Tds on purchase of property from nri

TDS 518 views 2 replies

We had deducted TDS @ 20% for our client who purchased the property from an NRI which was accepted by the system also.  Now the seller (NRI)  is not being full credit of 20% and only 1% is given to him.  Now we were told that the balance 19% will be credited to the buyer back in 26 AS and then he has to get the refund and then pay to the seller.  But still no credit to the seller and do not know how to proceed further.

Replies (2)

20% deduction is made on ground of capital gain tax for NRI, 

The tax is to be deducted on income only i.e on the amount of capital gains arising to the non-resident out of the total consideration.

But how will the payer determine the amount of capital gains arising to the non-resident transferee.

The answer lies in sub-sections (2) & (3) of section 195. Under, the provisions of these sub-sections the payer or transferor/payee may make an application to the jurisdictional Assessing officer to determine the sum of capital gains on which tax is to be deducted.

The application to the AO will be made in the prescribed form.

The amount determined by the AO will be the amount on which tax is to be deducted. However, if no such application is made by the payer or the payee to determine the sum chargeable to tax, the tax will be deducted on the entire consideration for sale of immovable property.

 

If any NRI is selling property in India to Resident Indian, TDS should be deducted under section 195 by Resident Indian from total consideration value. In some cases(as suggested by U.S.Sharma), NRI’s insist to deduct TDS only on capital gains but from definition of section 195 it clear that TDS should be deducted on total Sale Value.

TDS is required to be deducted at the rate of 20% plus Education Cess plus Surcharge (if applicable).

I think you deducted TDS at wrong amount & wrong rate.


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