TDS on NRI Property: Pitfalls and Solutions

Unlike Resident Seller, TDS on NRI Property is quite complicated. Its buyer responsibility to cut TDS during transaction under Section 195 and is ideally required to be deducted on the Capital Gains rate on whole transaction Amount. Sometimes it become bone of contention if buyer is not aware of these rules and finalized dea with seller without considering TDS in transactions.

Below is the TDS rate chart for NRI seller.

 

Less than 50 Lakhs

50 Lakhs to 1 Crores

1 Crore to 2 Crores

2Cr to 5Cr

5Cr and Abouve

Long Term Capital Gains Tax

20%

20%

20%

20%

20%

Surcharge

Nil

10% of above

15% of above

25% of Above

37% of Above

Total Tax (incl Surcharge)

20%

22%

23%

25%

27.4%

Health & Ed. Cess

4% of Above

4% of Above

4% of Above

4% of Above

4% of Above

Applicable TDS Rate
(incl. Surcharge & Cess)

20.8%

22.88%

23.92%

26%

28.496%

Problem:

Let suppose a NRI sell a property , after purchasing it 3 yesrs befor, for 50 Lacs consideration and get a capital gain for Rs 10 lac. His actual tax will be around 2,08,000 Rs, however TDS will be get deducted 10,40,000Rs and it will stuck with authority till refund claim after financial year.

Now TDS on whole transaction (even in less than 50 Lacs case) cause issue in deal as it cause a huge amount of transaction stuck with government for whole financial year. NRI seller wants to avoid it and get funds immediately.

Solution: TDS at a lower rate

There are few workarounds to make it lower and hassle free, along with getting lower TDS certificate from tax authority.

Please note that you must apply before you execute the sale agreement, and this is very time-consuming process. The assessing officer will determine the TDS after calculating the capital gains. This will put the money in your hands instantly instead of waiting for a refund.

Several documents related to Purchase Price, Date of Purchase, any expenses on Renovation/ Construction etc. would be required to be submitted along with application, and you need a professional help to get it done.

Tax exemption on Capital Gain by NRI

Capital gains made through the sale of a property can be reinvested in India to reduce tax liabilities. Invest the capital gains to buy another property within two years and save the tax generated from the sale proceed. Similarly, under section 54EC, you can invest the profit from the sale of property in Capital Gains Bonds within six months to get an exemption. These bonds usually have a lock-in of five years.

We at Sachan Property can help NRI client to sell their property without hassled and with minimum tax liabilities.

 

Minimum Documents Required:

Requirement list for application for lower TDS Certificate
   
   
Sr. No. Particulars
1 Pan Card
2 Mobile no.
3 Email
5 Current Year Details of :
  Advance TAX
TDS
TCS
6 TAN of Deductor 
7 Traces Log In / Password, if available
8 Current Year provisional Computation
9 Projected balance sheet and computation for the financial year for which application is to be filed. In case of individual, only projected computation is required.
10 Audited balance sheet and computation for any one of the four previous year. Not required in case of individual who is not carrying any business or profession
11 Copy of exemption certificate, if any exemption is claimed
12 copy of assessment order for the last four years, if any
13 copy of ITR acknowledgement for last four years
14 property papers, copy of agreement
15 income tax login details of NRI
16 copy of bank statements of NRI in India
17 Copies of 26AS of NRI

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