Q.1019 Property Sale Completed

Now Buyer wants TDS from

Seller

Question: Thank you for your very nice article New Tax rules when selling property in India . . . TDS on sale of property I have a question: My wife (an OCI card holder) last month sold her house after her mother expired - it was build in 80s and then extended (a floor added) in early 90s. We have the money from the buyer transferred to our NRO account / but the buyer is now asking for 1% before he would give us the TDS certificate. Clear Understanding with the buyer was that we owe him nothing after the sales is registered (which has been done). What should we do? If we, as the seller, owe this tax to GoI , we can pay it directly to the Income tax department and I have no issues with that (I assume that it will be adjusted against the Capital gains tax we will owe). But I do not want to send the money to the buyer since he seems to have been less than up-front with us (he is a promoter and knows all these TDS related rules) Will really appreciate a response in your very nice site . Regards Tapas Answer: I doubt if the buyer knows all the TDS rules, otherwise he would not be asking you for the 1% TDS after having made the full payment to you. My understanding is that it is mandatory that the buyer to deduct the TDS from the selling price and pay the buyer the agreed upon sale price of the property LESS the TDS deduction. Since you mention in your email that your wife has OCI status, consider the following: TDS of 1% under u/s 194IA is not applicable if the seller is a non- resident. For NRIs, TDS deduction is under TDS u/s 195 which makes it compulsory for the buyer to deduct 20.66% TDS on the sale price of the property if capital gain is long term capital gain. In case of short term capital gain, TDS will be 33.99%. Furthermore, TDS deduction for NRIs is not based on the capital gain but on the full sale price. Any overpayment made is refunded when filling tax return where actual capital gain calculation is done. Since you mention that the buyer wants 1% for TDS ,then he is basing his deduction on u/s 194IA.

Procedure to deduct TDS on property

sale under u/s 194IA

• The responsibility of this rests on the buyer. • Buyer must deduct the TDS from the sale price and submit the TDS amount to the Tax authorities within 7 days from the end of the month in which the TDS is deducted. • After depositing the deducted TDS with the government, the buyer should give the seller a TDS certificate [form 16B] • If buyer fails to deduct the TDS or deposit the TDS with the government, penalties can be levied. Perhaps you should consult a professional accountant familiar with property sales for guidance on how to proceed. No one wants to be in a position where they end up paying TDS under both TDS sections 194IA and 195 on the sale of the same property.