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How to obtain TDS exemption certificate from Income Tax officer in case of purchase of property from NRI

If you are buying property (such as site or house or flat) from a NRI, you have to do TDS (Tax Deducted at Source) @ 20% on the sale value of the property. The seller or the buyer can apply to Income Tax department (International Tax Ward) for determination of the amount of tax on capital gain. Based on the certificate of lower deduction issued by the Income Tax Officer, the seller can deduct lower taxes. In this article i tried to explaining the  procedural aspect of applying and getting TDS exemption certificate from the income tax officer. 

(Also read 7 things you must know about Income Tax before buying property from Non Resident Indian (NRI) for further information about taxation on buying property from NRI)

Apply to Income Tax Officer – The seller or the buyer of the property can apply to Income Tax Officer (ITO or higher rank depending upon the value of the transaction) seeking lower or NIL TDS certificate. The application is to be made to the concerned ITO, International Taxation wing of Income Tax department. Suppose the PAN of the seller is in the jurisdiction of Delhi Income Tax office, one can’t apply to ITO at Bangalore. So, the application is to be made to the respective officers in the jurisdiction where the PAN is allotted.

 

Documents to be filed –

  • Duly filled and signed Form 13
  • Photo copy of PAN Card of seller
  • Proof of residential Status – Passport copy with VISA stamping
  • Proof of TDS, Advance Tax paid, if any
  • In case Income during the previous 3 years was below taxable limit, an affidavit to that effect
  • Copy of the Registered Sale deed (at the time of purchase of property)
  • Copy of the sale agreement by virtue of which transaction occurs
  • Capital gain calculation
  • Proof for exemption/deductions claimed under the head capital gain
  • Bank guarantee for the tax liability arising out of the transaction if it is proposed to issue the certificate at 0%

 

Duration – The entire process will take around 20 working days

 

If the seller wants to re-invest: In such cases, he has to give bank guarantee for the tax liability arising out of the transaction. After making reinvestment of the sale proceeds, he can produce the documents to the Income Tax Officer and get the bank guarantee released.  Or else, he can make an investment prior to the sale and produce the document along with Form 13 to the Officer. If the reinvestment is done within one year prior to the date of sale, the Officer will issue NIL TDS certificate.

 

 If you have any query, please feel free to contact us –  [email protected]

 

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About CA Prasad Chartered Accountant

CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]