Today we will discuss the topics tax implication on SALE OF IMMOVABLE PROPERTY BY NON RESIDENT in India in detail. Whenever any immovable property which is located in India is sold by a Non-Resident Indian, there are many confusions arises as to the tax implications on such sale. So we will be covering in detail, all the Tax provisions that applicable on such sales.
TDS deduction on Sale of Immovable Property by Non Resident in India
Sec 195 of the Income Tax Act is applicable whenever any payment is made by any person to a Non-Resident. So the buyer of such property will have to deduct TDS on the amount of payment made to the Non-Resident. Below are the answer that will come in the mind of NON RESIDENT INDIAN regarding TDS at the time of sale?
Rate of TDS :
- If Long term Capital Gain (where the immovable property is held by Non-resident Indian for more than 2 years) – TDS rate will be 20% (plus surcharge & Cess as applicable).
- If Short term Capital Gain (where the immovable property is held by Non-resident Indian for less than 2 years) – TDS rate will be as per Slab Rates of that Non-resident Indian seller (plus surcharge & cess as applicable).
Any Minimum Threshold Limit:
There is no Minimum Transaction Value for TDS requirement. It means TDS is Must be deducted irrespective of the sale value.
When to deduct this TDS:
The TDS needs to be deducted at the time when payment is made to the Non-resident Indian. One must also note that TDS is also required to be deducted on any advance payment done by the buyer to a Non-resident Indian seller.
Amount on which TDS to be deducted:
The TDS is required to be deducted on the Capital Gains. However, this computation of Capital Gains cannot be done by the Seller himself and should be done by the Income Tax Officer. So there are 2 Options:-
1.Option 1 – By obtaining Certificate from income tax officer –
For this seller (or buyer on seller’s behalf ) can approach Income tax officer by filing an application to the income tax officer and request him to compute his Capital Gains.
The Income Tax Officer will compute the Capital Gains of the seller and will issue a certificate for deduction of TDS depending on the capital gains arising on the sale of property.
The seller is required to give this certificate to the buyer and the buyer will deduct the TDS on the Capital Gains arising to the seller as per the TDS Rate mentioned in the income tax certificate.
Tax Baniya team are helping in getting the lower deduction certificate from the income tax office
2. Option 2 – By Deducting TDS on the entire sale value
In case this certificate is not obtained by the seller from the Income Tax Officer, the TDS should be deducted on the Total Sale Price and not on the Capital Gains. This will result in TDS deduction of Excess amount, so it is very necessary for the seller to obtain this certificate from the Income tax Officer.
What is required from Buyer’s Side for deducting TDS of NON RESIDENT INDIAN-
- Buyer have to obtain TAN (Tax deduction & collection Number) if he don’t have.
- Buyer will have to deduct TDS on the amount of payment made to the Non Resident. This TDS is required to be deposited by the buyer with the Income Tax Dept as per normal TDS provisions of the Act.
- This TDS deducted is needed to be deposited with the Government within 7 days from the end of the month in which such TDS has been deducted. Example – If sale done in May & TDS also deducted in May month, then it has to be deposited to the Govt by 7th June.
Use challan no. ITNS 281 for TDS payment to Govt.
- After the deposit of TDS, Buyer is required to file Quarterly TDS return in FORM 27Q. This TDS Return is required to be deposited within 31 days from the end of the quarter in which the TDS has been deducted.
- At last, After TDS deposit & filing of TDS return, buyer is required to give TDS certificate in FORM 16A to the seller.
Important Provision on TDS deduction on Sale of Immovable Property by Non Resident in India
- TDS to be deducted at the time of each payment and not at the time of registration of immovable property.
- For TDS deposit and TDS Returns – Penalty and Interest are also leviable if any default is done in complying TDS provisions.
- If buyer has taken a home loan for this purchase, then TDS is required to be deducted when payment is done to the NON RESIDENT INDIAN Seller and not when the loan instalments are paid to the bank.
- Seller must try to get this certificate of Capital Gain calculations from the Income tax officer. It will help in lower deduction of TDS amount. Otherwise, TDS will get deducted on entire sale value.
- Tax Saving for NON RESIDENT INDIAN Seller – NON RESIDENT INDIAN Seller are allowed to claim exemptions under section 54 and Section 54EC on long term capital gains from sale of house property in India.
