Tds on payment to NRI on sale of property

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A buyer deducted TDS at 23.92% on a £6 crore property purchase from an NRI. However, the CPC issued a shortfall notice, calculating TDS at 26%. The CPC claims the remittance isn't covered by DTAA, but the buyer argues they followed the Income Tax Act. The core issue seems to be the calculation of the surcharge, which the buyer believes should be capped at 15% for capital gains, not 25% as potentially applied by the CPC. Advice suggests replying to the notice with the correct facts and considering an appeal or rectification.

Krishna

Krishna (Querist)

17 September 2024 assessee has purchased a property from NRI of 6 cr & deducts a tds @ 23.92% I. e. Rs. 14352000. however Cpc calculates a tds of Rs. 15600000 & sends the assessee a short deduction notice of Rs. 12.48 lacs.
Assessee write a mail to tds cpc. where they replied that nature of remittance mentioned in statement is not covered under DTAA hence short deduction default has been raised. you are requested to pay the demand.
Is this reply correct?
we have deducted a tds as per income tax Act & not as per DTAA.
please reply

PARAS CHHAJED

PARAS CHHAJED

(Expert)

17 September 2024 TDS u/s 195 is applicable.

Krishna

Krishna (Querist)

17 September 2024 Tds us 195 is 23.92% only no ?

Sowmya.G

Sowmya.G (Expert)

18 September 2024 What is the capital gain?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

18 September 2024 TDS applicable on total sales value not on capital gains in case of NRI.

Krishna

Krishna (Querist)

18 September 2024 Yes sir. We have also deducted on total sales 20% tax surcharge 15% & cess 4%. Dept calculated it's short deduction. Dept. calculated at 26%. This may be as 20% tax 25% surcharge & 4% cess effective rate is 26%. But in case capital gain maximum surcharge is capped at 15% only. 25% surcharge is for other than capital gain income.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

18 September 2024 You are right. Reply to the notice.

PARAS CHHAJED

PARAS CHHAJED

(Expert)

18 September 2024 It is also suggested to prefer an appeal before CIT(A) and filing an application u/s 154 for rectification of mistake u/s 154.

Sowmya.G

Sowmya.G (Expert)

18 September 2024 TDS is very much charged on the sales consideration not on capital gains but surcharge is based on total income which you can reply for the notice purpose. that is why asked for capital gains. Kindly respond to the notice quoting the actual facts.

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