If you are an NRI selling a property in India or a buyer buying a property from NRI seller then this video is for you. Here is a guide addressing the taxation aspects in India when a NRI sells a property. This video includes Various tax-related considerations that arise during the sale of a house in India by an NRI. The key topics covered include Tax Deducted at Source (TDS), Tax Deduction and Collection Account Number (TAN), Lower TDS Deduction Certificate, Capital Gain Tax, Claiming a refund, and Repatriation.
When an NRI sells a house in India, it is essential for the buyer to deduct TDS. TDS, or withholding tax, is calculated at a rate of 20% plus Surcharge (ranging from 10% to 15%) and Education Cess (4%) and this TDS is on sale consideration.
| Sale Price= > | Less than 50 Lakhs | 50 Lakhs to 1 Crores | Above 1 Crores |
| Long Term Capital Gains Tax (A) | 20% | 20% | 20% |
| Add: Surcharge (B) | Nil | 10% of (A) | 15% of (B) |
| Total Tax (C ) = (A)+(B) | 20% | 22% | 23% |
| Add: Health & Ed. Cess (D) | 4% of (C) | 4% of (C ) | 4% of (C) |
| Applicable TDS Rate (E) = (C) +(D) | 20.8% | 22.88% | 23.92% |
When seller is an NRI, buyer is required to possess a TAN. TAN is a 10-digit alphanumeric number, which takes approximately a week to obtain. The TAN is crucial for submitting the TDS amount to the government on behalf of the seller, filing TDS returns, and issuing TDS certificates to the seller.
Returning to the focus on TDS on the sale consideration, it is notably high. Please note, few people insist buyer to deduct TDS on capital gain which is wrong. TDS shall be deducted on sale consideration. To reduce the burden of higher TDS on NRIs, the government provides an option to apply for a lower TDS deduction with the assessing officer. This certificate is based on the actual capital gain from the property sale. For instance, if there is no capital gain, an NRI can apply for a NIL TDS deduction certificate. If the capital gain tax is applicable, approximately 5% of the sale consideration, the seller can request a certificate specifying a TDS rate of 5%. This application is submitted in Form 13 to assessing officer through online mode. Along with application various other documents like proof of being NRI, estimated income of current year, buyer’s TAN, Sale agreement etc are required to be uploaded.
Upon obtaining a lower TDS certificate from the Assessing officer, the buyer is obligated to deduct TDS at the rate stipulated in the certificate. Please note that even for filing a lower TDS certificate application, the buyer must have a TAN. Therefore, the first step for an NRI seller, upon finding a buyer, is to request the buyer to apply for TAN. If seller is resident, then in that case buyer doesn’t require to obtain TAN.
Moving on to the process of submitting TDS to the department, it is crucial to deduct TDS at the time of crediting the sale consideration to the seller. This TDS amount must be paid to the department using the TAN within seven days from the conclusion of the month in which the TDS was deducted. Subsequently, the TDS payment is linked with the seller’s PAN by filing a TDS return, which is mandated to be filed within 31 days from the end of the quarter in which the TDS was deducted.
Due date of filing TDS returns(27Q):
Quarter 1 (Apr 1 to Jun 30) – Jul 31
Quarter 2 (Jul 1 to Sep 30) – Oct 31
Quarter 3 (Oct 1 to Dec 31) – Jan 31
Quarter 4 (Jan 1 to Mar 31) – May 31
After a few days, the TDS certificate will be available for download which buyer should share with sellers for his records.
It is essential to be aware that there are substantial penalties for any delays in depositing the TDS challan and filing the TDS return. Seeking assistance from professionals is strongly advised to ensure compliance and avoid penalties.
If the TDS is deducted at an appropriate rate, seller has the option to approach NRO bank and request the repatriation of these funds to NRE or overseas bank account. This repatriation can be done under $ 1 Million scheme. In this case there will be no TCS on transfer. Bank may ask to submit a 15CA/CB certificate. Seller can seek an assistance from a Chartered Accountant (CA) who will issue a 15CB certificate and file 15cb on seller behalf.
Now, moving on to the final step, after the conclusion of the financial year, it is important to file your online income tax return to report this sale of property. The tax return should be based on your actual capital gain. Filing the tax return enables you to claim a refund for any excess TDS deducted. Even if there is no refund to claim, it is essential to file the tax return to avoid receiving a notice of non-filing, as all financial transactions are automatically recorded in the government’s data, linked through the PAN system.
Your Chartered Accountant will provide guidance on various other aspects during the execution of the sale, but in essence, this is the overall process. I trust that this information has provided you with some insights into the topic. Feel free to reach out to me for any additional clarifications; I am here to assist and would be delighted to help.
Disclaimer: This article is just to make you understand about very basics of the concepts. Please take Professional advice in case you have any doubts.
Or You can write to me at ushma@nricaservices.com or Call/Whatsapp me at +91 9910075924.
