The Income Tax Department may keep an eye on those buyers who have brought property from non-resident and have failed to deduct/deposit TDS on the purchase of property from a non-resident.

TDS part with respect to a non-resident is complex and should be complied with the help of an expert who is well aware of the compliances that have to be done before buying a property from non Resident.

The primary responsibility is imposed on the buyer to deduct the TDS at an appropriate rate and pay to the government. Omission with respect to TDS intentionally or unintentionally, the buyer will have to face the consequences of penalty, interest, and TDS.

There are various questions that arise in the mind of buyer and compliances that have to be done with respect to buying a property from a non-resident.

Frequently Asked Questions

1. Whose primary responsibility is to deduct the TDS and pay to the government?

t is the primary responsibility of the buyer to deduct the TDS at an appropriate rate and pay to the government. Any non-compliance will lead the receiving the notice from the Income Tax department which in turn attracts interest and penalty for non-filing of TDS return.

2. Is TDS @ 1% applicable when I am buying a property from NON -resident?

No. TDS @ 1% is applicable for the buyer who is buying a property from a resident seller and having a value of the property more than Rs.50 Lakhs.

3. What is the rate of TDS that is applicable when buying the property from a nonresident seller

Related post:  What are the Tax Implications for NRIs Who Want to Sell a Property in India?

4. I am buying a property from a nonresident but total agreement value is less than Rs.50 lakhs. Do I still become liable to comply with TDS?

Yes. Section 194-IA is not applicable when you’re buying a property from a non-resident. The TDS compliances have to be done as per Section 195 of the Income Tax Act which has no threshold limit.

5. Is TAN Number mandatory for paying TDS on purchase of property from non-resident?

Yes, when being a buyer purchase a property from a nonresident the transaction is covered u/s 195 of Income Tax Act and for payment of TDS TAN of a buyer is mandatory without which the buyer will not be able to make payment of TDS.

6. The TDS rates provided u/s 195 is on higher side is there any other option available with the seller to reduce the TDS Rate

Yes. NRI can apply for a lower TDS deduction certificate from Jurisdictional Assessing Officer in Income Tax department for allowing the residential buyer to deduct tax at a rate lower than TDS Rates as mentioned under section 195.

7. What is the due date for payment of TDS?

The TDS has to be paid on or before the 7th working day of next month failing which will attract interest.

8. When the TDS has to be paid is at the time of the agreement or is it applicable to the amount of advance paid without an agreement?

TDS has to be paid on or before the 7th working day of next month. The amount of TDS depends on whether the agreement is made or not. If the agreement is not yet made, TDS has to be deducted on the amount of advance paid. If the agreement is done, TDS shall be made on the entire amount of consideration.

9. Being a buyer I have applied for TAN and has also paid the amount of TDS. Is there any other compliance that has to be done?

Yes. The buyer has to mandatorily file the TDS return for the particular quarter in which TDS payment is done well before the due date to avoid the penalty for late filing of TDS return.

10. How shall the TDS be deducted in a case where the property to be sold is jointly owned by a resident and an NRI?

TDS for a resident shall be deducted @ 1% and for NRI @ 20.8% of the value in proportion of their holding. For example; a property equally and jointly owned by Mr. X (resident) and Mr. Y (NRI) is to be sold at Rs 80 lakh rupees, TDS shall be deducted @1% on Rs. 40 lakhs for MR. X and @ 20.8% on Rs 40 lakhs for Mr. Y.

11. What is the duration that will take for receiving the lower TDS deduction certificate?

The lower TDS deduction certificate is issued within 30 working days by the Assessing Officer.

12. Can an NRI claim benefit of a house property bought in India a year before the sale of house property in India?

Yes. An NRI can claim benefit under section 54F of Income Tax Act, 1961 where a house property bought one year before the sale of a house property. Similarly, a property can be bought within 2 years from the date of sale.  However, the investment in the newly bought property should be a minimum of the capital gain amount.

13. Under whose jurisdiction the lower TDS certificate shall be applied?

The application for lower TDS deduction shall be made under the jurisdiction of PAN of the seller and not the buyer.

Jitesh Telisara & Associates LLP, CA In Kalyani Nagar is a professionally managed firm catering to domestic and international clients with a broad range of services in domestic and international taxation, regulatory and advisory services and crosses border transaction-related services.

Our services: GST Consultant, IT returns consultant, Corporate law, Taxation, Regulatory & Advisory Services.

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