Payment to NRI for property sale under Income Tax

Save Share

This query is : Resolved

Quick Summary

This discussion clarifies the correct procedure for handling payments when selling a jointly owned property where one owner is an NRI and has made the full financial contribution. The consensus is that the buyer should remit 100% of the sale proceeds directly to the NRI daughter's account to comply with income tax laws and prevent complications. Splitting the payment with a resident co-owner who has zero contribution could lead to tax notices and the resident's share being treated as taxable income.

Dinesh Bhargava

Dinesh Bhargava (Querist)
Follow

01 September 2021 My daughter is an NRI, and I am a Resident in joint property. She has made definite 100% contribution through her Bank A/c and I have paid nothing. Under Income Tax law, she is the owner and I am not even a co-owner.
To avoid Income Tax complications later on:
• I feel the Buyer must pay 100% of sale proceeds to my NRI daughter in proportion to her 100% contribution towards cost.
• Moreover, being an NRI owner, under Income Tax law it is mandatory to remit the entire sale proceeds to her into her NRO A/c only.
• If 50 % payment is made to her and 50 % to me, will not the ITO issue a Notice to my NRI daughter and to me, and perhaps also to the Buyer as to why the NRI property proceeds were split and 50% paid to me into a resident a/c, which is illegal, especially since the Resident’s contribution is zero?
• The ITO may even consider any 50% payment to me as a windfall for me being without any consideration, and include it in my income for tax purposes!!

• This is all the more so, as all NRI details, including % contribution, NRI TDS % of 22.88 % (instead of 1%) etc will be mentioned in the sale agreement and sale deed.

I, the Resident so-called “co-owner” can give an NOC to the Buyer or his Bank for making 100% payment to the NRI 100 % contributor to avoid 50:50 % payment by Buyer to each of us.

I hope your expert opinion concurs with my views
Thank
D. C. Bhargava

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

01 September 2021 Yes, 100% payment can be made to your daughter. You can proceed as proposed above.
File ITR in the name of your daughter and claim excess TDS made.

Dinesh Bhargava

Dinesh Bhargava (Querist)
Follow

06 September 2021 Thank you very much for replying.
ISSUE No.2
Similarly, if there are 2 Resident Indians, and only one has paid definite and ascertainable 100 % contribution. Should not 100 % payment be made only to the 100 % payer, in proportion to his contribution?
According to section 27 of the Act, the transferor of the property only will be deemed to be the owner of the property if he has transferred the property to his spouse for inadequate consideration.
Any income arising from the house property will be taxed in the hands of the 100 % contributor.
If 50 50 payment is made, the ITO can also ask each for source of funds.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now