• Long term capital gain tax rate for property sale and applicable final TDS payable

I am a US Citizen of Indian origin (NRI per FEMA definition) and have sold old property in Mumbai which I bought in 1996, So I will incur long term Capital Gain Tax. I have done indexation based on 2001 base year after its 2001 evaluation and capital gain is more than 2 crores after all applicable deductions, etc. My questions are these:

	1. My retained CA insists that I have to pay 23.69% TDS for the year 2017-18.  He is basing it as 20% LTCG tax rate + 15% surcharge (as it is more than one crore) + 3% Cess.  Whereas on these pages and everywhere else it is stated that my final TDS would be only 20.66%.  Now, I am confused as my CA is putting his creditability on his number of 23.69%.  Am I missing something here or my CA is just misinformed and/or incompetent ?  Please guide me thru.
	2. Online consultation with tax expert confirmed that I can deduct my Travel expenses, lawyer's fees, CA's fees, agent's fees from the indexed Capital gain to calculate the final TD.  My CA says I can deduct first two items on the list.  Can I and I cannot ?  Please elaborate.
	3. Can I my CA (current or alternate) file for reduced TDS certificate and pass it to the buyer to pay it as it is required. I also learned that the buyer is supposed to deduct TDS on the sale value and not on the Capital Gain.  In that case, would I lose money or I can file for refund later.  I prefer not to go for second route.  Please advise.

I am looking forward from eminent experts on this site to guide me thru.  I would be very grateful.

Regards

Suresh Agrawal
Asked 2 years ago in Taxation from United States

No you are not missing anything. The buyer will deduct TDS @20.66% on sale price.

Refund can be claimed at the time of filling of income tax return.

Anupam Kirti
Advocate, New Delhi
90 Answers
2 Consultations

4.9 on 5.0

1.Dear Mr Agrawal,

Your CA is right .:

The 23.69% is calculated as

Long term capital gain Rs 2.00Cr

20% of 2.00 Cr. 40.00 lacs

15% surcharge. 6.00lacs

3% cess on 46.00 L. 1.38 lacs

Total Rs. 47.38 lacs which is 23.69% of the Rs 2.00Cr

2.The expenses related to the sale of capital asset the first 2 items are allowed as deduction.

The TDs will be deducted by the buyer and deposited in your account.

Vimlesh Prasad Mishra
Advocate, Lucknow
6371 Answers
20 Consultations

4.9 on 5.0

1)in case property is held for more than 2 years it is mandatory for purchaser to deduct TDS at the rate of 20% plus Education Cess and Secondary and Higher Education Cess which works out to the rate of 20.6% on gross transaction value if sale price is less than 1 Crore.

2)In case the sale price is above Rs.1 Crore at the rate of TDS works out to 23.69 per cent including Surcharge, Education Cess and Secondary and Higher Education Cess

3) your CA is not incompetent

4)Expenditure incurred wholly and exclusively in connection with transfer of property is deductible from sale value. for instance brokerage or commission paid for securing a purchase, cost of stamp or registration fee borne by you (generally it is borne by the buyer), legal expenses paid to advocate, etc. Even traveling expenses incurred in connection with transfer can be claimed provided your visit is wholly and exclusively for sale of the property.

Ajay Sethi
Advocate, Mumbai
74388 Answers
4450 Consultations

5.0 on 5.0

1) you can save your capital tax there are ways. Ad yiu have followed the Index table and deducting all figures still you're paying taxes in crores.

2) my question is to you do you want all money at once to be credited in your account to use in other fields besides land and buildings investment or government bond investment etc.

3) If you provide details of your estate and information where to invest the amount, so I can explain you all your path and legally you will ne safe.

4) You can arrange consultation call.

Ganesh Kadam
Advocate, Pune
9590 Answers
80 Consultations

4.9 on 5.0

TDS is to be deducted at the rate of 20% plus Education Cess and Secondary and Higher Education Cess which works out to the rate of 20.6% on gross transaction value if sale price is less than 1 Crore.

In your case sale price is more than one crore hence higher TDS is to be deducted

Thanks for your appreciation

Ajay Sethi
Advocate, Mumbai
74388 Answers
4450 Consultations

5.0 on 5.0

Definitely Indian tax laws are bit complex but one can easily understand.

The following are the wordings in the finance bill 2017 that will give you some idea:

(I) on income by way of other long-term capital gains [not being long-

term capital gains referred to in clauses (33), (36) and (38) of section 10]. ----20 per cent

Surcharge on income-tax

(a) in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether

incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-

tax Act, being a non-resident, calculated,––

I. at the rate of ten per cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid and

subject to the deduction exceeds fifty lakh rupees but does not exceed one crore rupees;

II. at the rate of fifteen per cent. of such tax, where the income or the aggregate of such incomes paid or likely to be paid

and subject to the deduction exceeds one crore rupees;

Hope you now get the idea how 23.69% is calculated.

Thanks for your understanding and rating

Vimlesh Prasad Mishra
Advocate, Lucknow
6371 Answers
20 Consultations

4.9 on 5.0

Taxation on Sale of Property by NRI’s (Non Resident Indians) is bit confusing subject. This confusion is caused due to lack of information and improper explanation. Sometimes it is in the interest of few professionals to complicate things and confuse NRI clients to maximize their gains.

Income Tax Act is not that complicated but it is in the hands of people who interpret it to make it complicated or simplified. To start with, Selling of property by NRI is taxable under u/s 195 of the Income Tax Act, 1961.

TDS of 1% u/s 194IA is not applicable if seller is NRI.

Long term capital gain tax will be 22.66% if NRI is selling a property in India after holding it for more than 3 years.

In case of sale of property by NRI, it is mandatory for buyer to deduct 20.66% TDS on the sale price of the property if capital gain is long term capital gain.

Capital Gain Taxation is same for both Resident Indians and NRI’s but only difference is in calculation and deduction of TDS.

The expenses incurred may be shown from the tax deducted while claiming refund.

The buyer will deduct the TDS from the sale consideration amount, the NRI can claim refund after filing returns accordingly.

T Kalaiselvan
Advocate, Vellore
64348 Answers
834 Consultations

5.0 on 5.0

What amazes me that I have received differing opinion whether my TDS tax rate of long term property capital gain of more than 1 Crore would be 20.66% or 23.69%. My question here and consultations with eminent Indian tax consultants are divided on the answer 50-50%. Is Indian tax code that complicated to have an unified answer, I am just perplexed. And everybody puts their professional credibility on their answer. It is amazing.

Taxation on Sale of Property by NRI’s (Non Resident Indians) is bit confusing subject. This confusion is caused due to lack of information and improper explanation. Sometimes it is in the interest of few professionals to complicate things and confuse NRI clients to maximize their gains. In most of the cases.

Long term capital gain tax will be 22.66% if NRI is selling a property in India after holding it for more than 3 years.

TDS of 1% u/s 194IA is not applicable if seller is NRI. TDS u/s 194IA is only applicable for resident Indian sellers. It is quite unfortunate that most of my NRI clients lost money as TDS was deducted under both the sections i.e. section 194IA and 195.

In case of sale of property by NRI, it is mandatory for buyer to deduct 20.66% TDS on the sale price of the property if capital gain is long term capital gain.

Now anomaly in this rule is that NRI is liable to pay Capital Gain Tax only on the Capital Gain arising out of sale of the property but unfortunately TDS is deducted on the total Sale Value of the property. Therefore in most of the cases there are no GAINS as such from the sale of property and actually NRI incur LOSS from the sale of the property if TDS refund is not claimed. As a result, NRI has to go through the process of claiming TDS refund from Income Tax Department.

T Kalaiselvan
Advocate, Vellore
64348 Answers
834 Consultations

5.0 on 5.0

Hi Suresh,

The answers to your questions are as under:

1. Surcharge is applicable even to non-residents as well. You can verify the calculation of tax on the website of the Income-tax Department.

2. For calculating capital gains, the "expenditure incurred wholly and exclusively in connection with such transfer" can be reduced from the sale consideration. Now depending on your facts you can deduct the expenses. If you have traveled to India solely to sell the property, then you can deduct those travel expenses, lawyer's fees for preparing the deed, etc. can also be deducted. Agent's fees / brokerage fees to sell the property is also deductible. Coming to CA's fees, if you have retained him to file your return, then his fees are not deductible. The fees charged by him should be connected to the sale of property.

3. As you are a non-resident, the onus is on the buyer to deduct tax on your capital gains and pay the remaining amount to you. If either of you want to deduct tax at a lower rate, then one has to apply for certificate lower deduction with the Assessing Officer. Assuming tax is not deducted, or deducted at a higher or lower rate, you can file your tax return for the said year, declaring your income from India, and pay taxes accordingly. If tax is deducted at a higher rate, then you can apply for a refund, if tax is not deducted or deducted at a lower rate, then you will have to pay the differential taxes.

Trust the above clarifies.

Regards,

Keerthiga Sharma

M.Com., CA, LL.B

Keerthiga Sharma
Advocate, Greater Mumbai
44 Answers
2 Consultations

5.0 on 5.0

Hi,

With so many advices you have, it is just a word of caution that the professionals deal the cases differently.

Ganesh Singh
Advocate, NEW DELHI
4398 Answers
9 Consultations

4.5 on 5.0

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