It is always advisable to mention the details of the TDS Deducted in the Sale Agreement. please consult Local property lawyer.
Capital gain on NRI property
Hi, I am buying a property from a NRI, they have assured me that they will bear whatever tax applicable on capital gain and post assessment by a CA, after that they will furnish a certificate from Income tax deptt, and I will deduct TDS accordingly , , I want to put a TDS clause in the sale agreement so that there will be no tax liability on me in future, please let me know what should be the exact words for this clause -- like - buyer will deduct TDS on transaction as per Income tax laws of Govt. of india with subject to seller's residential status... please suggest appropriate words for this clause or I should not accept this at all and go for 23% deduction on transaction . Thanks
Asked 6 years ago in Taxation
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8 Answers
1) TDS for NRI has to be deducted from total sale consideration and not mere capital gains
2) if seller wants TDS to be deducted from capital gains and not sale consideration he has to make application to ITO along with necessary documents
3) ITO would compute capital gains submit certificate about lower deduction of TDS
4) the buyer will then deduct at rates mentioned in certificate
5) the agreement for sale should mention that the purchaser shall deduct at 23%from sale price unless seller obtains certificate from ITO for Nil/ lower tax deduction certificate . .
Dear Sir,
The following information may kindly be read:
As in the case of resident Indians, NRIs who sell purchased property after three years from the date of purchase will incur long term capital gains tax of 20 percent. The gains are calculated as the difference between sale value and indexed cost of purchase. Indexed cost of purchase is nothing but the cost of purchase adjusted to inflation. Calculation of indexed cost of purchase is easy - many websites provide a calculator; else a chartered accountant can assist.
In case of inherited property, the date and cost of purchase for purposes of computing the period of holding as well as cost of purchase is taken to be the date and cost to the original owner.
To be more precise, the amount of long term capital gains together with the cost to the previous owner (i.e. the person from whom the property is inherited) would be considered as the cost of purchase. NRIs are subject to a Tax Deducted at Source (TDS) of 20 percent on the long term capital gains. But there are certain instances when NRI can get a waiver of the TDS.
One such case would be if the NRI is planning to re-invest the capital gains of the property in another property or in tax exempt bonds. In such cases, the NRI will be exempt from tax in India, and no TDS will be deducted either.
If the NRI sells the property before three years have elapsed since the date of purchase, short term capital gains tax at his or her tax slab is incurred. Short term capital gain is calculated as the difference between the sale value and the cost of purchase (without the indexation benefit). The NRI will be subject to a TDS of 30 percent irrespective of his or her tax slab.
NRI selling their properties can apply to the income tax authorities for a tax exemption certificate under section 195 of the Income Tax Act. They must make this application in the same jurisdiction that their PAN belongs to and will be required to show proof of reinvestment of capital gains.
If the NRI is planning to buy another house, the allotment letter or payment receipt will need to be produced; if capital gains bonds are chosen instead, an affidavit to this effect will have to be prepared. Usually, buyers withhold the last installment of payment until the NRI produces a certificate of exemption. A NRI has up to two years from the date of sale to invest in another property, or up to six months to invest in bonds.
Advance TDS will deduct by you if sale is more than 50lacs. LTCG tax will bear by seller, why you bother.
Buyer should first obtain TAN under section 203A of the Income Tax Act, 1961 before deducting TDS. TAN can be obtained by applying buy filling up the Form 49B. Just mention in sale deed, deducted 20% of the sale consideration as tax before making the net payment to seller.
Yes you can include the above clause but you need to see to it the same is fulfilled by the other party
See you should write The buyer shall deduct tax as applicable under Indian law and deposit same with the income tax department,
Further if not certificate for any exemption from department is produced straight away deduct the applicable tax,
The seller can always claim refund of the taxes deducted at source as per his eligibility, hence in order to avoid problems for you, it is better you may deduct the taxes as applicable without waiting for their CA's clearance.
This would be a safe measure to you to avoid the problems in case the seller fails to pay the taxes to government, being a NRI.
The buyer need to deduct TDS on total sales consideration as per IT act.
You can add above mentioned clause but you must contact local property Advocate for absolute clause as per your deal with the seller.
