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Tds deduction on the purchase of property

Manish (assistant) (23 Points)

21 December 2017

Dear Sir,

I am buying a property of 49 lacs.Seller works for a software firm TCS and is currently posted in Australia.I have been told that I need to deduct 20.66% TDS while making the payment as in all likelyhood is an NRI from taxation point of view. Now, my seller is claiming that he is still a resident Indian and not an NRI and gave me two years of ITR as a proof. He mentions "Res- Indian" in the ITR form.Income shown on ITR is 15000 INR with nil tax liability on both of them. He refuses to give his passport copy or any other personal documents.He is asking me not to deduct any TDS as the sale value is less than 50 lacs. Now my question is , if his ITR copies are enough to keep me out of any legal trouble? What else I can do to keep myself safe?

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5 Replies

CA Sachin Agarwal (Chartered Accountant B.com (Accounting Hons)) (831 Points)
Replied 21 December 2017

As per my opinion, mere mentioning of Resident in ITR of two previous year is not suffircient to determine residential status of an assessee.

You should also collect information on his stay in India in previous year as well in order to properly determine residential status as per Section 6 of Income Tax Act.

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Shubham Gupta (Business Consultants) (2077 Points)
Replied 21 December 2017

A per section 194-IA:

Any sum paid by way of consideration for transfer of any immovable property (other than agricultural land) is covered under section 194-IA, provided the consideration for transfer of an immovable property is not less than Rs. 50 lakhs.

Since your transaction is less than 50lacs , buyer is not required to deduct TDS,

CA. K George Philip (Partner) (226 Points)
Replied 22 December 2017

As the seller is a non-resident person, TDS is applicable. The limit of Rs.50 lakh applies to resident sellers only. You can ask for copy of his passport to determine his residential status from the date of departure and arrival are recorded therein.

CA Sachin Agarwal (Chartered Accountant B.com (Accounting Hons)) (831 Points)
Replied 22 December 2017

The section quoted is incomplete, there is mention of RESIDENT TRANSFEROR in section 194IA. Thus in the given case 194IA is not applicable.

Section 194IA
Any person, being a transferee, responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.

Manish (assistant) (23 Points)
Replied 25 January 2018

Thank you sir! Since he refuses to share his passport details etc saying that I ( Buyer) can not force him to share personal details such as passport, what do I do now? He keeps insisting that amount is less than 50 lacs and he has given me ITR of two years as a documentary proof of him being an Indian resident, I am not responsible for deducting any TDS. Pls suggest.