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Tds on purchase of property

G.Sujana (Accountant) (39 Points)

20 June 2016

Can any one please suggest the applicability of Income Tax Rule of TDS on purchase of property(house) worth Rs1,20,00,000 from NRI. Also, please advice the form and methid of payment,

Thanks in advance

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3 Replies

Senu Reddy (ca final) (291 Points)
Replied 20 June 2016

TDS on sale of property by a non-resident
Things are a little complex when a property is sold by an NRI. TDS rate as mentioned above is not applicable to NRIs. In the case of non-residents, reference has to be made to Section 195 of the income tax act. As per this section TDS must be deducted when making payments to a non-resident as per applicable rates. Usually when a property is sold in India, it results in capital gains. These gains can be long term gains when property was held for more than 3 years and short term when property was held for less than 3 years. If the property is inherited the seller must include the time it was held by the original owner for calculating the 3 year period. Long term gains are taxed at 20 per cent. Therefore, when the sale of a property results in a long term gain for the non-resident, TDS must be deducted @ 20 per cent. If the sale results in a short term gain for a non-resident, tax is payable as per the slab rate of income tax applicable.

Senu Reddy (ca final) (291 Points)
Replied 20 June 2016

How the buyer should deduct TDS?

It is: Normal and Standard Process. The buyer needs to have a Permanent Account Number (PAN) prior entering into any such transactions. Also he/she needs to have a Tax deduction Account Number (TAN) as per section 203A of the Income Tax Act 1961 as well. Buyer should also collect the Permanent Account Number (PAN) of the seller ( NRI) before deducting the tax. Deposit the tax, so deducted (by using challan for payment of TDS), with the government (through banks authorized to collect direct taxes) within seven days from the end of the month in which such tax is deducted. Once the TDS has been paid, the buyer should file the TDS returns electronically, within the due dates as applicable (to be submitted in the Form No. 27Q) giving the details of the Non Resident Indian, his/her address, PAN along with self PAN and TAN details. After filing the TDS returns electronically, the buyer shall issue the TDS certificate in Form 16A to the said Non resident Indian, within 15 days from the due date of furnishing TDS returns. Remember, if the buyer fails to deduct or fails to pay the amount deducted he/she will be treated as Assessee in Default as per section 201 of the Income Tax Act, 1961 and will be liable for payment of interest, penalties and prosecution.