TDS on Payment To NRI

Normally TDS to be deducted under Sec 195 @ 20% on capital gain earned by him, if the property is held by NRI for more than 2 years. If it is less than 2 years, TDS on capital gains as per his applicable slab rate.

But practically no one wants to disclose how much capital gain they are earning. In such cases, u can deduct TDS on full consideration of 1 crore to avoid penalties for you under non deduction of TDS and that NRI has to claim refund. But Try to explain the provision to that particular NRI that u need to deduct TDS on CG of NRI. If he is not willing to disclose, deduct TDS on full consideration of 1 crore. The second one is not exactly correct but that's what people do in practice.

Thank you very much for your kind and prompt reply.

Regards.

In such a case, you may also file an application to the Income Tax Officer for lowering of the TDS Rate. The income tax officer will review your application and on the basis of the documents submitted, will issue you a certificate for lower deduction of TDS.

This TDS Certificate is highly beneficial for NRI's as your amount does not get stuck with the income tax department and many NRI's opt for this certificate as it helps them reduce their TDS Liability.