TDS Rules in India when NRI sell their property in India
Tax withheld as TDS on property sale by Indian Resident & Non-Resident are not the same
TDS on NRI Property sold in India
• TDS of 1% under u/s 194IA applies to Indian residents and is not applicable to Non-Residents • TDS under u/s 195 applies to Non-Resident property sellers • TDS deduction when NRIs sell their property in India TDS deduction of 1% does NOT apply when Non-Residents (NRIs) sell their properties in India TDS rules . . .TDS Property Sale by Indian Residents
When Indian residents sell their properties in India, TDS is deducted @ 1% if property sale is for more that Rupees 50 Lakh. This is straight forward. Indian residents when they file tax they can then settle their capital gain or loss claims by either getting a refund or paying any additional tax they may owe. As residents they cannot escape the Indian taxation rules.TDS Property Sale by Non-Residents
Non-Residents (NRI) on the other hand do not reside in India, many of them hold foreign citizenship. Once they sell their property in India and capital gains occur, it is not easy for the Indian Tax Department to ensure compliance for those settled abroad. To ensure compliance of Indian tax laws, as per rules TDS is deducted by the buyer when property is sold in India. If the buyer of NRI property fails to deduct TDS then they may become liable for taxes due on the property they purchased. TDS u/s 195 is deducted to ensure capital gain tax compliance. If NRI is selling a property in India after holding it for more than 3 years, then it is mandatory for buyer to deduct: • TDS is to be deducted at the rate of 20% plus Education Cess and Secondary and Higher Education Cess which works out to the rate of 20.6% on gross transaction value if sale price is less than 1 Crore. • In case the sale price is above Rs.1 Crore at the rate of TDS works out to 22.66% including Surcharge, Education Cess and Secondary and Higher Education Cess. In case holding period is less than 3 years then Short Term Capital Gain Tax will be applicable. For short term capital gain, TDS applicable is be 33.99% When property is sold in India the one of the following will apply to the seller of the property: 1. A capital gain 2. A capital loss Options for lower or no TDS deduction for NRIs when selling their property in India • In case there is a capital loss, then to avoid the buyer from deducting TDS in compliance of the laws of India, NRIs can apply for NIL Tax Deduction Certificate from the Income Tax Department. This should be done before the final sale so the entire sale proceeds are received by the NRI seller. • In a situation where there is a capital gain which is much less than the designated rate of TDS that buyers are obligated to deduct as TDS. NRI sellers can apply for Lower tax Deduction Certificate. o Based on the cost of investment in property made in earlier years. o On the basis of tax saving investment NRI is willing to make out of the sale consideration. • Long term Capital Gain can be invested in either property or tax exempt bonds to save long term capital gain tax. In such cases, NRI can apply for Tax Exemption Certificate from Income Tax Department under section 195 of the income tax act, 1961 • If an NRIs total income in India is less than basic exemption limit [currently 2.5 Lakh] then they can apply for TDS waiver with Income Tax officer applicable to their jurisdiction. NRIs applying for tax exemption certificate under section 195 of the income tax act, 1961 that allows them save long term capital gains tax by investing in other Indian property or tax exempt bonds approved by the Government must provide proof of such investment before tax exemption certificate can be issued by the Indian tax department.
Disclaimer: Information provided is for general knowledge only and should not be deemed to be professional advice. For professional advice kindly consult a professional
accountant, immigration advisor or the Indian consulate. Rules and regulations do change from time to time. Please note that in case of any variation between what has
been stated on this website and the relevant Act, Rules, Regulations, Policy Statements etc. the latter shall prevail.
© Copyright 2006 Nriinformation.com
NRI
NRI - OCI - PIO Guide & Information
© Copyright 2006 Nriinformation.com
TDS Rules in India when NRI
sell their property in India
Tax withheld as TDS on property
sale by Indian Resident & Non-
Resident are not the same
TDS on NRI Property sold in India
• TDS of 1% under u/s 194IA applies to Indian residents and is not applicable to Non-Residents • TDS under u/s 195 applies to Non-Resident property sellers • TDS deduction when NRIs sell their property in India TDS deduction of 1% does NOT apply when Non-Residents (NRIs) sell their properties in India TDS rules . . .TDS Property Sale by Indian
Residents
When Indian residents sell their properties in India, TDS is deducted @ 1% if property sale is for more that Rupees 50 Lakh. This is straight forward. Indian residents when they file tax they can then settle their capital gain or loss claims by either getting a refund or paying any additional tax they may owe. As residents they cannot escape the Indian taxation rules.TDS Property Sale by Non-Residents
Non-Residents (NRI) on the other hand do not reside in India, many of them hold foreign citizenship. Once they sell their property in India and capital gains occur, it is not easy for the Indian Tax Department to ensure compliance for those settled abroad. To ensure compliance of Indian tax laws, as per rules TDS is deducted by the buyer when property is sold in India. If the buyer of NRI property fails to deduct TDS then they may become liable for taxes due on the property they purchased. TDS u/s 195 is deducted to ensure capital gain tax compliance. If NRI is selling a property in India after holding it for more than 3 years, then it is mandatory for buyer to deduct: • TDS is to be deducted at the rate of 20% plus Education Cess and Secondary and Higher Education Cess which works out to the rate of 20.6% on gross transaction value if sale price is less than 1 Crore. • In case the sale price is above Rs.1 Crore at the rate of TDS works out to 22.66% including Surcharge, Education Cess and Secondary and Higher Education Cess. In case holding period is less than 3 years then Short Term Capital Gain Tax will be applicable. For short term capital gain, TDS applicable is be 33.99% When property is sold in India the one of the following will apply to the seller of the property: 1. A capital gain 2. A capital loss Options for lower or no TDS deduction for NRIs when selling their property in India • In case there is a capital loss, then to avoid the buyer from deducting TDS in compliance of the laws of India, NRIs can apply for NIL Tax Deduction Certificate from the Income Tax Department. This should be done before the final sale so the entire sale proceeds are received by the NRI seller. • In a situation where there is a capital gain which is much less than the designated rate of TDS that buyers are obligated to deduct as TDS. NRI sellers can apply for Lower tax Deduction Certificate. o Based on the cost of investment in property made in earlier years. o On the basis of tax saving investment NRI is willing to make out of the sale consideration. • Long term Capital Gain can be invested in either property or tax exempt bonds to save long term capital gain tax. In such cases, NRI can apply for Tax Exemption Certificate from Income Tax Department under section 195 of the income tax act, 1961 • If an NRIs total income in India is less than basic exemption limit [currently 2.5 Lakh] then they can apply for TDS waiver with Income Tax officer applicable to their jurisdiction. NRIs applying for tax exemption certificate under section 195 of the income tax act, 1961 that allows them save long term capital gains tax by investing in other Indian property or tax exempt bonds approved by the Government must provide proof of such investment before tax exemption certificate can be issued by the Indian tax department.
