The sale of property by an NRI (Non-Resident Indian) in India requires compliance with various legal and taxation requirements. One of the most crucial aspects is to pay TDS (Tax Deducted at Source) and file TDS returns. Let’s understand the entire process in detail.
What is TDS?
TDS is a tax collection mechanism where the payer deducts a certain percentage of tax from the payment made to the payee and deposits it with the government. The TDS rates vary based on the type of payment and the applicable tax laws.
Sale of Property by NRI in India – TDS Payment
The buyer of the property is responsible for deducting and depositing the TDS with the government. Including the sale price and any other consideration paid, such as parking charges, and club membership fees, the total sale consideration is used to calculate the TDS amount. The value of movable assets such as furniture or appliances that may be sold along with the property is exempt from TDS. It’s important to note that the NRI seller needs to obtain a Tax Residency Certificate (TRC) from the country of their residence to avail of the benefits of the Double Taxation Avoidance Agreement (DTAA). DTAA allows the NRI to avoid paying tax twice on the same income in both India and the country of their residence.
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TDS Return
After deducting and depositing the TDS with the government, the buyer must file a TDS return within the specified due dates. The TDS return includes details of the TDS deducted, and deposited, and the PAN (Permanent Account Number) of both the buyer and the seller.
TAN No.
To file TDS returns, the buyer needs to obtain a TAN (Tax Deduction and Collection Account Number) from the Income Tax Department. TAN is a ten-digit alphanumeric code that serves as an identification number for persons who are required to deduct or collect tax at the source.
Consequences of Non-Compliance
Non-compliance with the TDS payment and return filing requirements can attract severe penalties and legal consequences. The buyer may face penalties for non-deduction or short-deduction of TDS, non-payment or short payment of TDS, or delay in filing the TDS return. The penalties may range from simple interest on the amount due to imprisonment for non-compliance with the provisions of the Income Tax Act.
Conclusion
In summary, the sale of property by an NRI in India requires compliance with TDS payment, TDS return filing, and obtaining TAN. The buyer of the property needs to deduct TDS at the applicable rates and deposit it with the government. The buyer also needs to file the TDS return and obtain a TAN to comply with the legal requirements. Timely compliance with the applicable provisions of the Income Tax Act is necessary to avoid severe penalties and legal consequences for non-compliance with these requirements.