10 FAQs on TDS on Sale of Property by NRI.

1. Who is required to pay TDS on the sale of property in India by NRIs? 

Answer – In India, NRIs who sell property are required to pay TDS if the property is held for less than 2 years, regardless of the buyer’s nationality.

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2. What is the TDS rate for NRIs on the sale of property in India?

Answer – TDS rate for NRIs on the sale of property in India is generally 20% of the sale value unless the NRI qualifies for lower rates under applicable Double Taxation Avoidance Agreements (DTAA).

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3. What is the PAN requirement for NRIs selling property in India?

Answer – Obtaining a PAN (Permanent Account Number) is mandatory for NRIs who sell property in India for the purpose of TDS (Tax Deducted at Source) on the sale of the property.

 

 

4. Who is responsible for deducting TDS on the sale of property by NRIs?

Answer – The buyer of the property from an NRI seller is responsible for deducting TDS (Tax Deducted at Source) on the sale of property by NRIs in India, and remitting it to the Indian government. The buyer is required to deduct TDS at the applicable rate before making the payment to the NRI seller and provide a TDS certificate to the seller as proof of deduction.

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5. Can NRIs claim a refund of excess TDS deducted on the sale of property in India?

Answer – Yes, NRIs can claim a refund of excess TDS (Tax Deducted at Source) deducted on the sale of property in India by filing their income tax return (ITR) for the relevant financial year. If the NRI’s total tax liability, including the TDS, is lower than the amount deducted, the NRI can claim the excess TDS as a refund while filing the ITR.

 

6. Do NRIs need to file an income tax return in India for the year in which the property was sold?

Answer – Yes, NRIs are generally required to file an income tax return (ITR) in India for the year in which the property was sold, if the total income (including the capital gains from the property sale) exceeds the basic exemption limit as per the applicable income tax slab rates. Filing an ITR is also necessary to claim any eligible deductions or exemptions and to comply with the tax laws of India.

 

7. What are the consequences of failing to pay TDS on the sale of property in India?

Answer – Consequences of failing to pay TDS on the sale of property in India include penalties, interest, non-compliance, and disallowance of expenses, as per the Income Tax Act, 1961. Compliance with TDS provisions is important to avoid these consequences and fulfill tax obligations.

 

8. Can NRIs claim exemptions from TDS on the sale of the property if they reinvest the sale proceeds in other assets?

Answer – NRIs may be eligible for exemptions from TDS on the sale of property in India if they reinvest the sale proceeds in other eligible assets under Sections 54, 54EC, or 54F of the Income Tax Act, 1961. These exemptions have specific conditions and limits. 

 

9. Should NRIs consult a tax expert or a chartered accountant before selling property in India?

Answer – Yes, it is highly advisable for NRIs to consult a tax expert or a qualified chartered accountant before selling property in India. Selling a property in India can have various tax implications, including TDS, capital gains tax, exemptions, and other compliance requirements. A tax expert or chartered accountant can provide accurate guidance on the tax implications, help with tax planning, ensure compliance with Indian tax laws, and maximize tax benefits such as exemptions or deductions. Consulting with a tax expert or chartered accountant can help NRIs make informed decisions, minimize tax liabilities, and avoid potential legal or financial issues related to the sale of property in India.

 

10. What documents should NRIs keep to prove compliance with TDS and tax laws when selling property in India?

Answer – NRIs selling property in India should keep documents such as sale agreement, TDS certificate, challan copies, capital gains calculation, proof of reinvestment (if applicable), and income tax return as evidence of compliance with TDS and tax laws. Consult a tax professional for specific documentation requirements.