Tax implications of buying a flat in India from an NRI

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This discussion clarifies the tax implications for buyers when purchasing a flat in India from a Non-Resident Indian (NRI). It explains that Tax Deducted at Source (TDS) under Section 195 applies, with rates potentially reaching 22.88% for long-term capital gains on properties over ₹50 lakhs. The conversation also covers the possibility of the NRI seller obtaining a NIL/Lower Deduction Certificate from the Income Tax Officer to reduce the TDS amount, outlining the application process and the importance of verifying such certificates before the transaction.

NiJPo

NiJPo (Querist)
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29 February 2024 Hi All,

I am in discussion with an NRI (settled in Singapore) for buying his flat. The property is located in Bangalore.
As I read from several articles online, TDS deduction should be about 22% which in turn impacts my discussion with the seller.
Could anyone please explain me about the TDS calculation?

CA. Bhavik P. Chudasama

CA. Bhavik P. Chudasama (Expert)
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29 February 2024 Basically such transaction will Fall under Section 195 and Firstly you need to check with the Seller whether the Capital Asset is Long Term or Short Term because if its Long Term then Tax Rate will be 20% and if Sale Value is above 50 Lacs Surcharge is applicable i.e. 10% so effective Rate will be 20% plus 10% Surcharge plus 4% Cess = 22.88% Effective Rate

NiJPo

NiJPo (Querist)
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29 February 2024 Hi Bhavik. Thank you very much for reply. For the seller, it is going to be as Long Term as the property is held by him for 6 years. The sale value is more than 50 Lakhs.
Is there any way to claim the tax deduction by the seller because it will impact final selling price as the Seller want to make certain profit out of the sell? I heard about ITO providing "No TDS deduction certificate" to the Seller. On what basis that can be done? What's the procedure?

CA. Bhavik P. Chudasama

CA. Bhavik P. Chudasama (Expert)
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29 February 2024 Correct, there is a Certificate called NIL/Lower Deduction Certificate, that needs to be applied by your Seller online with Several Documents like last 3 years ITR, Assessment Order for any of the previous year, Purchase agreeement copy, Passport copy to prove NRI Status etc etc. It can be done Online on Traces Website, that may take 30-45 working days time to get the certificate provided you follow up with the Officer.

NiJPo

NiJPo (Querist)
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29 February 2024 Thank you again for a prompt reply.
Is this certificate required to be collected before the actual property transaction or registration happens?
Let's say the person who is selling the flat has already got the certificate. In that case as a buyer, do I need to deduct the less TDS as compared to 22.88% tax or I would still deduct 22.88% TDS and later it is buyer's responsibility to get the tax refund? How does it work? Will I have any way to authenticate if the buyer actually obtained Lower Deduction Certificate from ITO and it it not a fake document?

CA. Bhavik P. Chudasama

CA. Bhavik P. Chudasama (Expert)
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29 February 2024 I would suggest you to kindly get in touch with Local Expert or Professional who can explain in person about the process.

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