• TDS on sale of NRI property

I am selling a residential property in Delhi. It's a parental property ( purchased in 1959) that is rebuilt consisting of 4 flats in 2020-21. I went to the USA in December 2019 i.e. 20 months back to my daughter and since then I am living there in the USA. I am NRI by status now. I am selling a flat in the above-said property through power of attorney given to my relative as I am out of the country. The buyer is deducting TDS at the rate of 22.88% on land value and 34.32% on construction value as per NRI sale of property laws. The sale deed will be registered by next week. Is it possible to get the TDS deducted at a 1% resident rate? I will be back in India in January 2022. I am saying to the buyer that I can mail him that I will be back in January 2022 and will stay in India for the time to get back the residential status again. Can it be possible to deduct TDS from the buyer at the 1% rate if the sale deed is to be registered next week but I will be back in Jan 2022 on the basis of my mail to him or on the basis of any other document? If not possible what are the consequences of deducting tax at the lower rate?
Asked 7 days ago in Taxation

7 answers received in 1 day.

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11 Answers

Only if you become resident then above rate will be applicable otherwise nri rate will be applicable

Prashant Nayak
Advocate, Mumbai
24476 Answers
52 Consultations

4.4 on 5.0

Since you are NRI as on date TDS would be deducted at 22 percent 

 

it cannot be deducted at 1 percent now

 

3) You should  file an application in Form 13 with the Income Tax Dept and request them to compute your Capital gains 

4) The Income Tax Department will compute the Capital Gains of the seller and will issue a certificate for Nil/ Lower deduction of TDS depending on the capital gains arising on the sale of property.  

5) You should to give this certificate to the buyer and the buyer will deduct the TDS as per the rates mentioned in the income tax certificate.

6) In case this certificate is not obtained by the seller from the Income Tax Department, the TDS should be deducted on the Total Sale Price and not on the Capital Gains. Therefore, it is very important for the seller to obtain this certificate from the Income Tax Officer.

 

 

Ajay Sethi
Advocate, Mumbai
84382 Answers
5530 Consultations

5.0 on 5.0

The buyer is duty bound to deduct TDS at the applicable rate. You may have to file your IT return and get the refund, if eligible. For further assistance, it is better to consult a chartered accountant specializing in tax laws, as it is strictly not a legal issue as yet.

Swaminathan Neelakantan
Advocate, Coimbatore
1018 Answers
17 Consultations

4.9 on 5.0

- As per law, an NRI/OCI , who is selling house property which is situated in India have to pay tax on the Capital Gains , and this tax that is payable on the gains depends on whether it’s a short term or a long term capital gains.

- Further, long term capital gains are taxed at 20% and short term gains shall be taxed at the applicable income tax slab rates for the NRI based on the total income which is taxable in India for the NRI.

- Further, when an NRI sells property, then the buyer is liable to deduct TDS @ 20%.

- However, an NRIs is allowed to claim exemptions under section 54 and Section 54EC on long term capital gains from sale of house property in India.

Mohammed Shahzad
Advocate, Delhi
8182 Answers
86 Consultations

5.0 on 5.0

If your status is is NRI as on the date of execution of the registered sale deed, then the applicable taxes i.e., the TDS for NRI would be applicable.

In such a case where you are returning to India, you may better postpone the sale of property till your arrival back to India. 

To reduce the TDS on Sale of Property by NRI, the NRI is required to file an application in Form 13 with the Income Tax Department for issuance of Certificate for Nil/ Lower Deduction of TDS.

After checking the documents, the tax department will issue a lower TDS certificate and will give the exact percentage of TDS that needs to be deducted by the buyer,"  

T Kalaiselvan
Advocate, Vellore
74484 Answers
1226 Consultations

5.0 on 5.0

Dear client,

The TDS rate can be lowered but with the permission of the Income Tax department. To lower TDS you need to do the following steps:

1. you should try to get certificate from Income tax department for calculation of capital gain which will reduce TDS

2. Submit all the documents related to property like purchase price, any renovation or construction done to the property, Date of purchase etc along with form 13. If the department is satisfied they can reduce TDS.

Thank You.

 

Anik Miu
Advocate, Bangalore
2729 Answers
27 Consultations

4.9 on 5.0

You can postpone the sale of property until you become eligible to acquire resident status.

Without confirming your residential status, the buyer cannot accede to your request to deduct only1% now towards tax from the sale consideration amount.

The buyer can be prosecuted for not deducting appropriate and applicable tax at the time of payment of  sale consideration amount.

 

T Kalaiselvan
Advocate, Vellore
74484 Answers
1226 Consultations

5.0 on 5.0

Better option for you is to execute sale deed in March 2022 

 

seller will not deduct TDS at 1 per cent merely on basis of your letter 

Ajay Sethi
Advocate, Mumbai
84382 Answers
5530 Consultations

5.0 on 5.0

Generally, the buyers play it safe and are advised by their tax consultants to be so in such matters. Notwithstanding your written statement about your acquiring the resident status later, there is an element of risk involved and so the buyer would be reluctant to oblige you.

Swaminathan Neelakantan
Advocate, Coimbatore
1018 Answers
17 Consultations

4.9 on 5.0

Dear client,

if you want TDS deduction then you have to first become resident of India till march 2022 and then if you sell your property after becoming resident the TDS will be deducted at 1% but you need to sell your property after March 2022 when you receive resident status.

Thank You.

Anik Miu
Advocate, Bangalore
2729 Answers
27 Consultations

4.9 on 5.0

Yes the same applies to you if in a year you have stayed in India for above period then you can claim the same

Prashant Nayak
Advocate, Mumbai
24476 Answers
52 Consultations

4.4 on 5.0

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