Exact TDS Rate on Sale of NRI Properties in Detail

Friends, generally I get this question from my NRI friends who are planning to sell their property that what will be the TDS rate when I’m going to sell my property in India, what TDS rate, the buyer is going to deduct and they get a different type of answers from google or different experts as somebody says 1% somebody says 20% and somebody says 30%. So, in this article, we will make it clear how much TDS should be deducted in different scenarios and why it’s important to understand the TDS rate before you proceed to sell your property in India.

TDS rate

My name is CA Arun Tiwari. I’m a Chartered Accountant and deal in NRI taxation, international taxation, appeal, and assessment procedure and I’m starting a whole new series where I’m going to answer all the frequently asked questions, especially related to NRI property selling in India because a lot of times, I have seen that people get wrong information and it creates a problem after the property got sold. So, let’s begin. What are the TDS rates? TDS rates are depending on the kind of capital gain. Now, what is capital gain so in simple terms it is a profit which you are making at the time of selling of your property but the type depends upon how much time you have held property so if you held any property for more than 2 years? It is long-term capital gain and if you have property less than 2 years it’s short-term capital gain and in both cases, the TDS deduction rate will be separate. So before I start and talk about the TDS rate, let me tell you a few important things.

The first thing the TDS rate is an advance Tax so it’s not a final tax so if you are paying more TDS, you file your income tax return and you can get the refund. However, as always said prevention is better than cure. If I have the option of not paying more taxes then why I’m going to pay tax and then run behind the income tax department to get my own money.

That can take time between 6 months to 1 year or 2 years also. So there is an option is given by the income tax department itself. So if as per calculation your capital gain tax is less than what they are asking as a TDS rate you can always file Form 13 to get lower TDS or Nil TDS certificate where Nil TDS means literally zero TDS which means you don’t have to pay any TDS. In case you are selling a property where there is no capital gain or you are selling a property at a loss. So, this thing you have to keep in mind and if you want to know more about the procedure of filing of lower TDS certificate or form 13, you can watch the video on this link: Procedure For Form 13 (Lower TDS) | form 13 – YouTube. Here I have given a complete guide on that apart from that if you consult with me on any matter related to property sale which may be legal or tax-related, you can reach out to me at 9320953120/9372644735 or you can simply use this link of our site aktassociates.com/. My team will assist you in the consultation section. So let’s proceed and understand what are the different charge rates.

Friends I have prepared a proper table for that so that we will have a very easy understanding of what will be the TDS rates on your property sale. 

Lower TDS Certificate On Sale of Property

So friends, when you are going to sell a property and the property is long term i.e. you are holding for more than 2 years then the TDS rate will be as follows:

Particulars Less than 50 Lakhs 50 Lakh to 1 crore 1 Crore to 2 Crore 2 crore to 5 crore Above 5 Crore
Long term capital gain tax 20% 20% 20% 20% 20%
Add Surcharge Nil 10% of above 15% of above 25% of above 37% of above
Total Tax (Inc Surcharge) 20% 22% 23% 25% 27%
Add Health and Edu. Cess 4% of above 4% of above 4% of above 4% of above 4% of above
Applicable TDS rate 20.80% 22.88% 23.92% 26% 28.50%
(Inc Surcharge and Cess)

Now, remember TDS is applicable on complete property price and not on the capital gain. So, suppose you are selling a property for Rs. 1 Crore and the capital gain is only 30 lakhs but you have to pay TDS on complete 1 crore @ 22.88%. 

Now in this example, 20% is the base tax rate on which you have to add surcharge @ 10% and on both of these you have to pay 4% as education cess and the same way as the property price exceeds the rate of surcharge will also increases which are shown in above table. Consider this amount is to be deducted until and unless you applied for a lower TDS certificate however it will take 30 to 45 days. So you have to plan in advance and you have to all documents ready and do all your consultation so that as soon as you find a buyer you would not have to kill your time because, for lower TDS, you have to manage a lot of documents especially, documents related to purchase of that property. So, that should be done in advance. 

Another important you have to remember friends, normally it is seen that people accept token money or down payment. Token money you may before after you applied for lower TDS certificate but down payment should take only after taking TDS lower certificate because whatever money you take before filing an application, you have to pay TDS on the amount which has been received to you. So for example: if you have taken token money of 5 lakh which is fine but on down payment, you should get the lower TDS certificate application first. Just applying for a TDS lower certificate would be sufficient. 

Now let’s talk about the TDS rate in the case of short-term capital gain. If you are having a property that is held by you for a period of fewer than 2 years then you have to pay tax at a higher rate. The chart is as follows:

Income Slab (In Lakhs) Tax Rate Cess Tax Rate
2.5-5 5% 4% 5.20%
5-7.5 10% 4% 10.40%
7.5-10 15% 4% 15.60%
10-12.5 20% 4% 20.80%
12.5-15 25% 4% 26.00%
Above 15 30% 4% 31.20%

With Surcharge Tax Rate Surcharge Cess Final Rate
0.5 to 1 Crore 30.00% 10.00% 4.00% 34.32%
1-2 Crore 30.00% 15.00% 4.00% 35.88%
2-5 Crore 30.00% 20.00% 4.00% 39.00%
Above 5 Crore 30.00% 37.00% 4.00% 42.74%

If you don’t use the lower TDS certificate option then you will end up with almost 42% of your property in the income tax department. Although you can always take the refund by filing the income tax return why go by that if you have the option. Only you have to work slightly proactively. So friends apart from that if you have any procedural questions, you can write to us at cs2@aktassociates.com. Hope now it will be clear but apart from that if you have any query related to TDS or any question-related NRI taxation, you can send us or if you want a faster resolution then you can Whatsapp me on 9320953120 and you can also reach out to our team. In the next series, I will discuss more questions similar to this topic which are generally asked especially related to gifts or related to inheritance. That’s all for today. Thank you. 

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