TDS on the sale of property for NRI and Residents


(Last Updated On: May 8, 2019)
In our first part, we already discussed TDS on sale of property by resident u/s 194IA @1%. through this blog we will enhance our understanding on the tax to be deducted by Non-Resident seller. When a NRI makes a sale of property in India the buyer is required to deduct TDS under section 195 of the Income Tax Act 1961. The rate of the tax deduction is not fixed at 1% unlike section 194IA in this case. Rather, it would depend upon the nature of capital gains arising out of the transaction like

Type of Capital Gains

TDS should be done at

For Long Term Capital Gains20% + Cess
For Short Term Capital Gains30%* + Cess
*No benefit of the slab should be allowed to NRI. Instead, the tax should be deducted at the highest slab rate of 30% presently. One of the key differences apart from the residential status and tax rate is that as per Section 195 of the Income Tax provisions, in this case, TDS needs to be done even if the amount in the transaction involved is less than Rs 50,00,000 (Fifty Lakhs). Whereas if the seller is Resident TDS liability under section 194IA is attracted only in case transaction amount is Rs 50,00,000 (Fifty Lakhs) or higher. In addition to the above, the buyer deducting tax under 194IA can deposit tax through Form 26QB. And is not mandatorily required to quote TAN (Tax Deduction and Collection Account Number). But as far as tax deduction by buyer making a purchase of property from NRI seller is concerned it is required to quote TAN compulsorily. We can summarise the discussion done above as under

Seller

Resident

Non Resident

Section Applicable194IA195
Rate of TDS1%20% or 30%
Transaction amountRs 50 lakhs and aboveAny amount
TANMandatoryNot mandatory
CA Certification to foreign remittance received (Form 15CB)Not requiredRequired to certify declaration to be filed with the Income Tax Department.
Capital Gains ComputationNot necessaryIs always computed
For in-depth understanding about TDS on sale of property for residents under section, 194IA read our Blog.

Author


Team Tax2Win