When a Non-Resident Indian (NRI) sells a property in India, the transaction is subject to tax deducted at source (TDS). This means that the buyer is required to deduct a certain amount of money from the sale price of the property and deposit it with the Income Tax Department on behalf of the seller. In this article, we will explore the TDS on the sale of property by NRI in India and its implications.
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Firstly, it is important to note that the rate of TDS on the sale of property by NRI depends on whether the property has been held for more than two years (long-term capital gains) or less than two years (short-term capital gains). If the property has been held for more than two years, the rate of TDS is 20% of the sale price. On the other hand, if the property has been held for less than two years, the rate of TDS is the same as the applicable income tax slab rate of the seller, along with surcharge and cess.
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It is also worth mentioning that the TDS is required to be deducted from the entire sale price of the property, irrespective of its value. Even if the value of the property is less than Rs. 50 lakhs, the TDS is still applicable.
Now, the question arises, who is responsible for deducting and depositing the TDS? As per the law, the buyer is responsible for deducting the TDS and depositing it with the Income Tax Department. The buyer is required to deduct the TDS at the time of making the payment to the seller. Even if any advance is being paid for the purchase of property, TDS is required to be deducted.
In the case of NRI sellers, they cannot compute the capital gains on their own, and it has to be done by the Income Tax Officer. To facilitate this, the seller is required to file an application in Form 13 with the Income Tax Department and request them to compute his Capital Gains. The Income Tax Department will then compute the Capital Gains of the seller and issue a certificate for Nil/Lower deduction of TDS depending on the capital gains arising on the sale of the property. The seller is required to give this certificate to the buyer, and the buyer will deduct the TDS as per the rates mentioned in the income tax certificate.
It is important to note that failure to deduct or deposit the TDS can attract penalties and interest. Therefore, both the buyer and the seller need to ensure that the TDS is deducted and deposited with the Income Tax Department in a timely and accurate manner.
conclusion
 The TDS on the sale of property by NRI is a crucial aspect of the transaction that needs to be taken seriously by both the buyer and the seller. The rates of TDS vary depending on the duration of holding the property, and it is the buyer’s responsibility to deduct and deposit the TDS with the Income Tax Department. The seller can also obtain a certificate for Nil/Lower deduction of TDS by filing an application with the Income Tax Department. Any non-compliance with the TDS regulations can lead to penalties and interest, and hence, it is important to follow the rules and regulations laid down by the Income Tax Department.