• Issues related with purchase of property from NRI

I am purchasing a residential property from the daughter of an NRI. The property was purchased when the Daughter was minor under the guidance of father. Now the Girl is a major and the property is for sale. Though the seller (father of the Girl) is claiming to sell the property by declaring the girl as a Indian resident providing local address and Pan card details, I understand the girl stays abroad together with family. Infact the property agreement address of owner is also from UAE. Pls advise on how to handle this sale proceedings. what would be my liability wrt to such property purchase. What would be the TDS applicable.
Asked 5 years ago in Capital Gains Tax

If the seller is a NRI he needs to get a certificate from his AO with regard to the amount on which TDS would be deducted and amount of TDS.

If that certificate is not made available to you then you need to deduct TDS @30% plus cess on the sale value.

In case of a NRI seller the limit of 50 lakh is also not applicable.

However if he gives a written proof that he is a resident Indian then you need to deduct 1% tds of sale value if its above 50 lakh.

 

Hope you find the information helpful, if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

As per the Indian Income Tax Act, when a resident purchases any property from a non resident, he has to deduct income tax (TDS) and pay the balance amount to the seller.

 

TDS rate is 22.88 per cent of the deal value if the property is worth anywhere between Rs 50 lakh and Rs 1 crore.

*In case the property is worth over Rs 1 crore, 23.92 per cent of the deal value must be deducted as TDS by the buyer.

*TDS of 20.80 per cent must be deducted even if the deal value is less than Rs 50 lakh.

 

You should first obtain TAN under section 203A of the Income Tax Act, 1961 before deducting TDS. TAN can be obtained by applying buy filling up the Form 49B.

 

TDS must be deducted at the time of making the payment to the NRI. The information about the TDS being deducted and the rate at which it was deducted should be mentioned in the sale deed between the NRI seller and the buyer.

 

The TDS deducted by the you should be deposited through Form number or challan for TDS payment on or before the 7th of next month in which the TDS is deducted.

 

The TDS can be deposited through banks that are authorised by government of India or the Income Tax Department to collect Direct Taxes. The deposit has to be made by the buyer.


If he provides sufficient proof of her Indian residency then only one per cent of the deal value is deducted by the you.

 

Also, if the deal value is less than Rs 50 lakh, no TDS deduction liability arises on such deals.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

You can either ask him to provide you the passport copy for last 2 years so that you can check whether he is resident or not.

If not providing then ask him to get TRC, which is generally issued to resident for income from outside india but its a proof whether the person is a resident or not.

 

Or else just get the Screen shot of his ao details if it is showing a local AO then he has shown himself as resident for income tax purpose and if its showing international taxation then his status for income tax has been changed to non resident.

 

This are the few ways in which you can check. Lastly also you won't face any such issue you would only be charged with interest amount if the seller files his income tax return properly.

 

Thank you

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

Hi

 

For NRI, TDS shall have to be deducted under section 195 @20.8% plus surcharge.

You will have to take a TAN first. 

 

The seller may apply for a No deduction / Lower deduction certificate to the Assessing Officer on receipt of which you may deduct TDS at such lower rate.

 

 

Lakshita Bhandari
CA, Mumbai
5687 Answers
909 Consultations

5.0 on 5.0

You can ask the seller to produce his daughter's passport copies for determining residential status or ask for a tax residency certificate.

Lakshita Bhandari
CA, Mumbai
5687 Answers
909 Consultations

5.0 on 5.0

Hi,

 

- The critical question here is whether she is resident in India or not. As you are going to purchase the property in the current financial year i.e. F.Y. 2019-20, you need to check whether she is resident or not in the current F.Y. 2019-20 i.e. as of today. Residential status is calculated for each relevant financial year separately. If she has the intention to leave permanently or for uncertain period then the current financial year will also be previous year for the purpose of filing of tax purpose. 

 

- Collect following documents in respect to her.

1) Copy of passport for the last five years and calculate the no.of days she stayed outside for each of the five years and share with me.

2) If the father is claiming her to be resident, ask for the copy of Aadhaar.

 

- The seller will insist to claim her resident because of the higher TDS deduction in case of NRI. In case of resident TDS is 1% otherwise basic rate is 20% +surcharge+cess(4%). Surcharge depends on the value of the sale as per the sale deed.

 

- In case seller is NRI, after deduction of TDS you need to obtain TAN and submit the TDS return. In case seller is resident, there is no need to obtain TAN and you need to file return cum challan i.e,. Form 26QB only.

 

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

1. Passport Copy

 

2. TRC 

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hello,

 

You need to check whether his daughter is resident or Non-resident as per the Income Tax Law. You can ask for a copy of her passport or tax residency certificate of the daughter.

 

If she is a Non-Resident, TDS would be 20%+ applicable surcharge and cess. This TDS is required to be deducted whenever any payment is made to the NRI for purchase of the property and not at the registration of the property. If the seller wants the TDS to be deducted on the capital gain amount and not on the sale consideration, he shall file an application to the ITO for the same and the ITO will give the seller a certificate for lower deduction of TDS. 

In case she is a Resident, then TDS deduction would be at 1 % if the sale consideration is more than Rs. 50 Lakhs.

 

I hope this answer satisfies your requirement.

 

Regards,

CA Hunny Badlani

Hunny Badlani
CA, Madhya Pradesh
2608 Answers
16 Consultations

5.0 on 5.0

You can take a self declaration from the seller that she is a resident. You may also insist upon a certificate from a CA to certify her residential status based upon the entries in the VISA and passport. 

B Vijaya Kumar
CA, Hyderabad
1001 Answers
124 Consultations

5.0 on 5.0

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