Q.905 How to get refund of TDS

deducted on sale of property in

India

Dear Sir, I went through your website and would like to thank you for the clear explanation provided on capital gains tax by selling property. Could you please clarify few more details. I am giving a summary of my case below. I purchased a house in Pune in 2008 for Rs 44 lakhs. I was a resident Indian that time. Thereafer, I moved to Canada in 2011 and am staying in Canada since then. In Feb 2016, I became Canadian citizen and surrendered my Indian passport in the embassy here. I have sold my property last month for Rs 72 lakhs. While selling, 1% TDS has been paid by the buyer and he has taken that money from me. As per your indexation sheet, my property value should be around Rs 81 lakhs (indexation factor of 1.85 * 44 lakhs) but I have sold it for less. So, I guess I am not due to pay any long term capital gains tax. Is my understanding correct? How can I claim this refund of Rs 72,000/ (1% of sale value). If you can give me contact information of some good CA who can help me in this regard and also file the IT returns, I will be really thankful. Also, if I don't need to pay any tax, do I still need to file IT returns? I don't have any other income in India and have not filed returns since the time I came to Canada. I have spoken to few people but everyone is giving different information and not able to help properly. Appreciate your help. Regards, Aloy Ghosal Answer: The financial year in India is from April 1, to end of March. So depending on the month of purchase, you could use the cost inflation index for the year of purchase to be 2007-2008 or if purchased after April 1st use the cost inflation index for the year 2008-2009. Since you sold the property last month which would be June 2016, you would use the cost inflation numbers for the year of sale as 2016 -2017 which is 1125. Regardless the result shows a loss. Under the 1% TDS rule for property sales that exceed Rupees 50 Lakh, the purchaser is obligated to deduct 1% TDS regardless of whether the seller has capital gain or a loss. The purchaser of your property should have given you a copy of Form 16B which is a type of TDS certificate showing the amount paid. This is the document you need when filling your tax return to claim the refund of the 1% TDS since you have no capital gain but a loss from the sale of your property.

TDS on property sale in India -

Overview

The 1% TDS rule on sale of property was introduced in the 2013-14 Budget and came into effect as of June 2013. Under this rule, for any property [except agricultural land] sale that exceeds Rupees 50 Lakh, the purchaser must deduct 1% of the sale price as TDS. This 1% is sent by the purchaser to the tax department. To clarify this in simple terms: • Purchaser when making payment for the property holds back 1% of the negotiated sale price. • Purchaser pays this 1% deducted amount to the tax authorities online from the Indian Income tax department website on Form 26QB which has been designated for paying TDS on property, this should be done within seven days from the month in which the purchaser has made the 1% TDS deduction. • The buyer is then required to give a statement of the deduction made as 1% TDS in Form 16B to the seller. Seller will need this Form 16B when filing tax return if they wish to claim a refund.

Seller claiming refund of the 1% TDS

In case the seller suffered a loss on the sale of the property the question of capital gains does not arise and the seller can claim a refund of the 1% TDS by filling a income tax return. No refunds are possible unless a tax return is filed. Regards to recommending a CA, I normally avoid recommendations unless I have personally dealt with someone. I am currently in Seattle but expect to be in Pune during the first week of September this year. If by then you have not found anyone you can send me an email.

Sample of FORM 16B shown below &

FORM 26QB sample cam be seen by

clicking HERE