In my previous post on NRI’s and TDS on sale of property we discussed basics of TDS on Property Sale by NRI. In this post we will understand how my NRI friends can lower the TDS on Property Sale. Before you decide to go ahead with property sale following 2 points should be considered
1. Type of Capital Gain from Property Sale i.e. Short Term Capital Gain or Long Term Capital Gain
2. Whether i am willing to pay capital gain tax or would like to save capital gain tax by Re-investment of capital gains
Once these 2 points are clear then we are ready for property sale in India. Let’s discuss the case of Mr. Ashok Taneja (with his due permission) who lives in California. He has property in Delhi which he bought in Aug, 2009 for 70 lakhs. He approached me for consultation on TDS on property sale by NRI’s. He is planning to sell it in current FY 2014-15 for 1.5 Cr. Now in his case, the answer to above mentioned 2 points are
1. Capital Gain will be Long Term Capital Gain as Mr. Taneja held the property for more than 36 months. Rate of Capital Gain Tax for Long Term Capital Gain is 22.66%
2. Mr. Taneja is inclined to save capital gain tax by re-investment of capital gains
Therefore 1st task is to calculate long term capital gain of Mr. Taneja. Indexed cost of acquisition of property is approx 1.13 Cr and he is selling it for 1.5 Cr. Long Term Capital Gain from property sale is approx 37 lakhs and corresponding Long Term Capital Gain Tax at 22.66% is 8.38 Lakh.
As i shared in my previous post that there is anomaly in law. If in case of Mr. Taneja, buyer deduct TDS at 20.66% u/s 195 then TDS will be deducted on sale consideration value i.e. 1.5 Cr. TDS u/s 195 will be approx 31 Lakh against Mr Taneja’s Long Term Capital Gain Tax liability of 8.38 Lakh. In short, u/s 195 excess TDS to the extent of 22.62 lakh will be deducted assuming Mr Taneja decided not to re-invest capital gains from property sale.
After point 1 i.e. calculation of capital gain, there are 3 possible scenarios
(a) Capital Gain is Zero or there is Capital Loss on Property Sale: In this case NRI Seller can apply for NIL Tax Deduction Certificate.
(b) NRI Seller is willing to pay Actual Capital Gain Tax i.e. if Actual Capital Gain Tax liability is less than TDS u/s 195: In this scenario, based on capital gain tax calculation NRI seller can apply for Lower tax Deduction Certificate. In above example, Mr. Taneja can apply for Lower Tax Deduction Certificate as actual long term capital gain tax liability is only 8.38 lakh against TDS of 31 lakh u/s 195.
(c) NRI seller is willing to re-invest capital gain to save capital gain tax: In this case, NRI Seller can apply for Tax Exemption Certificate.
How to apply for Nil / Lower Tax Deduction Certificate or Tax Exemption Certificate on Property Sale
NRI Seller can apply for Nil Tax Deduction or Lower Tax Deduction with Income Tax Assessing Office. In case, NRI seller is planning to re-invest capital gain as i mentioned earlier then he can apply for tax exemption certificate. Based on assessment by Income Tax Department, certificate will be issued to NRI seller for property sale. In this case, buyer will not deduct TDS u/s 195 on sale consideration value. In above example, if Mr Taneja get certificate from Income Tax Department then buyer will pay full consideration i.e. 1.5 Cr to Mr. Taneja without deducting TDS. NRI seller can handover original Nil Deduction Certificate to the buyer for his reference. In short, buyer need not to file any TDS in seller’s name as TDS will not be deducted in this case. Income Tax Department will issue separate certificate to NRI seller for TDS on capital gains. For Tax Exemption Certificate, NRI seller can submit application in Income Tax Department under whose jurisdiction his / her PAN belongs to. To know the jurisdictional IT office of PAN, click on following link
https://incometaxindiaefiling.gov.in/e-Filing/Services/KnowYourPan.html
In few cases i observed that TDS is not applicable on property sale as NRI seller obtained NIL Deduction or Tax exemption certificate but then buyer deducted TDS u/s 194IA just for the sake of deducting TDS. In such cases, full payment should be released to NRI seller for property sale and buyer should obtain Nil deduction certificate / Tax Exemption Certificate from NRI seller.
Documents Required: Income tax department may ask for following documents to issue Nil / Lower Tax Deduction or Tax Exemption certificate
(a) Passport
(b) PAN
(c) Sale Agreement / Sale Deed
(d) Income Tax Returns
(e) Bank Statement
(f) Any other document deemed relevant
Entire process may take upto 1 month’s time and it is advisable to hire a professional for this job.
In case, there is no tax liability then NRI can file form 15CA and 15CB online. These forms can be filed by CA. After filing form 15CA and 15CB, money can be transferred to country of residence else money can be retained in NRO account in India. Repatriation of funds during FY should not exceed $ 1 Mn
NRI’s and PIO’s can repatriate sale proceeds of property inherited from resident Indian without RBI’s permission subject to certain conditions. General Permission is available for repatriation of sale proceeds from inherited property. Documents required are Inheritance Certificate / Succession Certificate or Probate and a certificate from Chartered Accountant in specific format.
Word of Caution:
1. Please check income tax rules in your country of residence on capital gain out of property sale in India.
2. Please check income tax rules related to long term capital gain exemption under section 54/54F/54EC in your country of residence.
3. Please check whether DTAA (Double Taxation Avoidance Agreements) is signed between India and your country of residence.
4. Last but not the least, in many cases i observed that NRI seller insist buyer to not to deduct TDS. In specific cases, TDS is not deducted due to ignorance at buyers end. In all such scenarios, hefty penalty can be imposed on buyer or on NRI seller. It is always advisable to pay all taxes on time to buy peace of mind which is priceless.
Hope my NRI friends liked the post. You can share this post with your friends and family members through following social media icons.
In my next post, i will discuss how buyers can deduct TDS u/s 195 if they are buying a property from NRI i.e. Property Sale by NRI.
Copyright © Nitin Bhatia. All Rights Reserved.
Very complicated. I’m against investing in RE & Gold. Thanks to equities.
If there is no capital gain on sale of a property by a NRI, for getting a nil tax deduction certificate is it mandatory that the sale proceeds be invested in another property within 2 years of the sale of the first property? Or can a NRI deposit the entire amount in a NRO account and use it for investment in mutual funds or any other investment as he pleases?
Sorry, that comment was addressed to the blog writer.
As i mentioned in my post that if you convince tax authorities that your capital gain is NIL then you can apply for NIL dedcution certificate. If there is a capital gain in property transaction and you are planning to re-invest capital gain to save capital gain tax then you may apply for Tax Exemption Certificate.
If you get NIL dedcution certificate then you are free to invest or can even opt for Repatriation of sale proceeds. In case of tax exemption certificate, you have to retain the sale proceeds in NRO account.
Just one more additional question. Can i sell my property first and THEN get a ‘Nil tax deduction certificate’? If yes, is there any time limit within which i am required to complete this formality after the sale of the property?
Thanks.
In this case, TDS will be deducted. Any exemption certificate should be applied and issued before the transaction.
hi nitin,
Please advise if it is possible to pay the TDS and claim a refund of the difference between the TDS deducted and actual long term capital gains tax ?
It is feasible. You can claim refund.
Hi Nitin ji ur suggesion r very useful for us. I m in process of purchasing property from NRI cost Rs. 1.32 Cr. Selller n me both were not aware about TDS rules. I paid only 10% value to the seller. Now when we both came to know that me as a buyer has to deduct 22.66% of consideration cost from the full value to pay it in income atx deptt. now he is not agree n want to have Exemtion certifiate from IT deptt. My queries r:-
1. What r the documents to be made ready to apply for Exemption certificate of TDS.
2. If sellers jurisdiction is ITO ward 4(4)patna, then can seller apply in Delhi or nearby n in which office.
3. Total time to be taken by IT deptt. in issuing of Exemption certificate of TDS.
4. Original Exemption certificate to be kept by seller or buyer.
5. Whether the Original Exemption certificate to be produced by the buyer in the office of Sub Registrar at the Registry of SAle deed.
6. After getting Original Exemption certificate from the seller, as i understand purchaser dont need to deduct 22.66% of TDS from buyer payment. (yes or No).
7.What r other precautions to be taken when property to be purchased from NRI residing in Dubai.
1. Following documents are required
*Duly filled and signed Form 13
•Photo copy of PAN Card of seller
•Proof of residential Status – Passport copy with VISA
stamping
•Proof of TDS, Advance Tax paid, if any
•In case Income during the previous 3 years was below
taxable limit, an affidavit to that effect
•Copy of the Registered Sale deed (at the time of purchase
of property)
•Copy of the sale agreement by virtue of which transaction
occurs
•Capital gain calculation
•Proof for exemption/deductions claimed under the head
capital gain
•Bank guarantee for the tax liability arising out of the
transaction if it is proposed to issue the certificate at
0%
2. I don’t think so
3. It vary from office to office. Normally 2-3 weeks
4. Buyer
5. You can share photocopy of same if demanded. Also mention the details in sale deed.
6. No
7. It is subjective and depend on case to case basis. For general points, please check my posts on same topic.
Hi sir, i m in process to purchase a property in Delhi for Consideration cost of Rs. 1.32 Cr. from NRI residing in dubai. NRi fellow is in process to get TDS exemption certificate from IT Deptt. He is having huge amount of LTCG for this property.
Kindly guide on following points:-
1. Whether TDS exemption certificate from IT deptt. could be issued to him when he is having huge LTCG and he is assuring to IT deptt. that he is going to invest whole money in India only for purchasing another property with in a stipulated time.
2. e TDS exemtion certificate to NRI fellow, considering point no. 1, then on which basis IT deptt. takes his guarantee that he will follow what he has committed.
3. If TDS exemption certificate would not be issued on the due date of execution of sale deed to be registered, then how much TDS to be deduct from the consideration value of Rs. 1.32 cr. and on which percentage.
4. How the deducted TDS would be deposited in the IT deptt. by the purchaser.
5. Max. Duration from date of execution of sale deed within which the TDS have to deposited in the IT deptt. from the purchaser.
6. If the TDS could not be submitted in IT deptt. by the purchaser then what r the penalties.
7. How originality of TDS exemption certificate issued by IT deptt. to the NRI seller could be checked by the purchaser on internet or by any other means.
8. What is to be done of original TDS certificate taken by purchaser from Seller. Whether it is to be submitted some where or to be kept by purchaser for always.
9. What r the requisite docs of seller n purchaser to be produced in the office of Sub registrar at the time of registry of sale deed.
1. It is subjective and depend on how his CA present the case. Prima facie it seems doubtful
2. As i mentioned it is doubtful
3. 20.66% on 1.32 Cr
4. Please check following post
https://www.nitinbhatia.in/real-estate/deduct-tds-nri-section-195/
5. The 7th of next month in which the TDS is deducted. Assuming i deduct TDS during Dec’15 then i have to deposit on or before 7th Jan, 2016.
6. I have explained in post as shared in point no 4
7. Please get it verified from IT department only
8. A buyer will retain original
9. PAN is must. Sometimes id or address proof may be demanded.
I m very thankful for your valuable guidance. As i earlier asked about TDS exemption certificate applied by the NRI seller for nil or lower deduction of TDS. Now TDS exemption certificate having 10 digit certificate no. has been issued to the NRI seller and he provided us the same.
1. Can i check/verify the originality of this certificate, online.
2. As per certificate i have to deduct income tax at the rate of 0.01% (excluding Education cess/surcharge as applicable) to or as the case may be to the account of Seller. What it mean…
Kindly advise.
Thanking You
Ashwani Kumar
1. You can check with IT department.
2. I have not seen the certificate therefore cannot comment. You can mail me at info@Nitin Bhatia.in only then i will be able to comment.
Thank you very much for the above information. We are planning to sell our property in India and are looking to get the Tax exemption form. Can you please let us know which form to fill regarding that.
You may file Form 13 to get Tax Exemption Certificate.
I need to have Nil TDS certificate from the seller and need a professional who can handle this matter.
For consultancy on same you can approach me. For operational matters you can check with local agent.
I am NRI from last 4 years starting 2011 but I bought property in 2005, which I am selling, when I was resident Indian and registered the same property in 2013 Dec. What happenes to TDS in this case ? Does buyer need to still deduct 20.66% TDS?
TDS will be 20.66%. Status considered is as on date.
In the process of applying for NIL TAX Deduction, NRI Seller has upto 2 years to re invest long term capital gains in another property and as a proof an Allotment Letter and (or) Reciept of payment made acquire new property has to be provided. My question is that if the NRI seller has not yet purchased another property, then how can NIL tax deduction certificate be received. Is any affidavit saying that (within two years, NRI seller will re-invest in another property) is to be made and is it legal proof in court of law.
Thanks.
If your capital gain on this transaction in NIL or you are incurring a capital loss on this transaction then also you can apply for Nil Tax Deduction Certificate.
is the individual buyer has to deduct the tds u/s.195 as sec. 194IA is not applicable to nri
Even if the buyer is individual, TDS u/s 195 is applicable in case of a NRI Seller.
Hi Nitin,
Thanks for the nice article. I am NRI selling my property in couple of months. My capital gain is around 15lakh and TDS @20.6 it will be 3.09lakh and if seller deduct TDS on sale value 28lakh the TDS @20.6 will be around 5.76lakh.
Based on your article I should apply “Lower Tax Deduction Certificate” before the sell. Can you please advice what should I do? or do you provide service for the same? Also in this case how to file 15CA and 15CBto Repatriate the money to my current country?
Thanks in advance
Sudipto
Thanks for your query. I only provide consultancy service. For any operational activity, you may hire a local CA who can help in obtaining lower tax deduction certificate.
Hi Nitin,
I have a few queries on this topic.
We are selling an apartment in Gurgaon for 1.21Cr and we bought the same in Aug 2011 for 84 Lacs and paid 5lacs as registration. My queries are:
1. This is an apartment we own jointly between my wife and me. So do we need to both apply for the reduction in TDS?
2. Secondly, CPI index for 2015-16 is not available still and as per CPI index of 2014-15, the indexed cost comes out to be 1.16cr. IS there any way to get the CPI for current year and apply that to reduce the LTCG tax.
3. Do we need the agreement to sell to get the reduction certificate?
4. how long does it take to get this certificate, can it be done parallel to agreement to sell and obtain it before the registration?
5. Do we have to show Capital gain calculation in a particular format?
6. Form 13 does not mention any documents, can you share a list of documents required for reduction in TDS?
7. We also plan to reinvest the proceeds in another property, but we can do that only after sale of this property. Is there any way to show the intent and claim exemption?
8. Lastly, can you recommend any local CA for this process in Delhi?
Appreciate the help!
Thanks
1. Yes
2. It will be declared by Ministry of Finance
3. Normally it is required
4. 2-3 weeks
5. Yes
6. List of documents
*Duly filled and signed Form 13
*Photo copy of PAN Card of seller
*Proof of residential Status – Passport copy with VISA stamping
*Proof of TDS, Advance Tax paid, if any
*In case Income during the previous 3 years was below taxable limit, an affidavit to that effect
*Copy of the Registered Sale deed (at the time of purchase of property)
*Copy of the sale agreement by virtue of which transaction occurs
*Capital gain calculation
*Proof for exemption/deductions claimed under the head capital gain
*Bank guarantee for the tax liability arising out of the transaction if it is proposed to issue the certificate at 0%
7. No
8. Professionally i don’t share references
Hi Nitin, this is a fantastic post – thank you So much for taking the trouble to explain all this. It is truly a maze & navigating it is not for the faint of heart :-)
Two questions to ask of you :
1. Does it matter or change anything if property buyer is NRI also? (Seller is an NRI)
2. In your example above,
TDS under section 195 will be approx 31 Lac (buyer’s simple calculation).
Separately, LTCG (seller’s calc, or more correctly IT dept calc) would be 8.38 Lac.
As a buyer, I only need to focus on the 31 Lac component, calculcated at 20.66%, correct ?
From the Seller’s perspective, exactly what is his LTCG due and how he will get his refund, that
is his concern, and as you mentioned in another post, only competent authority for determining
all the correct figures is IT dept.
The only situation where I, as a buyer, would deduct LESS than the 20.66% TDS at the time of sale is if Seller is able to furnish a “Nil” or “Lower Tax Deduction Certificate” from IT Dept. Can you please confirm if this understanding is correct ? Not sure why in your post you mention the difference between 31 and 8.38 – maybe that difference is relevant to the Seller & how he deals with his tax liability.. As a buyer, I should be thinking only of the 20.66%…
Thanks again..
1. Yes. You need to check taxation rules of both the countries and also how the payment will be transferred. You also need permission of RBI
2. To answer your queries. i need to go through complete details.
Per the NRI laws, my wife can be considered as Resident but I would be non-resident. Our flat is jointly owned. What options I have?
1. Transfer full ownership to her so that TDS can be 1%
2. Since we are joint owners, her TDS part can be 1% where as my part would be 20%. This way overall TDS can be reduced to 10%?
What are additional fees to transfer full ownership to her name as in #1 above?
1. You have to stamp duty on gift deed in this case. Moreover if gift deed and sale deed are executed in quick succession then it may raise suspicion that gift deed was executed to avoid TDS
2. Roughly yes in case of equal ownership
Hi Nitin,
Thanks for valuable post. Is Withhoulding Tax under Section 194/A is applicable for a Non-Resident selling 6 year old immovable property to a Resident buyer. Buyer wants to deduct 1% TDS on the transaction value since it is more than Rs. 50 lakhs.
Property is sold at loss below indexation cost hence capital gain is Zero. Does Withhoulding Tax 1% TDS under section 194/A still applicable for NRI seller and can seller apply for NIL Tax Deduction Certificate. Appreciate your knowledge and help.
TDS u/s 194IA is not applicable for NRI sellers rather TDS u/s 195 is applicable. In case of NIL Tax deduction certificate, TDS is not applicable at all.
Dear Sir..We have purchases property for 6cr from NRI and deducted TDS 20.66% , What is rate applicable to it..? What is remedy as aggrement and everything is done..Thank you in advance
Sorry i could not understand your query.
Hi Nitin
I am selling a flat in Goa. Owned jointly with my dad, we are NRI. The property is not legally registered in our names, we have the original sale agreement. The resort cancel this and issue a new agreement in favour of buyer (Indian resident). Buyer wants to deduct TDS. Sale price approx 31lak. We bought in 2005. There is a capital gain, but minimal rental income (under 2.5 lak pa). We do not intend to reinvest in India. Does buyer have to deduct tax? If so, are we entitled to tax exemption certificate? If so, how and where do we get this. My father has a PAN, I do not, do I need one? How long will it take, the buyer wants to complete by 4 October.
TDS will be deducted. You may apply for PAN, it will take a month’s time. You may apply for NIL Deduction certificate in local income tax office.
Extremely informative and valuable post.
I have received a notice under TDS195 from IT Department, asking me to file my returns for the purchase of a shop in 2012. No TDS was deducted at the time of the transaction. The Sellers have either paid their taxes or otherwise invested in Government Bonds that exempt them from paying taxes. How do I (the Buyer) deal with the following;
1. Will a Nil Deduction Certificate or a Tax Exemption Certificate suffice in such a case, so as to avoid double jeopardy?
2. Can a Nil Deduction Certificate be obtained post transaction? If so, who applies for this, the Buyer or the Seller?
3. Can a Tax Exemption Certificate be obtained post transaction? If so, who applies for this, the Buyer or the Seller?
4. What is easier from a Buyers perspective, without having to inconvenience the overseas Seller?
Any suggestions on what I need to do to absolve myself from paying taxes or fines (in the event the above is not possible)?
Any alternatives?
1. Yes
2. No
3. No
4. You may calculate capital gain tax and pay with interest
I am not sure why as a buyer you received notice u/s 195. It must be pertaining to source of funds.
Am planning to purchase a property from an NRI. He moved abroad in month of September 2014 and continues to reside abroad as of Sept 2015. What would his residential status be (Given that for the last FY he was less than 182 days in India).
How can a buyer determine if the seller is a bonafide NRI or not? Do we look at the PAN card, address provided and the fact that the seller is available in person for the transaction.
Can I proceed with the assumption that he is a resident and do a 1% TDS.
Thanks in advance for your response.
Prima facie it seems that seller is a NRI. Applicable TDS will be 20.66%.
As per FEMA, residential status is not determined by period of stay but on the INTENT of the person staying abroad. Person becomes NRI (from FEMA perspective) the day he goes out of India with the intent of staying out of India for an uncertain period of time. And for property transactions, NRI means NRI with respect to FEMA.
very useful article sir…
Thanks :)
Hi Nitin,
I have been reading over the comments and you didn’t seem to answer Marian’s comment
“…if the NRI seller has not yet purchased another
property, then how can NIL tax deduction certificate be received. Is any
affidavit saying that (within two years, NRI seller will re-invest in
another property) is to be made and is it legal proof in court of law.”
I am an NRI and want to buy property from the proceeds of the sale of my flat and not before that to not have to pay TDS.
It is subjective and depend on whether Assessing officer is satisfied with your justification or not. Normally NIL tax deduction is issued in case of NIL Capital Gain or Capital Loss from property transaction.
Nitin, very useful article. Quick question – I am going to reinvest in another real estate transaction. In that case, how do I get Nil certificate and how much time do I have to reinvest ?
Thanks
Normally NIL deduction certificate is issued in case of Nil capital gain or capital loss. You can get it from Income Tax Department. You can invest either 1 year before or 2 year after from the date of property sale.
Myself NRI, want to sell ancestral plot (not house) and want to claim exemption u/s 54F. For claiming exemption, can I make use of booking of a residential flat made 2 years before (allotment letter from builder recd) but possession and sale deed execution shall be in about 1-2 year’s time. I don’t have any other residential property in India. Thanks in advance. Regards.
Dear Nitinji, very useful information. Please advuse if a resident buyer defucts only 1% TDS on a property bought from an NRI then what is the liability of the NRI seller on the transaction already completed. There is no actual capital gain tax liability on the seller because of indexation. To calculate the long term the oeriid starts from when? The date of Purchae Agreement or the date of actual regustrationnif the property?
Best regards, DK Gupta
It is subjective and depends whether NRI declared correct status for property transaction or not. Also whether money will be repatriated or not. TDS is applicable irrespective of capital gain tax liability.
Dear Sir, Very nice and informative post. I really appreciate your efforts for sharing such a critical and technical information.
Thanks for liking the post.
Thanks a lot for the information. If at the time of purchase the seller(NRI) didnt disclose his residential status and I deducted only 1% TDS what are the consequences I might face in future.
Lets say its a deal for 1Cr and I deducted 1 lakh as TDS. However after adjusting for inflation the actual capital gains tax for the seller will be 3 lakhs. So in this case, if IT dept comes after me, then will I have to pay entire 20 lakhs or that 3 lakhs (or 3-1 lakh=2lakhs).
For non-deduction penalty can be 100%. Penalty is on TDS amount not on capital gain. Also it is over and above TDS amount.
Hi Nitin,
Your article is very useful. But since every transaction is unique, there are always some doubts.
I am planning to buy a property in Gurgaon from an NRI seller ( 2 of them as joint owners). One of them has got his share post death of his father in heritance. Payments have been made over last 5-6 years but due to death of their father a new agreement has been drawn by the builder in 2015 only. Sale deed of the property is going to be executed in their name very shorthly.
We are buying this property from them almost at their purchase cost, hence there is almost NIL capital gain. If indexing is done of their investment, it would be a Capital loss in their hand. How do we go about the TDS and related issues in this case? If there is a deduction, how does he claim it back ?
Thanks in advance for your guidance.
Rakesh Arora
TDS is applicable irrespective of Capital Gain or Loss to NRI seller. Only exception is if seller produces Nil / Lower Tax Deduction or Tax Exemption certificate issued by IT department. NRI seller can claim refund of same if he convinces IT department that his capital gain is NIL or he incurred capital loss on property.
Also it is a case of inherited property therefore buyer should be extra careful in such cases.
Hi Nitin
Thanks a lot for wonderful information.
My name is Rajeev Bhatia and I am an NRI ( US Citizen ) living in USA. I jointly own a property in India with other 2 NRIs. The property is under final stage of sale and will be transferred with in few days. I don’t have a PAN number and have applied for. The other 2 partners have chosen to be Indian resident. Based on that information the buyer has deducted 1% TDS ( equally in the names of 2 partners excluding me ). The gain in this transaction will be about 3-4 lacs of rupees or loss depending on whether it is long term or short term capital gain. The property was purchased under construction linked plan about 5 years ago and is now being transferred without taking possession.
My questions are as Follows:
1. Will it be a LTCG or STCG? If it happens to be a LTCG then probably we will have a LTCG due to indexation.
2. There is no TDS deducted by buyer in may case as I don’t have a PAN #. Will in mase it be 20%, 30% or 1% TDS?
3. Or the TDS ( in my case be ignored ) and I should apply for NIL certificate.
4. The other 2 partners have a concern of being scrutinized as the TDS amount is more as compared to their share of sale consideration. TDS has already been deducted @ more than 1% as my share of 1% has been deducted by the buyer from other 2 partners.
5. What should be done to resolve this situation?
In my first question it should be LTCL in second line.
Hi Nitin
Thanks for the detailed explanation on the post.
I’m buying a property from an NRI for a property with base cost as 72 lakhs
He bought it in 2009 at around 24 lakhs
Considering the inflation in 2009 and now.his cost of procurement as on date will be around 45 lakhs. Hence a capital long term gain of 72-45=27 Lakhs.
Will the tds be 23.33percent of 27 lakhs.
Or 23.33%pf 72 lakhs.
I have no idea if he plans to reinvest as on date.
A clarification taking the above mathematics in to account will help
TDS is calculated on total consideration value not on capital gain. Also check the applicable TDS rate.
Thanks. Interestingly my buyers CA has stated that they will Pay 20% on the long term capital gain and provide me a challan!! They stated i shudnt pay the TDS of 20.66 from my side and they will give me an indemnity bond stating that for any loss occured as a result of greater income tax applicable as stated by the tax dept they will be responsible.
Obviously this isn’t right .
Read sellers CA instead of buyer
It is not right process. A buyer should deduct and deposit TDS. Also TAN is required in this case.
Dear Nitin,
Thanks for very insightful article. I had one query with respect to exemption/lower rate certificate. From what I understand, a CA’s certificate is also valid for lower rate/exemption u/s 195 (6).
Can you pls clarify?
Thanks
It is not correct. Sec 195(6) is related to form 15CA and 15CB i.e. A person making payment to NRI has to furnish these forms to I-T department. 15CA can be filed online but in few cases, form 15CB is required from CA before uploading form 15CA. In 15CB, a CA can only certify Payment details, TDS Rate and TDS deduction u/s 195.
This clause is normally misunderstood and misused. A lower or NIL tax deduction from CA has NO Legal validity. Only department of I-T can issue tax certificate in this regard. Please check following link
http://www.incometaxindia.gov.in/_layouts/15/dit/pages/viewer.aspx?grp=act&cname=cmsid&cval=102120000000041704&k=&isdlg=0
Dear Sir
I really appreciate the article published by you. In regards to same I have one query. I’m interested in buying a property worth 1.00 Cr from Mother & Daughter. Mother is Indian Citizen whereas Daughter is US citizen. They have decided to split the money on 40:60 ratio (40 Lacs to Mother and 60 Lacs to Daughter). So, I would like to know what TDS will be applicable in this case?
The division of consideration value will not be based on the discretion of sellers. You should pay in proportion of ownership in the property. For Mother, as she is resident Indian therefore TDS will be 1% for her share in property and for daughter’s share, TDS will be 20% + applicable cess & surcharge on her share. As the daughter is foreign national therefore RBI permission might be required for the sale of this property.
Hello sir.Really appreciate your efforts.
Sir my question is my brother is planning to sell his property which he had recd. through nomination on his name from my mother before her death.His current status is PIO(Indonesian citizen).And now he wants to share all the sale proceeds among we 4 siblings in a ratio of 40,30,15,15 though our names are not there in the nomination form.
1)Can he give us the sale proceeds by doing a gift deed to us.
2)If yes, then what is the procedure for the same.
2)Also howmuch TDS will be applicable on him.The total consideration of the property is 62 lacs.
Waiting for your reply.
Regards.
1. Yes
2. All the siblings need to sign a Gift Deed. It is not necessary to register. Gift tax is exempted in your case. Your brother need to check Indonesian laws in this regard i.e. amount received by him through sale of property might be taxable in Indonesia. Also he needs to pay capital gain tax in India.
3. 20.60%
Thank you sir for your prompt response.But I have some more doubts sir.
1)Whether the amount of tax of 20.60% is applicable on the entire amount of sale proceeds i.e 62 lacs in this case.Or only on my brothers share of amount i.e 40% (24.80 lacs) since we will make gift deed among ourselves before the registration for sale with the buyer.
2)The buyer can give the us individual cheques or he will be paying only to my brother the entire amount and then my brother will be paying us from the amount.
Thanks and regards.
1. TDS is applicable on total consideration value i.e. 62 lacs.
2. Buyer will pay to your brother and then your brother will gift the amount to his siblings.
Hello sir.Awaiting your reply sir.
Thanks & best regards.
Thank you very much sir.Your guidance will be very helpful to us.
Regards.
Hello sir,
This question is in relevant to my previous posts. Can I know if my brother is willing to re-invest his share of amount in a property in India only, then what are the formalities to be done to avoid the tax(20.60%), since he is holding a PIO Status currently.
Thanks & Regards.
TDS is applicable until unless he get Nil Tax deduction certificate from IT department. He can claim refund of TDS if he invest to save capital gain tax.
Hi Nitin, thank you for sharing knowledge.
Scenario
Sale Transaction value is approx. 4 Cr.
Both Buyer and Seller is NRI and both have PAN
TDS u/s 195 will be approx 80 Lac (buyer’s simple calculation)
LTCG would be approx 50 Lac.
NRI seller have a small consulting business in India earning less than Rs. 10 lakhs p.a. for which TDS always deducted by the clients, always files a return on time.
I won’t think, a seller will allow a buyer to cut and deposit Rs. 80 lakhs to income tax department. In that case, NRI seller cannot sell his property. Can NRI seller claim a NIL certificate from IT Dept. showing that he will deposit the sale proceeds in buying a residential plot before filling the return of the year in which transaction occur and construct it within 3 years. Can he do the transaction as shown below?
Agreement of sell Property 1 – Dec 2015
Agreement of buy by NRI Seller Property 2 – Jan 2016
Apply for NIL certificate from IT Dept. – Jan 2016 – showing we have invested some portion of sale proceeds and will invest all LTCG when he will receive the balance sale proceeds.
Get balance sale proceeds from NRI buyer for Property 1 – Feb/Mar 2016
Pay the sale proceeds for property 2 – Mar 2016
Thanks
It is subjective and purely dependent on the decision of AO. Prima facie, i don’t think so that he can get NIL Deduction Certificate. Secondly, TDS is due at the time of making payment therefore in above scenario he will apply NIL certificate after agreement and i assuming part payment will be made at the time of agreement therefore buyer will deduct TDS of 20.66% at the time of making payment. Normally NIL deduction certificate is issued in case of NIL Capital Gain or Capital Loss.
Hi Nitin, With Ref to Sale of Property based out of Delhi owned by NRI. Few questions wrt to following Facts:
Purchase cost of Property is Rs. 2.75 Lacs in 1987.
Indexed Cost (2015) is Rs. Rs. 19.81 Lacs
Selling Price is Rs. 48 Lacs
Cost on Renovation in 2013 Rs. 15 Lacs, . Calculating on the basis of CII 2012/13 as 852 and CII 2015/16 as 1081.
Indexed Cost of Renovation Becomes Rs. 19 Lacs
CAPITAL GAIN calculated on above figures 48L – (19.81 + 19) = 9.91 L
LTCG on above Figures @ 20% of 9.91L = Rs. 1.83L
From Sellers Perspective
1. Is there any rule on NRI Selling Property below Rs. 50 Lacs is exempted from TDS deduction of 20% / 20.66% ?
2. How to apply for Nil / Lower Tax Deduction Certificate or Tax Exemption Certificate in this case?
3. Possible to deposit LTCG before AO (IT Dept) and Procure Lower Tax Deduction Certificate? And Execute the Transfer after obtaining the same.
As a buyer Perspective
1. If the Seller is not able to Procure Nil / Lower Tax Deduction Certificate, TDS should be at which rate 20 / 20.66 / 23.6 etc.
Seller:
1. No
2. A seller may apply through his CA
3. Possible but subjective & depend on AO. I could not understand the objective in this case
Buyer:
1. 20.60%
Thanks for ur Reply,
3. Objective to save on TDS @ 20.6 % of 48L (selling price) which is Rs. 9.88L.
And the actual LTCG is only Rs. 1.8L
Will consult CA for procuring Nil/Lower Tax Deduction Certificate
Thanks Again
Hi Nitin Good Article…
I am also have similar Scenario.I am a NRI buyer with total consideration @ 1.2 Cr.
However stuck @ TDS deduction from Seller who is NRI.
The property is jointly owned.My questions are as follows:
1.TDS % is 20%(TDS) 3%(CEss) & 12% Surcharge(as transaction is above 1cr) .Total 23.072%.
2.Seller is asking to deposit TDS against only one seller even though there are joint seller however no where % share is mentioned .Stating ease of refund process.
3.Full transaction is being executed by appointed POA in both cases.
Thanks
1. 20.66%. The cess and surcharge is on TDS amount. Surcharge is 10%. The surcharge of 12% is on LTCG of equity schemes for NRI’s.
2. I will not suggest. It should be in proportion of ownership in property. If not mentioned then it is equal.
Hi Nitin
We are in final stages of selling our flat purchased 20 years ago while in India. As a US citizen are we taxed in India ( property gain ) and US income tax?
Vin
You have to pay capital gain in India and you will be taxed in USA under provisions of FATCA.
Dear Nitin Bhai, thanks for the clear details. I am an NRI and want to apply for NIL deduction certificate . What FORM do we fill to apply ? Can please help me with it …I have all documents in order as needed for applying . Being NRI I don’t have any incomes income from India which taxable. I have not filled my returns so far. , can you respond
You need to fill form 13.
Thank you Nitinji for the prompt response .
Need your inputs. I am in process of buying an apartment in Gurgaon in resale. The seller is an NRI.
Under the income tax laws section 195, I am entitled to deduct TDS. As per the law, if the seller is an Indian, the buyer should deduct 1% of total consideration value of the propertly, and 20.66% in case the seller is an NRI.
Now, the seller has provided me ID (PAN card) and address proofs (bank passbook) of India only, and is saying that I should deduct only 1%.
I am little confused. Please provide your suggestions/inputs.
Also, will the TDS rate be 20.66 or 22.66 if the total amount of consideration is more than 1cr?
20.66%
TDS is decided based on current residency status of the seller. PAN and Bank Passbook does not have any relevance. The TDS of 20.66% is applicable in your case.
But, the income tax site suggests 22.66% deduction in case amount is more than 1crore. Am I missing something?
I have explained the same in my post with an example. Request you to go through the same.
Hello Sir, How do we get refund, if TDS is paid without PAN number and we later obtained a PAN number? Thank you
The revised TDS return can be filed by the buyer with PAN and after that TDS amount will appear in your form 26AS then you can claim refund.
Thank you so much sir.
Hello Sir, Could buyer remit TDS without PAN number of one of the seller ? Will the system allow? Or buyer need to goto any other specific office to remit due to non-availability of Seller’s PAN number?
In my friends case, her mother (Indian Citizen with PAN number) and daughter (NRI just applied for PAN number) already sold their house a week ago. Only last minute buyer realised about that second owner’s (NRI) PAN number requirement. Sale registration completed. Buyer collected the TDS amount as applicable for Resident and non-resident (50:50 ownership). However, not sure how buyer could remit the 20%+ TDS collected for NRI portion (50%) without a PAN number.
PAN number is getting delayed due to improper photo size etc. So, NRI had resubmitted the revised photo. Not sure how much more time it may take to get the PAN number. But TDS is due to be remitted in the next 10 days time.
Please advise
Thank you
A buyer can deposit TDS without PAN. In the challan buyer can mention in PAN filed PANAPPLIED
Hello Sir-
01. The property sale transaction already completed on 20-Jan-2016. Can I say, 7th Feb 2016 is the last day before which buyer has to remit TDS collected?
02. For a NRI portion (50%), buyer had deducted 20%+ as TDS. However, sellers jointly (resident and NRI) investing in purchase of another property in India (Senior Home) this month. Money already given to the property company on 23rd Jan 2016. Can we show this as proof to the buyer based on which buyer can refund the TDS collected instead of Remitting to INcome TAx dept? Or do we need assessing officer certificate etc? Is it possible to get assessing certificate now so that we can provide it to the buyer towards refunding the TDS to the seller?
03. Do you represent taxation at Chennai,Tamil Nadu?
Thank you so much for all the guidances
1. Right
2. Only AO has authority to exempt TDS. A buyer cannot decide even if the seller provide proof of investment u/s 54. Buyer should deduct TDS and seller can claim refund by producing proof of property investment to income tax department. If the seller can produce exemption certificate before last date of filing the TDS challan then buyer may consider the refund subject to certain conditions.
3. No
The calculation shared by me is correct. The surcharge of 10% is on Education Cess and Secondary & Higher Education Cess.
Hello Mr. Bhatia
My question is I am a NRI (OCI card holder) and buying a property (not selling) the builder says I have to file 1% tax directly to Govt. and 99% goes to builder. My fund source is from NRI account, sent from the country I live in. My bank always take the interest earned out of my FD and savings account for tax. Per policy, NRI do not have to pay tax on the principle amount and tax on interest is always taken out of my accounts. I need to know do I still have to file TDS?
Thank you for your help
Mita
You have not mentioned whether you are citizen of India or has taken citizenship of country of residence.
Thank you for your response. I am Indian but hold OCI card because India government does not allow duel citizenship. I have USA passport.
Thank you
As you are USA passport holder therefore as per my understanding you are citizen of USA. You may cross check on that. The rules may vary in this case.
Assuming, you are citizen of India, An OCI holder is treated at par with NRI therefore the TDS of 1% is applicable in your case. Also you may be covered under the provisions of FATCA. Please check on the same.
Thank you. What is FATCA?
Under Foreign Accounts Tax Compliance Act (FATCA) of the US, Indian Govt is committed to furnish all the information about Indian properties and Indian income of the residents of the USA. All these transactions may be taxed in USA also. As you have remitted money from USA to India therefore you may need to comply under FATCA.
Hi Nitin,
I am planning to buy flat from NRI in India. I am a resident Indian buyer and NRI seller has given me No Tax Deduction Certificate. I will not be deducting TDS and entire amount will be deposited in NRI seller NRO account in India.
Now I have following queries regarding this transaction:
1) Is there need for form 15CB from CA for this transaction or I have to file form 15CA online with details from No Tax Deduction certificate?
2) Do I need to submit form 15CA in person to income tax to any specific department before making payment to NRi seller?
3) Is 27Q form to be electronically filed for Nil TDS return and do I need to apply for TAN for this transaction for filing Nil TDS Return?
4) Apart from form 15 CA and form 27Q is there any other form needed to be filled for this property transaction?
Regards,
Neha
1. It depends whether seller is remitting the money chargeable to tax in India or not
2. It can be done online
3. For NIL TDS return there is a separate process. I am not sure why you are referring to 27Q.
4. I have not checked all details therefore cannot comment. You may check with local CA.
Hi Nitin,
1) Can you please let me know process and Forms for filing – Nil TDS Return?
2) Seller will not be taking money out of India will be investing in property in India. So in this case form 15CA will be required or not?
1. Please check following link
http://blog.tdsman.com/2014/03/procedure-filing-nil-tds-return-tdscpc-website/
2. Prima facie it is not required still you may check from your CA
Hello sir,
Iam still stuck up with the deal.Kindly help.My queries are :
The property in question has only my brothers name on the share certificate who is now holding a PIO status since he is now an Indonesian citizen.We are total of 4 siblings but only his name is there in the society share certificate.
The property was purchased by my father in 1971 and after he expired it got transfered on my mothers name and before her death she nominated the entire property on my brother name who is holding PIO status currently.Now my brother is willing to give us certain amount from the sale proceeds.Now :
1) Since he is willing to pay remaining 3 of us a certain amount as mutually agreed, so can we add our names in the society share certificate.If yes what is the procedure.
2)Do we need Legal heirs certificate from the court for the same purpose or is there some other procedure to get our names added in the share certificate.
3)We need this to be done since we 3 are resident Indians and only 1% will be deducted and we will directly get paid from the buyers bank on our names since he is taking a bank loan.
4)And if we don’t add our names then will the buyer or the bank deduct 20.66% tax amount from the sale proceeds.
4)Or is there any other procedure wherein we 3 get our share of money by deducting only 1% TDS from our amount.
Kindly help.
Thanking you in anticipation,
Regards.
1. Your brother can execute gift deed in his brother’s name including you
2. No as the property is already in your brother’s name
3. It depends whether you are buying a share or your brother is gifting. TDS is applicable if you are buying a share from your brother’s share
4. Your brother can sign partition deed
Hi Nitin
Hope you’re well.
I’m a UK based NRI and have a 50% share in a residential property with my brother. The sale of property now means LTCG tax. The tax liability in India may not be a problem as I’m thinking of buying another property but I want to avoid any tax liability here in UK. My question is would it be better to transfer my share to my brother before the sale and does that mean any tax liability for me?
Thanks
It depends on type of transfer i.e. whether you are gifting or relinquishing your rights.
Thanks for a prompt response.. I can do either. I don’t require any consideration from the property so whatever is more tax/cost efficient. I heard transferring to brother will attract stamp duty but gifting to my mother can be a better idea. What would be your recommendation?
In some states gifting to blood relative does not attract stamp duty like Maharashtra. If stamp duty is not applicable for mother then for sure there is NO stamp duty for transfer to brother as brother is also blood relative. Even if it is applicable for brother in your state. I will prefer single step process i.e. transfer directly to brother.
Please check my following post for more details.
https://www.nitinbhatia.in/real-estate/how-to-deduct-tds-on-property-sale-us-194ia/
Hello Sir,
We have property which was on the name of my father. My father has given the property to us by will (Vasiyatnama) in 2007. Father expired in 2008.
Till the date we haven’t transferred the bungalow on our name.
Now if we want to sell our inherited bungalow property and we are interested to sell against cheque payment only. In this
situation, we need to know that, in context of Long Term Capital Gain that if
we transfer our bungalow on the name of all heir / successor and then we sell it, can we get benefit of new residential proper (provided single property is there) + Bond (50 Lacs) + Indexation for every heir ?
If such benefit are available for every individual, are they available if
(i) we transfer the name of all heirs (Jointly for this bungalow & then sell it ? OR
(ii) wemake parts of bungalow and then transfer the name of each part on the name of each heir individually & then sell it ?
Total 3 successor are their i.e.
1) Mother
2) Two Brothers
Please guide us.
Thanks & Best Regards,
Sunil Shah
It depends on the wordings of the WILL. Normally, a % share is mentioned for each beneficiary. It is advisable to transfer the property in joint name in the proportion of individual share. After that you can sell it.
You may call and check with TDS helpline.
Hi Nitin,
I am in the same boat. I found that to register as a deductor in the tdscppc site I need a TAN. Secondly I also need a “token number for regular statement filed” in that year for a non-NIL TDS deduction. So I dont think this option will work for us taxpayers buying from NRIs. What is the solution here.. I suppose its fine to just do nothing ?
@Neha can you update if you found a way out ?
As i shared in my other comments. There is no mechanism to file TDS challan and return without TAN.
Hi,
Above discussion is all related with NRI seller. But what about NRI buyer? If NRI buy new property from builder above 50Lac, then who has to pay 1 % TDS on that property? If builder asks NRI to pay this TDS then , is there any way to avoid it? or Can NRI claim tax refund in coming year by filling tax return considering his income in India is zero?
Please Guide us.
Thank You
TDS is to be paid by NRI buyer. There is no way to avoid it. And why do you want to avoid it ? You are just deducting that portion from the total sale value, so there is no loss to you, so why do you want to claim refund of this amount.
I concur
Hi Nitin
I have read through your entire post and understood the tax implication for sell of a property by a NRI. I have few queries based o my situation which is as below
I am a NRI based in UK for the last 6 years with my family. My wife and I both have a permanent resident permit for UK and I have recently got British citizenship. My wife is in India for the last two years and planning to be here in next three months. I have a property in India which I want to sell. The property was registered in my wife and my name. The buyer is also a NRI based in USA. If you could help me with below points:
1. As my wife is in India for the last two years and her status currently is resident India. Will this be taken in to consideration for TDS of 1%
2. Do I have to still bear a TDS of 20% on the sale price
3. If I provide a lower tax certificate to the buyer then will the buyer only deduct the TDS of 20% on capital gain.
4. I do not wish to reinvest the sale proceed but wish to have the funds repatriated to UK. Will the certificate of payment of LTCG will suffice
5. How can I simply understand the DTAA implications. This seems to be very complicated. If you could help in explaining the DTAA rule applcable for this particular deal.
6. The NRI buyer will take a loan to pay me for the property sale price.
7. Does his status as NRI has any implication?
It will really be very helpful if you could help me with some guidance on above points.
Thanks
Raj
1. The definition as per FEMA and Income tax are different. If as per FEMA, she is Resident Indian then TDS of 1% is applicable. It seems she is resident Indian.
2. Yes on your share in property
3. He will deduct as per lower tax deduction certificate
4. India and UK has DTAA. You can accept payment in NRE for repatriation. A buyer will file form 15CA and 15CB if you are planning to repatriate the money.
5. In simple terms, you need to check rate of long term capital gain tax in UK on sale of property. As you are british citizen therefore you may need permission from local govt to sell property in India. Assuming UK tax LTCG at 25% and you pay 20% in India then you have to pay 5% in UK. In UK, LTCG is 15% then you need not pay any tax in UK. For compliance, you may need to inform british govt that you have sold your property in India. Please check with local attorney for more details as there are lot of ifs and buts.
6. No issues in this
7. RBI permission may be required else i don’t foresee any issue.
Thanks a lot Nitin. It was very helpful. Few more points:
1. How will I calculate the LTCG only on my share (50%). Even my wife will also have to pay LTCG tax as per resident indian. Or will it make any sense for me to pay LTCG on the complete sale proceed.
2. I booked the property by paying a booking amount of INR 200,000 in Nov’10.And 20% of agreement value in Jan’11. For rest of the amount I got a home loan and the payment was made as demanded by the builder. I got possession of the property in Nov’15. I hope this property will fall in LTCG, which year will be considered for calculation of cost of index.
3. I have a NRO account. Can the sale proceed be deposited in NRO for repatriation.
Thanks in advance.
1. You calculate total and your LTCG will be half.
2. Income tax department consider date of possession as date of acquisition as some of my clients received notice in this regard. Therefore, capital gain can be Short Term Capital Gain Tax. You may check with CA in this regard.
3. It should be NRE account for repatriation.