TDS on purchase of property from NRI

Dear Sir,

As per my understanding, you have not deducted tds on purchase of property.

If the Buyer fail to deduct or deposit TDS under section 195 then buyer will be declared as "Assessee in Default" as per section 201 of Income Tax Act. All the tax dues including interest and penalty will be recovered from buyer by the income tax department. A buyer cannot claim ignorance reference to TDS provisions under section 195 while buying a property from NRI.

There are whole lot of other penalty clauses under section 272 and 271 of income tax act 1961.

Please be aware that the department will come back after couple of years and not in the year of sale!

The non-compliance of TDS provisions will cost the buyer heavily.

Thanks & Regards,

Payal Chhajed

However, in case NRI seller produce NIL / Lower Tax Deduction Certificate under section 195 or Tax Exemption Certificate the applicable TDS rate will be as per certificate issued by the income tax department. To obtain NIL / Lower Tax Deduction Certificate under section 195 or Tax Exemption Certificate is sole responsibility of NRI Seller. In many cases, i observed that buyer is doing all the running around for this certificate.

As you or your consultant have no power to reduce TDS percentage. Only Income Tax Officer (ITO) is authorised to reduce TDS percentage. For this one has to apply (buyer or seller) to ITO and get the certificate.

Thanks & Regards,

Payal Chhajed

So there is a bit of problem and in this case you will be required to pay the amount as you are not able to catch hold of seller, technically the amount of TDS is required to be deducted from sale price even if the sale price is below 50 lakh as mentioned in section 194IA applicable to residents , but now since you have not done the same you will be required to pay this from your pocket.

TDS would be deducted u/s 195 which says TDS is required to be deducted on amount of capital gain which seller shall tell the buyer by asking for a certificate from its income tax officer, but since you don't have any such thing you will have to deduct TDS on sale amount. Now there are two rates at which TDS can be deducted i.e. one is 20.8% in case of long term capital gain and another is 31.2% in case of short term capital gain.

Now since you don't know what type of capital gain he would have incurred you will deduct as per 31.2%.

23lakh * 31.2% i.e. 7.176 lakhs and on this you will have to pay interest @1.5% per month from January to August i.e. 9% and on top of that you will have to pay ₹200 per day for filing late TDS return. Let's assume your due date for filing TDS return is from January 1. So late fee would be 46000 and you will also have to get a TAN no. Required to deduct TDS.

So the rough amount to be paid would be 7.176 lakh +64530 interest + 46000 late fee.

And in such cases Income tax department is going to catch buyer rather than seller, so I would suggest to either pay this amount and try to recover it from seller or else appoint a good CA in Kolkata who can handle this.

Hope the above information helps you if it does do rate it 5 and provide your valuable feedback.

Thank you

Ya if you didn't knew and the sellers didn't let you know that they are NRI then you can file case against them..in the sale deed have they mentioned that they are resident in India?

If yes then income tax won't come before you and they won't come to know that you have purchased property from NRI.

If you get to contact them just ask them to pay the above amount and you deposit it as TDS deducted, ask them under what status they file their income tax return, if they file their return as resident then there will be no liability on you. However if they file income tax return as NRI then it's the liability of purchaser to deduct TDS, ask them their capital gain amount and deduct TDS on that, if they have filed income tax return and declared such income and paid tax on same then also you will have to pay interest and penalty on same, because if you read any article on any website it clearly says that if the buyer fails to deduct TDS on amount paid to NRI then the Income tax will catch the buyer and make them pay all interest and penalties.

So it's better to sort out everything.

Dear Sir,

If he refuses to corporate then you will have to consult with the practicing lawyer.

Even If he corporate, all these things need to be taken care of by the buyer in case of purchase of property from a NRI. So, you will have to deal with income tax authorities and pay accordingly.

Thanks & Regards,

Payal Chhajed

Hi,

It was your responsibility to deduct tds and since they were NRI's tds should have been deducted at 20.6%. If the buyer fails to do so, you will be liable to all the tax dues including interest and penalty. Ignorance of the law cannot be a reason for non compliance.

Regards,

Nikhil.

Please consult the same lawyer who was hired for sale deed registration and involve him to get this sorted out. You can get in touch with the seller and explain him the law along with your lawyer and ask him to pay you so that you can pay the tds to the authorities along withtm the interest.

Hope that clarifies. You can get in touch with me for further clarifications.

Regards,

Nikhil.

Hi,

The best way to handle this is by way of cooperation. You can't sue them for concealment because it was not required to disclose. It was your duty to ask them about their status.

You should talk to them and assure them that Whatever TDS will be deducted, they will get it back post payment of due taxes. This can help you in case any TDS notice comes

Other option is to take a proof that they have made payment of due taxes

Hi

Primarily it was your responsibility to deduct TDS .Now you cannot sue them on these basis.

Rather it is advisable to get in touch with seller and make sure nri seller has paid taxes on this transaction,there are chances you may not get any notice for this tds non deduction and payment default.

Hi

Primarily it was your responsibility to deduct TDS .Now you cannot sue them on these basis.

Rather it is advisable to get in touch with seller and make sure nri seller has paid taxes on this transaction,there are chances you may not get any notice for this tds non deduction and payment default.

Dear Sir,

Thank you so much for your valuable feedback.

If you need any further help in future, please let is know.

Thanks & Regards,

Payal Chhajed

Hi,

- Ask for copy of return of income to ensure that they have filed ITR in india with the disclosure of above transaction.

- If they have not filed ITR, ask for TDS amount from them and deposit it. Aware them once they will file ITR they can claim the TDS amount in ITR otherwise you need to pay interest and penalty for non-deduction of TDS.

Thanks

Hi

Its always the buyer's liability to know the residential status of the seller and deduct TDS accordingly.

The best option would be to negotiate with the seller. Receive the amount of TDS from them and deposit the the TDS after obtaining TAN. The seller would anyways get refund of such TDS at the time of return filing if he has no capital gain tax liability.

Dear Sir,

It was your responsibility to know the status of seller and deduct the tds accordingly.

Practically, it is not possible to catch the seller and expect any corporation.

In this scenario, please consult with a lawyer.