Section 195

Hey Hi

TDS rate is 20% on capital gain, to ascertain gain you can also make an application in Form 13 before A.O u/s 195(3) for determination of quantum of tax to be deducted.

You can not walk away with not deducting of TDS liabilty else you will have to pay penalty & also have to face prosecution.

Also you need to deposit tax within one week from the end of month in which the payment was made or within two months from the end of month in which credit was made.

Thank you Vaibhav for your response.

Few queries:-

1.  what is your opinion on Point #1? The seller with whom I am in discussion, he has sold many properties and he is doing the same thing in consultation with his CA. His logic is at the end of the day he is taking care of all the tax that's due to the goverment so I don't need to bother about it. He is saying anyways he can't take the money out of the country with out certification from a CA that all his taxes are paid. So essentially there is no revenue loss that's going to happen. He also says since I am going to deposit money in NRO account and not NRE account, money can't be moved out of country with out taxes. If that's really corect than why should there be section 195 at all.

2. My second query is lot of good properties belongs to NRI in bangalore. Lot of such deals happens on daily basis and in  my interaction with several people no one knows about section 195 and they do the deal in a normal fashion (with out TDS). So practially is this section really ever used against the purchaser. Because if there were too many notices happening from IT deptt on this then people oin general would have more awareness on this. Please give your opinion on this.

3. Regarding section 195(3), yes this is an option but seller's don't want to go through it. Also I feel if I go this process then they may put my case for scrutiny. They may ask for long justification for source of payment etc. etc..Though  I have answeres for all the queries but its a hassle I don't want to get into. Do you think by excersing this option there is a risk of scrutiny for the purchaser as well?

thanks a lot for your help on this. I am sure many would get benefitted from your replies.

Thanks,

amit

Hey Thnaks for acknowledgement..

1. If he is saying no TDS to be deducted then property then he must have been purchasing out of rupee resources, that is income earned in rupees and the amount must be credited in the NRO account or in the capaity of resident indian.

2. Correct many people are not aware about it. I dont have information whether this section ever used against any one, but chances are high to catch such cases.

3. True you may be put under scrutiny.

Thanks//Vaibhav

Thanks Vaibhav for your response.

Regarding #1, yes as per him the money used to buy this property is Indian money and he is asking me to deposit the money in NRO account and in Indian rupees only. Also whatever capital gain he will earn on this transaction that will be deposited in a captial gains account. His CA will do the calculation to tell me how much to put under NRO account and how much to put in capital gains account.

Theoritically in this approach there is no loss of revenue to the government as he can't draw money from capital gains account with out paying tax or else he will have to reinvest it in  purchasing a new property or govt approved REC bonds.

For the money deposited in NRO account his CA will have to give a certification that his money is tax free and then only he would be able to repatriate the money to his country of residence.
 

IN your opinion do you think above approach is safe and even if I don't deduct TDS under section 195. Its ok under these circumstances and I won't get into any legal troubles from IT deptt.

Thanks alot for taking out time to respond..

Yes its 100 % legal  view.

Thanks//Vaibhav

I am sorry I couldn't understand you last comment "yes its 100% legal view .."

Can you please slightly elaborate?

Are you saying I can take the payment route he is suggesting and there is no need for me to deduct TDS under section 195  on this and I still would be safe legally from any action from IT deptt.?

Thanks!

amit

Yes,  his CA will have to give a certification that capital gain tax is already paid /deposited in Capital Gain A/c by the NRI & on the basis of that no TDS is deductible by seller.

Thanks//Vaibhav