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Buying a Property? Hold Up! Let's Talk TDS on Seller's Residency

CA. Bhavik P. Chudasama , Last updated: 24 February 2024  
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Congratulations on your decision to buy property in India! But wait, before you finalize the deal, understanding the Tax Deducted at Source (TDS) implications is crucial. Whether you're buying from a resident Indian or a non-resident Indian (NRI) seller, different TDS rules apply, and navigating them can be tricky.

This article is your one-stop guide to understanding TDS on property purchases, empowering you to make informed decisions and avoid potential tax headaches. We'll delve into

Aahil: So, Vivaan, everything's done! I finally bought my new apartment! But there's this TDS thing the seller mentioned. What's that all about?

Vivaan: Ah, TDS on property sales. It can get tricky, but don't worry, I'll explain it simply. Imagine TDS as a tax deducted at the source, like income tax from your salary. Here, the buyer (you) deducts a part of the sale price and pays it directly to the government.

Buying a Property  Hold Up  Let s Talk TDS on Seller s Residency

Aahil: Okay, but why? And how much do I deduct?

Vivaan: It depends! The main factor is the seller's residency status. If they're a resident Indian, you deduct 1% Straight on Entire Value, But if they're a non-resident Indian (NRI), you need to deduct 20% of the sale price (excluding certain exemptions) Education Cess and Surcharge applicable as the case may be.

Aahil: Oh, that makes sense. So, it's like ensuring NRIs pay their fair share of taxes?

Vivaan: Exactly! The deducted amount gets credited to the NRI's account, ensuring tax compliance.

Aahil: But wait, what if I forget to deduct TDS?

Vivaan: Not good, Aahil. You'll be personally liable for the deducted amount, plus interest and penalty. So, it's crucial to get it right.

Aahil: Okay, I don't want any trouble. How do I know if the seller is an NRI and what to do next?

Vivaan: The seller should provide you with a copy of their PAN card and consult with your tax advisor. Then, you need to file a TDS return online and make the payment within the due date.

 

Aahil: Sounds like a bit of paperwork. Is there any easy way to handle this?

Vivaan: Definitely! Consult a Good Chartered Accountant who will help you to calculate the amount, and even file the return for a fee. Saves you time and ensures everything's done correctly.

Aahil: That's a relief! Thanks for explaining, Vivaan. I feel much more prepared now.

Vivaan: No problem, Aahil. Remember, TDS is important, but don't stress. With the right information and tools, you can handle it smoothly. Now, let's celebrate your new apartment!

 

Key Takeaways

  • TDS applies to property sales, but the rate and applicability depend on the seller's and buyer's residential status.
  • Residents selling to residents with sale value below ₹50 Lakhs are exempt from TDS.
  • Residents selling to NRIs need to deduct TDS at varying rates depending on the capital gain type.
  • Seeking professional guidance from a tax advisor is crucial for ensuring compliance and maximizing potential benefits.

Disclaimer: This conversation is for informational purposes only and does not constitute legal or financial advice. Please consult a qualified tax professional for personalized guidance on your specific situation.

The author can also be reached at office.bhavikco@gmail.com

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Published by

CA. Bhavik P. Chudasama
(Practice)
Category Income Tax   Report

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