Tds on sale of property

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If an NRI buys a property in India from another NRI, whether he needs to deduct any tax from consideration payable to him? Since sec 194 IA, mentions to deduct tax if seller is resident.. So, if another section applies here for TDS on sale of property here in this case?
Replies (7)

I think section 195 will apply and not 194-IA.

Wait for more replies.

According to Section 9(1)(i), any income, directly or indirectly, through of from a property, asset or source of income in India is deemed to accrue and arise in India.

Under section 195, any other sum chargeable to Income Tax in India, not being salaries would require the deduction of tax at source. Deduction under section 195, is to be made by all persons (Resident or Non Resident), while the payee/deductee has to be a Non-Resident.

 

Therefore, if section 9 is read with section 195, I believe the liability to deduct tax at source exists.

Totally agreed with Sam TK and Mihir.

Thanks all! 🙆 Means for this purpose, TAN will be required and return filing too. Can you please help, at what rate the tax will be deducted?
In sec 194IA it is mentioned as resident in the case of seller only,in the case of buyer there would be no difference whether resident or non resident. Hence 194IA applies in this case and 1% deductible and remitted by the buyer in form 26QB.
Rao sir,in the query it is mentioned that seller is Nri.therefore sec 194IA shall not apply.

Section 195 is what is applicable in the case and not section 194IA.  Accordingly, section 195 prescribes that Income tax shall be deducted at the rates in force.  Section 195, unlike other sections in the Chapter does not prescribe a rate to be applied for deduction of tax at source.  Hence, 'rates in force' implies, to my mind, the buyer would be required to compute Income in the hands of the seller arising on account of the sale of the property and determine the tax thereupon and deduct the same from the sale proceeds payable and remit it.  This would require the buyer to be in a position to determine the nature of Income arising in the hands of the seller (short term or long term capital gains) and apply the appropriate rate - special rates under sectoin 112 of the Act is prescribed for long term captial gains ( @ 20%).  Also, special provisions are applicable to NRI's for Income on Investment Income and LTCG ( @ 10%) where in indexation benefit u/s 48 is not available. 


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