How To Apply For Lower TDS Certificate

Introduction

Today I am going to discuss some important issues regarding the purchase of property from non-resident Indians or sale of property by non-resident Indian. Such kinds of people are supposed to have many legal and tax-related compliances while purchasing or selling the same. I have been dealing with such kind of cases where NRI intend to sell a property or any Indian resident is supposed to Purchase property from NRI.

According to my presumption, NRIs are interested in taking advantage of the strong economy of India in the current scenario by disposing of their property in India at lucrative rates which are justified too. That is the reason why so many NRIs are interested in selling a property. However, this is not an easy process at all. This whole process can be simplified by understanding the various phases of selling which will be technically and legally justified.

Those NRIs who are interested in selling their property or those residents who are interested in purchasing a property from NRI are most likely to face tax related compliances. The tax-related provision regarding the sale and purchase of property from or to NRIs is entirely different. I will prefer not discussing the theoretical implications of sections rather I will be discussing the practical implications of such transactions. I will let you know in detail, that what are the basic precautions, an NRI is supposed to take in consideration while selling their property in India.

I will also let you know, the same with reference to buyer i.e. people who are interested in purchasing a property from an NRI. If you are expecting that one fine day you will travel across India, sell your property here and will go back then I am sorry friends this will not be the case here. It is very much required to follow certain provisions for selling such kind of property. It is advisable for you to prepare well in advance for such kind of transactions. I will discuss both aspects of the transaction with reference to the buyer and seller of such property for your detailed clarification.

Tax Compliance for NRI Seller

First, we will discuss with reference to an NRI seller. The very First Requirement of this process is systematic and well-structured planning.

If you have any intention of selling your property within India, you must prepare at least 2 months advance prior to such transaction. Otherwise, you will be wasting your precious time and energy which alternatively you could have saved by proper planning. So let’s discuss the foremost point. It’s regarding the payment of taxes. If NRI is selling his property, there is a legal provision of the tax to be deducted at source. If the NRI intends to sell the property which he is holding for three or more than three years, the gain from such property will be included in long term capital gain. So the tax on such kind of transactions will be levied upon @ of 22.88%. I would like to clarify again this by an example. Suppose an NRI is selling a Property worth rupees 1 CR. Here the buyer will deduct 228000 Rs from 1 CR and will give you the rest of the money. It is a big amount. Even if you go for claiming the refund of this money, it will take a period of 6 months to 1 year. Definitely, it is not a beneficial idea.

Now the question arises that how we are supposed to avoid such kind of situation. In these circumstances, you can apply well in advance for Lower TDS certificate or Nil TDS certificate. It is also mandatory for you to understand the basic difference between Lower TDS Certificate and NIL TDS Certificate. Suppose if you have calculated the Capital gain and accordingly it comes to 10%, in this situation you will request the concerned income tax officer to reduce the rate of your tax at 10%. In some situations, where the capital gain comes to 0%, you can accordingly request the concerned IT officer to issue a NIL TDS certificate to you. If the concerned Income Tax officer will be satisfied with your logic and calculations, he will issue your TDS certificate. This certificate can be furnished to the buyer for further proceedings. As now, if the Lower TDS certificate displays the rate of tax at 10%, the buyer will deduct only 10 Lac and will give you the rest of the money. Usually, there is no such capital gain on sale of such kind of properties. Sometimes property is also sold because funds are required by the seller on an urgent basis. Although it may possible that there are no losses on such kind of transaction, the capital gain will also not reflect in such kind of transactions.

Capital Gain Explained

Let’s discuss regarding the Capital gain now. If there will be no capital gain on the sale of a property, you can apply for NIL TDS. It means that there will be 0% deduction of tax. It is possible only if you are calculating the capital gain in an appropriate manner and are filling the form accordingly. This form can be filled up online also. You can get a NIL or Lower TDS certificate from Income Tax officer accordingly afterward. Actually, it seems to be a complicated process but can be simplified by hiring the services of an experienced CA who can take care of all your requirements, thereby saving your precious energy and resources.

Our firm has an enriched experience of dealing with such kind of cases and providing services for such kind of transactions at an economical rate. Even though, if you are interested in taking the charge of selling your property on your own, you can still do that. However, you are most likely to face the challenges of making coordination with Income-tax authorities in such case.

Process

Let’s begin with the first step of this process. The very first thing an NRI is supposed to verify is his Pan Card Jurisdiction. It is mandatory for an NRI to have the Pan Card with the same Jurisdiction where such kinds of sales transaction are taking place. It is a matter of fact that whether you are an NRI and have settled abroad, living there for a long time or have settled there long back and even you are paying taxes in abroad as an NRI, your pan card will still reflect the same jurisdiction where you have filed your last Income tax return. I have been dealing with such cases where the NRI is already filing his Income-tax return abroad and still, his pan card is reflecting his local address where he was residing earlier.

To avoid these kinds of hassles in future, you are supposed to apply in advance for the transfer of your Pan card from Local address to international Address as it requires a considerable time period. You have to accordingly apply to Local as well as International concerned authorities intimating them as you are an NRI, you need to get your Pan Card transferred from your Local address to International Address. Pan Card will be required while applying for the Lower TDS Certificate. After this application, the next stage will be of collecting all the required and relevant documents for this process. You are supposed to upload the same on the internet on a relevant portal. Furthermore, you are required to calculate your capital gain so as you can apply for lower TDS or NIL TDS Certificate. For calculation of Capital gain, you will be required to deduct all expenses and purchase costs from sales value. If you are holding the relevant property for three or more than 3 years then Purchase index cost will be calculated. I will make you understand how it works.

Let’s assume that you have purchased a property ten years back at a specified price, but now at this point of time that specified price will not reflect exactly value of a property. The cost at which the property has been purchased must have been increased in the span of ten years. That’s why; the purchase Index cost is calculated. Accordingly, the capital gain is calculated as per the purchase cost index. Now you are supposed to pay the taxes at a specified rate on a net capital gain. Now you can well understand that in comparison of paying tax at a whopping rate of 22.88%, now you are paying taxes only on the net capital gain. In case your capital gain is NIL, you can apply for NIL TDS certificate also. After deducting all your expenses and purchase cost from the sales value, you are supposed to pay taxes on the balance amount. In case the Capital Gain comes to zero, you are required to apply for NIL TDS Certificate.

Steps

You can start with filling up the online form on Income tax Portal. You have to disclose all other sources of your income, for example, you are receiving rent or any other source of income in any bank within India. You have to attach all relevant certificates along with. Moving forward you also have to attach certificates certifying that the said property has been purchased from the declared income only. You can attach accordingly details of the bank account; details of cheque or copy of Draft or purchase agreement along with. Your Pan card will be attached surely. You will also attach the copy of the draft agreement.

It is advisable for you to intimate the buyer in advance that being an NRI, you are applying for Lower TDS Certificate and the whole process will take some time, most preferably 1 to 2 months. The buyer is supposed to maintain patience for such period of time. It is better to intimate the buyer about this in advance otherwise there is a risk of losing your precious amount of energy and resources. As you are intending to avoid the whopping rate of 22.88% by applying for Lower TDS Certificate, you should intimate the buyer that he should cooperate for the same.

You are also required to take on record the phone number, pan number and email ID of the buyer. If the property has been registered jointly in the name of two different persons, they both are required to apply separately. If the agreement does not specify anything in writing, it will be considered that both persons hold the property in equal proportion. In cases of couples, where the wife is a housewife and is not working then also they have to apply separately. You are also required to submit an affidavit stating that in case you have furnished wrong facts or have manipulated facts and figures, you will be liable to pay penalty for the same. This is a part of the required formality.

You can contact us with all compiled documents of the above-mentioned list. After uploading all the relevant documents on the income tax portal, you are required to wait for 5 to 7 days for a response from the income tax department. Afterward you may contact concerned Income-tax officer to know the status of your application or alternatively, you can also check online. This procedure is required to be done which may take a time period of approximately one month. Your application may get accepted or rejected within this tenure of one month. Generally, the reasons for the rejection of the application are a submission of incomplete papers or incomplete documentation. All this needs to be done online.

Now you are supposed to make an effective follow-up system for Income tax authorities in order to remain updated. As we know that Bureaucracy in India is a little bit slow and creepy, you should remain yourself updated with the progress of your application’s status. Please make it sure that you have to apply only after the transfer of your pan card jurisdiction; otherwise, there are high chances that your application might get rejected on the same criteria. Most of the income tax authorities will pursue your application without any push but off-course there are some people in the system who will expect something out of the box from you to pursue your case, especially when the sum total of a transaction is a hefty amount. However, I would like to mention here that it is a game of patience after all.

If you can wait for 30 days, no one will demand money. The money is expected for perusing the application at a speedy track. When the Lower TDS Certificate will be issued to you, it will include the names of both buyer and seller on the Certificate. All you have to do is just to furnish this Lower TDS Certificate to the buyer. The buyer will deposit this certificate in the Bank from where he is getting a loan to purchase the property. He will file TDS Return. The provisions regarding the TDS return for NRI are entirely different from the normal residents. You can view all the relevant details of TDS in the 26AS form on your income tax portal. You are supposed to file your IT Return on the basis of credits exhibited in the 26AS form on your IT Portal.

Let’s go through all the steps, meant to be followed by you in the whole process. First of all, you need to apply for the transfer of your Pan Card jurisdiction. Again you have to file form no 13 for Lower TDS Certificate, receiving the TDS certificate, and finally submitting the Lower TDS Certificate to the buyer of the property. The buyer will deposit the TDS Certificate in his bank and deposit the amount of TDS in the concerned bank. You can check on your income tax portal in 26AS form for your relevant credits. You can file your IT Return after 31st March accordingly. In the case where the property jointly owned by two people, both are required to file the return. If the tax has been deducted at a higher rate, you may also claim for refund.

In some specific situations, where the application for Lower TDS certificate has been rejected by IT department on the certain ground involving incomplete documentation or faulty submission of documents, there is no need to get disappointed or panic. You can pay the tax at the rate of 22.88%. Afterward, in March you can claim for refund. You will be requiring an experienced and sincere CA for the purpose of dealing with such situations. It is highly recommendable for an NRI to hire an experienced CA for systematic follow up of the case. I strongly recommend that in such situations, it is better for a buyer as well as the seller to hire the services of a common CA to maintain effective coordination. Our firm offers this service in a Combo pack for both sellers as well as the buyer.

Purchasing Property from NRI

Now we will discuss the various aspects of this process from a buyer‘s point of view. If you are intending to purchase a property from an NRI which seems to be a profitable deal for you, then definitely you must go for the same. However, it should be kept in mind that the provision related to the purchase of property from an NRI is entirely different from that of purchase of property from a resident. Now I will tell you what are the key points you should keep in mind while purchasing the property from an NRI. The very first requirement is that of a Tan Number. You are required to apply for Tan number which is entirely different from Pan Number. Most of the Indian citizens do have Pan Number but you are supposed to apply for Tan number.

You will be required to provide TAN no to receive Lower TDS certificate, After deducting the tax from sales value in accordance with the rate mentioned in the Lower TDS certificate, you have to file TDS Return. You are required to download a form from income tax portal and will attach along with which will certify that all your taxes have been paid off. The seller can also check on his income tax portal the all the relevant taxes have been paid by you. Finally, you have to surrender your TAN number. It is advisable to surrender Tan numbers after the final transaction of the property for purchase has been completed or otherwise, you will be liable to file a quarterly return for the same.

Review

Let’s go through and review all the required formalities for the purchase of property from an NRI. First of all, you are required to apply for the TAN number and intimate the seller regarding this TAN number. This TAN number will be used for applying the Lower TDS Certificate. You will have to wait for the issuance of Lower TDS Certificate. If the Tax rate in Certificate will be 0%, you are not required to deposit any tax or file the TDS. All you are supposed to do is to surrender your TAN Number.

Alternatively, you have to pay taxes in accordance with the rate specified in the TDS certificate and then file the TDS. Finally, surrender your TAN Number. Lastly, I would like to conclude that patience and time are required for such kind of processes. It is highly recommendable to get the services of an experienced and sincere CA for this. It would be a wise decision for both buyer and seller to hire a common CA for such kind of transactions. There will be effective coordination in the system thereby avoiding any case of professional competition between the different CAs of buyer and seller.

Our firm offers such kind of services at economical prices. We are well versed with the laws and provisions for dealing with this kind of cases on behalf of the seller as for a buyer. We offer a best-combined package of this service for both buyer and seller. The sooner you start preparing for this, the better it will be for you. Usually, you should start at least 2 months before this sale. You should also be very careful from such kind of firms which charge very heavy amount ranging from 50, 000 to I Lac for offering services for such kind of cases. The justified charges by CA for dealing for kind of case would range between somewhere from 12,000 to 13,000. You can directly reach us for this kind of services.

We also deal with after-sales services. Likewise, an NRI intends to transfer the amount received from the sale to abroad after the deal. Such an amount can be transferred after filling up the 15CB form. This service is also being offered by our firm. We offer all relevant services for NRIs as well as Local residents. I have tried my best to update you regarding the provisions and alternatives available for dealing with such kind of cases so that you may not be fooled by the fake agencies in the market. If you still have any related query, kindly comment and I will try to answer it in the comment box. You can directly reach us at below-mentioned email IDs and Phone numbers.

Name: AKT Associates

Email ID: cs@aktassociates.com

Phone No: 9699042660