There was always a bit confused regarding TDS compliances applicable on purchasing the property from NRI, whether TDS is required to be deducted as per section 194IA or section 195. The Income Tax Act clearly states that section 194IA shall be applicable only to the properties purchased from Indian residents.
In this article, we will discuss the TDS compliances required at the time of buying a property from NRI sellers such as
- Who is required to deduct TDS, in case of buying property from NRI?
- When to deduct TDS from NRI?
- What is the rate of deduction in the aforesaid case?
- When to deposit the TDS, so deducted, to the credit of Government?
- How to furnish Form 27Q to the Income Tax Department?
- When to issue a TDS certificate to the deductee (seller)?
- How to apply for a Lower TDS certificate in case of buying property from NRI, as the TDS under section 195 is higher?
- What are the mandatory details required to make an application in Form no.13?
Who is required to deduct TDS, in case of Buying Property from NRI?
Any Person such as Transferee or buyer, who is responsible for paying to a Non-resident seller or transferor is required to TDS for transfer of immovable property.
When to deduct TDS from NRI?
TDS is required to be deducted at earlier of the below
- At the time of credit of such amount to the account of payee/seller; or
- At the time payment thereof in cash or cheque or any other mode,
What is the rate of deduction in the aforesaid Case?
As per the provisions of section 195 of the Income Tax Act, 1961, if the property is purchased from a non-resident (NRI) seller, the buyer is required to deduct TDS at the rate in force as described below:
- In case of Sale of Long-term capital asset (Immovable property which is held for a period more than 24 months)- TDS shall be deducted at the rate of 20% plus applicable surcharge and cess.
- In the case of Sale of Short-term capital asset- TDS shall be deducted at the rate of 30% plus applicable surcharge and cess.
TDS shall be deducted in aforesaid cases irrespective of any threshold limit on the sale price.
When to deposit the TDS, so deducted, to the credit of Government?
The Buyer is required to obtain Tax deduction account number (TAN) and the Tax so deducted by the buyer, is required to be deposited to the credit of central government account on or before 30th April if in case such consideration is credited or paid in the month of March. In any other case, TDS so deducted shall be deposited within a period of 7 days from the end of the month of deduction.
How to furnish Form 27Q to the Income Tax Department?
After depositing the tax so deducted to the credit of the central government account, the buyer is required to furnish the online TDS quarterly statement in Form-27Q.
The Due date for furnishing the TDS Statement in form-27Q shall be as follows:
| Quarter | Ending date of Quarter | Due date |
| 1 | 30th June of Financial Year | 31st July of the Financial Year |
| 2 | 30th September of Financial Year | 31st October of the Financial Year |
| 3 | 31st December of Financial Year | 31st January of the Financial Year |
| 4 | 31st March of Financial Year | 31st May of the Financial Year |
When to issue a TDS certificate to the deductee(seller)?
The Buyer is required to issue a TDS Certificate in Form 16A to the Non-resident seller or deductee within the period of 15days from the due date of furnishing TDS Statement in Form 27Q.
How to apply for a Lower TDS certificate in case of buying property from NRI?
Non-resident seller (NRI) has an option to opt for lower TDS or Nil TDS certificate (as the case may be) by making an application in form no.13 to the Jurisdictional Assessing Officer prescribing the details of proposed sale transaction of immovable property and the computation of gain or loss of such transaction.
If the Assessing Officer is satisfied that the total income of the recipient justifies the TDS deduction at any lower rates or no deduction of income-tax, as the case may be, the Assessing Officer shall issue him an appropriate certificate.
Providing such a lower TDS certificate obtained by the non-resident seller to the buyer, the Buyer shall deduct TDS at such a lower rate or nil rate of tax in accordance with such a certificate.
What are the mandatory details required to make an application in Form no.13?
For making an application in form no.13 by the non-resident seller for lower TDS certificate following details are required mandatorily:
- PAN of such Non-Resident seller
- TAN of the Buyer
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