TDS Deduction in Case seller of property is NRI

When the seller of a property is a Non-Resident Indian (NRI), the buyer is required to deduct TDS (Tax Deducted at Source) at the time of making the payment for the property purchase. Here’s how TDS deduction works in the case of a property transaction involving an NRI seller:

  1. Applicability of TDS: TDS is applicable on the purchase of property from an NRI seller under Section 195 of the Income Tax Act, 1961. The buyer is responsible for deducting TDS on the consideration paid or payable to the NRI seller.
  2. Rate of TDS: The applicable rate of TDS on the purchase of property from an NRI seller depends on the capital gains arising from the transaction. For long-term capital gains, the TDS rate is typically 20%, while for short-term capital gains, it is usually 30%. However, it’s important to check for any specific rates or exemptions as per the Double Taxation Avoidance Agreement (DTAA) between India and the country where the NRI seller resides. The seller may also apply for Lower Deduction TDS Certificate (LDC) if he feels that his actual income for the financial year will not fall in that slab.
  3. Apply for TAN: The buyer, who is responsible for deducting TDS, needs to apply for a TAN if they don’t have one already. TAN is a 10-digit alphanumeric number issued by the Income Tax Department to individuals or entities who are required to deduct or collect tax at source.
  4. Obtaining PAN of Seller: The buyer must ensure that the NRI seller has a PAN (Permanent Account Number) in India. If the NRI seller does not have a PAN, the TDS rate under Section 206AA of the Income Tax Act may be higher, i.e., 20% or the applicable rate, whichever is higher.
  5. Payment and Deduction of TDS: TDS must be deducted by the buyer at the time of making the payment to the NRI seller or at the time of credit of such amount to the seller’s account, whichever is earlier.
  6. Filing TDS Return and Issuing Certificate: The buyer is required to file a TDS return in Form 27Q within the prescribed time frame, providing details of the TDS deducted and deposited. Additionally, the buyer must issue a TDS certificate (Form 16B) to the NRI seller as proof of TDS deduction.
  7. Compliance with FEMA Regulations: In addition to TDS provisions under the Income Tax Act, buyers and sellers involved in property transactions with NRIs must also comply with the regulations of the Foreign Exchange Management Act (FEMA) and other relevant laws.

It’s essential for buyers to understand and comply with the TDS provisions applicable to property transactions involving NRI sellers to avoid any penalties, interest, or legal consequences for non-compliance. Seeking advice from tax professionals or legal experts can help ensure adherence to the applicable regulations and smooth execution of the property transaction. If you are looking for TDS deduction in case of NRI, Please feel free to consult us for any query.


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