 weeks time. You can deposit TDS on your own. It is not that complex as perceived :).
Hi Sir,
I am buying the property jointly with my wife. And in my case TDS is coming around 17 lakh. In what proportion should we pay the tds ? Or one buyer can pay whole tds. Current property also owned by joint owners(husband wife)
TDS should be deducted and deposited in proportion of ownership in property. In your case, for installment you need to file 4 challans because of 2 buyers and 2 sellers.
Hi