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 obtain TAN registration and file eTDS return

• 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

• In case NRI feels that TDS is to be done at a lower rate (less than 20%) or Nil rate, he can apply to Income Tax Officer and obtain No TDS certificate. Read How to obtain TDS exemption certificate from Income Tax officer in case of purchase of property from NRI to know more about the procedure.

• You may also like to read 7 things you must know about Income Tax before buying property from Non Resident Indian (NRI)

Thought for the day

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

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