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Posted by CA JItesh on March 7th, 2019

It is a primary responsibility of the buyer to make sure that before purchasing a property from a resident or a nonresident, an appropriate amount of TDS as applicable as per Income Tax act is deducted and paid to the government well within time.

As per Income Tax Act, TDS at the rate of 1% of the sale value is to be deducted by the buyer where the value of the property sold by a resident seller is Rs 50 lakhs or above.

The scenario changes when the seller of the property is a non-resident Indian. Income Tax Act has an altogether separate section for this case. As there is a lot of confusion on tax applicability on selling of property by a resident and a non-resident Indian, we in this article shall cover the complex part of the transaction involving a non-resident seller.

CA in Kalyani nagar

Therefore, any person being NRI who wants to sell a property in India would be interested to know as to what will be the tax implications upon selling the property which located in India and what are the provisions that helps in tax savings and other procedures that needs to be compiled so as to be compliant with the procedures and the provisions of the Act.

TDS Rates on the sale of Immovable property in India by a non-resident Indian

  1. Option I

Deduct TDS under section 195 as per below-mentioned table – applicable for FY 2018-19 onwards

ParticularsWhere Income of the NRI Seller is Below Rs. 50 LakhsWhere Income of the  NRI seller is between Rs. 50 Lakhs to Rs 1 CroreWhere Income of the NRI seller is above Rs 1 Crore.
TDS Rate20%20%20%
Add: SurchargeNIL10% on above Rate15% on above Rate
Total Tax20%22%23%
Add Health & Ed.Cess @ 4%4% on above Rate4% on above Rate4% on above Rate
Total TDS Rate20.8%22.88%23.92%

When the seller opts for this option the following points are to be noted

  1. The above TDS rates are applicable on entire sale value/agreement value and not on capital gain value.
  2. Long term capital gains are taxed as per above table and short term gains shall be taxed at the applicable income tax slab rates for the NRI based on the total income which is taxable in India for the NRI.
  3. The TDS as per the above table shall be deducted even when the transaction value is less than Rs 50 lakhs.

2. Option II-

Apply for a certificate for deducting TDS at a lower rate.

In this option, an NRI can apply for a lower TDS deduction certificate from Jurisdictional Assessing Officer in Income Tax department for allowing the residential buyer to deduct tax at a rate lower than TDS Rates as mentioned above. In this application, a TDS rate shall be arrived at by calculating the capital gains.

This certificate shall be issued by the Assessing Officer within 30 working. After this certificate is received by the NRI seller, the buyer can deduct TDS at the agreed rate and deposit the same with the government and file a TDS return.

When the seller opts for this option the following points are to be noted

  • Application for the certificate should be made before an agreement to sell and not after the agreement is done.
  • For advances/token amount received before application for lower deduction certificate TDS rate will be applicable as per the table mentioned above and not as per the certificate provided.

The penalty for non Compliances with the above-mentioned provision

As mentioned earlier, the primary responsibility of deducting TDS and depositing the same with the government is of the buyer. Therefore when the above provision has not complied, the penalty shall be imposed on the buyer.

Late filing fee

Under Section 234E, the buyer will have to pay a fine of Rs 200 per day (two hundred) until TDS return is filed. This penalty shall be levied for every day of delay until the fine amount is equal to the amount of TDS.


Nature of DefaultInterest subject to TDS amountA period for which interest is to be paid
Non-deduction of tax at source, either in whole or in part1% of the TDS amount per monthFrom the date on which tax is deductible to the date on which tax is actually deducted.
After deduction of tax, nonpayment of tax either in whole or in part1.5% of the TDS amount per monthFrom the date of deduction to the date of payment

Jitesh Telisara & Associates LLP, CA In Kalyani Nagar is a professionally managed firm catering to domestic and international clients with a broad range of services in domestic and international taxation, regulatory and advisory services and crosses border transaction-related services.

The team at the firm has dedicated and experienced professionals and associates like Chartered Accountants, Company Secretary and Consultants to provide end to end services to your business. With the effort of gaining a deep understanding of your business, the team is committed to providing valuable, consistent and efficient services based on its in-depth knowledge and wide experience in the areas of audit, taxation, regulatory compliances, and related business services.

Our services: GST Consultant, IT returns consultant, Corporate law, Taxation, Regulatory & Advisory Services

Also See: Nri Seller, Non Resident, Income Tax, 50 Lakhs, Tds, Tax, Seller

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