The seller should take care of the applicability of TDS on the sale of property by NRI in India and other related matters
The sale of property by Non-Resident Indians (NRIs) in India is subject to certain tax implications, including the requirement to deduct Tax Deducted at Source (TDS). The Indian government ensures the collection of taxes at the time of the transaction itself through TDS, which is a mechanism. In this article, we will discuss the applicability of TDS on the sale of property by NRIs in India and the key things that sellers need to take care of.
Applicability of TDS on Sale of Property by NRI in India:
As per the Indian Income Tax Act, 1961, when an NRI sells a property in India, the buyer is required to deduct TDS on the sale proceeds before making the payment to the NRI seller. The applicable rate of TDS depends on whether the property is a short-term capital asset or a long-term capital asset.
Next stop: Learn more about TDS Provisions for NRIs Selling Property in India!
1. Short-term capital asset:
If the property is held for a period of up to 2 years before selling, it is considered a short-term capital asset. In such cases, the TDS rate is 30% of the total sale proceeds.
2. Long-term capital asset:
If the property is held for a period of more than 2 years before selling, it is considered a long-term capital asset. In such cases, the TDS rate is 20% of the total sale proceeds.
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However, the actual TDS liability may vary based on the total income of the NRI seller and the availability of exemptions, deductions, or benefits under the applicable Double Taxation Avoidance Agreement (DTAA) between India and the country of residence of the NRI. It is advisable for NRIs to consult with a qualified tax professional to determine the correct TDS liability.
The seller should take care of the following things.:
As an NRI seller, there are certain important things that you need to take care of while dealing with the TDS requirements for the sale of property in India:
- Obtain a Tax Deduction and Collection Account Number (TAN): Before the buyer deducts TDS on the sale proceeds, the NRI seller needs to obtain a TAN from the Indian Income Tax Department. All TDS-related documents require mentioning a unique 10-digit alphanumeric number called TAN, and the seller should take care of it.
- Calculate the Correct TDS Amount: As mentioned earlier, the actual TDS liability may vary based on various factors. The NRI seller needs to calculate the correct TDS amount based on the applicable rates, exemptions, and deductions, and communicate the same to the buyer.
- Submit Form 15G/15H, if applicable: If the NRI seller’s total income is below the taxable limit and there is no other tax liability in India, he/she can submit Form 15G (for individuals below 60 years) or Form 15H (for individuals above 60 years) to the buyer. These forms declare that the NRI seller’s income is below the taxable limit, and hence, no TDS should be deducted
- Collect TDS Certificate (Form 16B): Once the buyer deducts TDS, he/she is required to provide a TDS certificate (Form 16B) to the NRI seller within 15 days from the due date of TDS payment. The NRI seller needs to collect this certificate as it serves as proof of TDS deduction.
- File Income Tax Return: The NRI seller needs to file an income tax return in India to report the sale of property and the TDS deducted. This is important to reconcile the TDS credit with the actual tax liability and claim any refund
Conclusion:
The sale of property by NRIs in India is subject to TDS requirements, and it is important for NRI sellers to be aware of the applicable rates and comply with tax laws. NRIs should obtain a TAN, calculate the correct TDS amount, and submit Form 15G/15H if applicable. Additionally, NRI sellers should collect the TDS certificate from the buyer and file an income tax return in India to report the sale and TDS details. It is advisable for NRI sellers to seek professional tax advice to ensure compliance with the relevant tax laws, including any exemptions or benefits available under the applicable DTAA. Non-compliance with TDS requirements can result in penalties and legal repercussions. Being diligent and proactive in fulfilling the TDS obligations can help NRI sellers avoid any unnecessary complications and ensure a smooth and compliant property sale transaction in India.