Sec 195 Deduction of TAX by an individual
This query is : Resolved
Guest
Guest
(Querist)
18 November 2009
Is individual is required to deduct TDS u/s 195(e) while making payment to non resident in respect of purchase of house property from non resident ??
18 November 2009
yes
18 November 2009
For purchase of property in India? Yes. The tax on CG is applicable to NR and therefore TDS has to be applied.
Guest
Guest
(Querist)
18 November 2009
noooooooooooooooooo
its a question of TDS whether purchaser of property is required to deduct tds ??
In our case seller is NRI
its a question of TDS whether purchaser of property is required to deduct tds ??
In our case seller is NRI
23 July 2025
Great question — this touches on an important and often misunderstood area of **TDS under Section 195** when **an individual buys immovable property from a Non-Resident (NRI)**.
Let’s break it down clearly.
---
## ✅ **Is an Individual required to deduct TDS u/s 195 when buying property from an NRI?**
**Yes. Absolutely.**
Section **195 of the Income Tax Act** applies **to all persons**, including **individuals**, **irrespective of whether they are doing business or not**, when making any **payment to a non-resident that is chargeable to tax in India**.
> 🏡 So, if you (an individual) are buying a **house from an NRI**, then **TDS must be deducted** on the **capital gains component** of the sale.
---
## 🔍 Important Points:
### ✅ 1. **Which section applies?**
* **Section 195**, not 194-IA.
* **Section 194-IA** applies only when **resident sellers** are involved.
* In your case, the **seller is an NRI**, so **194-IA is not applicable**.
---
### ✅ 2. **What is the TDS rate?**
* **TDS under Section 195** must be deducted **on the capital gains** (not the total sale consideration).
* The applicable rate depends on:
* **Short-term or long-term capital gain**
* Whether the NRI has **applied for a lower or nil deduction certificate** from the Assessing Officer (via **Form 13**)
#### Indicative TDS Rates (as per current provisions):
| Capital Gain Type | Base Rate | Surcharge | Cess | Effective Rate |
| ---------------------- | --------- | ---------- | -------- | ------------------- |
| Long-Term Gain (LTCG) | 20% | +Surcharge | +4% Cess | \~20.8% to \~23.92% |
| Short-Term Gain (STCG) | 30% | +Surcharge | +4% Cess | \~31.2% to \~35.88% |
> These rates apply to **capital gain**, not full sale value.
> But if **gain amount is not known**, then TDS is generally deducted on **full consideration** to be safe — **unless a lower deduction certificate is obtained**.
---
### ✅ 3. **Can the NRI get lower TDS deduction?**
Yes. The seller (NRI) can apply for a **certificate for lower or nil TDS** under **Form 13** to the **Income Tax Department**. If approved:
* You can deduct TDS at the approved lower rate
* Without it, you're expected to deduct on **full sale value** at above rates
---
### ✅ 4. **TAN required for buyer?**
Yes. To deduct TDS u/s 195, the buyer must obtain a **TAN (Tax Deduction and Collection Account Number)** — **Form 26QB does not apply** in NRI cases.
---
### ✅ 5. **Form 15CA & 15CB required?**
Yes, in most cases:
* **Form 15CB** (CA certificate) is needed to certify the nature and amount of tax
* **Form 15CA** is filed online by the buyer before remitting any amount (even within India)
---
## ✅ Summary
| Question | Answer |
| ------------------------------------------------------------------ | ------------------------------------------------------------ |
| Is individual required to deduct TDS u/s 195 on purchase from NRI? | ✅ Yes |
| Which section applies? | **Section 195** |
| Rate of TDS? | **Depends on capital gains** (typically 20%–30% + SC + Cess) |
| TAN required? | ✅ Yes |
| Form 26QB to be used? | ❌ No |
| Form 15CA/15CB required? | ✅ Usually, yes |
---
Let me know if you'd like:
* Sample calculation of TDS
* Help with filing 15CA/15CB
* Draft of lower deduction certificate application (Form 13)
Happy to assist!
Let’s break it down clearly.
---
## ✅ **Is an Individual required to deduct TDS u/s 195 when buying property from an NRI?**
**Yes. Absolutely.**
Section **195 of the Income Tax Act** applies **to all persons**, including **individuals**, **irrespective of whether they are doing business or not**, when making any **payment to a non-resident that is chargeable to tax in India**.
> 🏡 So, if you (an individual) are buying a **house from an NRI**, then **TDS must be deducted** on the **capital gains component** of the sale.
---
## 🔍 Important Points:
### ✅ 1. **Which section applies?**
* **Section 195**, not 194-IA.
* **Section 194-IA** applies only when **resident sellers** are involved.
* In your case, the **seller is an NRI**, so **194-IA is not applicable**.
---
### ✅ 2. **What is the TDS rate?**
* **TDS under Section 195** must be deducted **on the capital gains** (not the total sale consideration).
* The applicable rate depends on:
* **Short-term or long-term capital gain**
* Whether the NRI has **applied for a lower or nil deduction certificate** from the Assessing Officer (via **Form 13**)
#### Indicative TDS Rates (as per current provisions):
| Capital Gain Type | Base Rate | Surcharge | Cess | Effective Rate |
| ---------------------- | --------- | ---------- | -------- | ------------------- |
| Long-Term Gain (LTCG) | 20% | +Surcharge | +4% Cess | \~20.8% to \~23.92% |
| Short-Term Gain (STCG) | 30% | +Surcharge | +4% Cess | \~31.2% to \~35.88% |
> These rates apply to **capital gain**, not full sale value.
> But if **gain amount is not known**, then TDS is generally deducted on **full consideration** to be safe — **unless a lower deduction certificate is obtained**.
---
### ✅ 3. **Can the NRI get lower TDS deduction?**
Yes. The seller (NRI) can apply for a **certificate for lower or nil TDS** under **Form 13** to the **Income Tax Department**. If approved:
* You can deduct TDS at the approved lower rate
* Without it, you're expected to deduct on **full sale value** at above rates
---
### ✅ 4. **TAN required for buyer?**
Yes. To deduct TDS u/s 195, the buyer must obtain a **TAN (Tax Deduction and Collection Account Number)** — **Form 26QB does not apply** in NRI cases.
---
### ✅ 5. **Form 15CA & 15CB required?**
Yes, in most cases:
* **Form 15CB** (CA certificate) is needed to certify the nature and amount of tax
* **Form 15CA** is filed online by the buyer before remitting any amount (even within India)
---
## ✅ Summary
| Question | Answer |
| ------------------------------------------------------------------ | ------------------------------------------------------------ |
| Is individual required to deduct TDS u/s 195 on purchase from NRI? | ✅ Yes |
| Which section applies? | **Section 195** |
| Rate of TDS? | **Depends on capital gains** (typically 20%–30% + SC + Cess) |
| TAN required? | ✅ Yes |
| Form 26QB to be used? | ❌ No |
| Form 15CA/15CB required? | ✅ Usually, yes |
---
Let me know if you'd like:
* Sample calculation of TDS
* Help with filing 15CA/15CB
* Draft of lower deduction certificate application (Form 13)
Happy to assist!
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