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The TDS provisions on Sale of properties by Resident Indians and Non-Residents

 

The common factor is ‘sale of property’ and the difference is the status of the seller – Resident or Non-Resident. The rules for Tax Deduction at Source (TDS) on sale of property are different for non-residents. This article is about such differences.

 

Sale of property by Resident Indians

 

If an Indian resident wants to sell his property, he has to know the following tax rules.

  • If the sale value of the property is less than Rs.50 lakhs, there is no need to do TDS
  • If the sale value of the property is more than Rs.50 lakhs, then the buyer has to do 1% TDS u/s 194IA
  • PAN card is mandatory for both seller and buyer
  • TAN is not required to be obtained by buyer and consequently there is no need to file eTDS returns.
  • The buyer has to issue Form 16B to the seller
  • The seller can adjust TDS done against his capital gain tax. In case, the seller makes reinvestment of the gain, he can file income tax return and claim refund of TDS from income tax department
  • A copy of the tax challan to be produced before the Sub-Registrar at the time of executing the sale deed

 

Sale of property by Non Resident Indians

 

If a Non Resident wants to sell his property, he has to know the following tax rules

  • Irrespective of the sale value of the property (even if it is less than Rs.50 Lakhs), the buyer has to deduct TDS u/s 195 at 20%
  • The buyer has to issue Form 16A to the seller
  • The NRI seller should obtain PAN. However, unlike in case of resident sellers, NRI needn’t have PAN for sale of property! He can obtain even after the sale. Once he gives PAN details to the buyer, he can file eTDS return to credit TDS amount against the PAN of NRI seller.
  • The NRI seller needs to file income tax return. There is an exception for not filing the return in case capital asset is acquired through foreign sources.  
  • But practically, it won’t work that way. The buyer of the property will deduct tax (TDS) on the sale value of the property without reducing the cost of purchase. So, NRI seller has to compute actual tax liability after reducing the indexed cost of acquisition of the property and file returns. Any additional TDS done by the buyer can be claimed as refund from the department
  • NRI can also reinvest capital gains in property or capital gain bonds as specified by Income Tax Act

 

Thought for the day

TDS rules: It’s a fairly detailed and tedious process.

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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]
  • Piyush Moghe

    If the seller who was non-resident when he bought the property and now is in India from a long time while selling the property does buyer needs some proof from seller to establish that the seller now is
    resident indian?

  • Piyush Moghe

    What is the TDS tax liability on buyer if property is jointly held with one seller being resident indian and other being non-resident indian.