• TDS on joint ownership of property (Resident Indian + NRI)

I am planning to buy a residential property worth 70 lakhs in Chennai. The property is jointly owned by father(resident Indian) and son(NRI). The money from the sale of property needs to be repatriated by the seller to Canada. 

I have the following questions: 

1. How is the TDS to be calculated in this case if the ownership between father and son in 50-50%? 

2. In case the ownership is not 50-50%, do I need to deduct TDS only for the first owner? 

3. What other things should I keep in mind while buying in this special case?
Asked 7 months ago in Income Tax

If as per sale agreement both father and son are the sellers then you need to deduct TDS on both account. It can be proportioned in the ratio of sale proceeds transfer. You have to get TAN no and deduct TDS @20%. And also file TDS return 

Vidya Jain
CA, Kolkata
974 Answers
58 Consultations

4.8 on 5.0

1.In case of NRI - TDS needs to be deducted @20.8% on the sale proceeds (i.e. Rs. 35 lacs) and not on the capital gain amount. In case of Resident, TDS @1% on Rs.35 lacs would be deducted. In case of resident, you need to file Form 26QB for deposit of TDS and in case of NRI you have to obtain TAN, deposit tax through challan  and file TDS return. NRI can file lower/NIL TDS deduction certificate if there is a loss on the sale of the property and he has other income below exemption limit of Rs.2.50 lacs.

 

2.  Ownership under Income tax is determined on the basis of actual investment by each co-owner in the property  unless it is a case of gift, will, inhertiance etc. This is the first step before dedcution of TDS.

 

3. You should pay sale consideration directly in the account of each co-owner and not in the account of one co-owner only. In case of payment to NRI, you have to file Form 15CB and 15CA before making payment to his account.

 

4. Sale consideration of the property should not be less than the circle rate/gudiance value (i.e. the vaue adopted by the state authority for the payment of stamp duty).

 

For detailed discussion, you may consider phone consultation.

Vivek Kumar Arora
CA, Delhi
4493 Answers
621 Consultations

5.0 on 5.0

1) TDS will not be applicable on resident as sale consideration is less than 50 lakhs. While 20.8% TDS will be applicable on the sale consideration paid to NRI.

2) For resident, 1% TDS is applicable if sale consideration exceeds 50 lakhs, while for NRI TDS is to be deducted irrespective of the sale amount.

3) Buyer will have to apply for TAN for deducting TDS from NRI. It is to be deposited within 7 days from the end of the month in which it is deducted.

 

Ruchi Goel Anchal
CA, Gurgaon
505 Answers
12 Consultations

5.0 on 5.0

1) TDS is to be calculated on the sale value of the property.  In the case of Resident owner, its 1%, if the sale consideration is Rs 50 Lakhs and above u/s 194-IA of Income Tax Act.  In your case, there is no need to deduct tax the share of the resident owner is Rs 35 L only. However, if his share is Rs 50 L and above, deduct tax. 

In the case of non resident, tax has to be deducted  on sale consideration u/s 195 irrespective of the amount involved. Its 20.8%, unless he submits a certificate issued by the Income Tax department for non deduction of tax or deduction of tax at a lower rate. 

2) In case the ownership is not 50-50%, then deduct tax only for the first owner and make sure that you make payment to him only. 

3) Make payments directly to the owners for their respective shares after deduction of tax as applicable. Also in the sale deed, you may mention that the consideration is paid by transfer to bank accounts as well as by deducting TDS. 

B Vijaya Kumar
CA, Hyderabad
965 Answers
124 Consultations

5.0 on 5.0

1. The TDS has to be deducted at the rate of 20.8%. The TDS has to be deducted on the amount paid to both the sellers. The holding in the property depends on the amount invested by each owner.

2. Do obtain TAN and form 15CA and15CB.Also note that the sale consideration should not be less than the stamp duty value. 

 

Prerna Peshori
CA, Pune
94 Answers

5.0 on 5.0

Respected Sir,

 

Your case is similar to case of M/s. Oxcia Enterprises Private Limited Vs DCIT (ITAT Jodhapur)

we note that sub-section(2) of sec. 194-IA of the Act provides an exception from deducting tax of 1% of the sale consideration, when the sale consideration for the transfer of an immovable property is less than Rs. 50 lacs. Therefore, in the instant case, we note that the total sale consideration is only Rs.60,12,000/- and the admitted fact as taken note by AO & Ld. CIT(A) is that Shri Anant Ram Kumawat and Smt. Seema Kumawat are the co-owners, and jointly owning the immovable property. So, the sale consideration has to be divided equally into two by virtue of sec. 46 of the Transfer of Property Act which prescribed that where immovable property is transferred for a consideration by persons having distinct interest therein, the transferors are, in the absence of a contract to the contrary, entitled to share in the consideration equally. So, in this case, since there is no contract to the contrary could be pointed out by the Ld. DR for Revenue, in this case consideration for each transferor comes to Rs.30,06,000/- each, which is below the prescribed limit of Rs.50 lacs given by the statute as aforesaid and, therefore, in the light of the same, we are of the opinion in the facts as discussed, supra, that the provisions of sec. 194- IA of the Act are not applicable in the instant case and, therefore, provisions of section 194-IA of the Act are not attracted. In any case, we note that when the department was knowing the PAN details of the Power of Attorney holder Shri Vijay Kumawat who was none other than the son and brother of the Joint Owners Shri Anant Ram Kumawat and Smt. Seema Kumawat respectively, the AO could have easily found out whether these co-owners have reflected the sale consideration as discussed above in their respective Return of Income, if he had made some enquiry or referred the case to the AO who has jurisdiction over the POA holder Shri Vijay Kumawat, (who had obtained the entire sale consideration in his bank account or as to whether POA has shown it as his capital gain or not). Then only picture would be clear and the apprehension of income/gain escaping from the hands of co-owners could have been easily addressed rather than finding fault with the assessee’s omission of not doing due diligence to track down the PAN details of the co-owners of the immovable property and in any case the department is now also empowered to find out the reality of the facts discussed above if the statute permits and in accordance to law.

Hence, If you jointly own property there is no need to deduct TDS.

 

Thanks and Regards

Shiv Kumar Agarwal
CA, Delhi
489 Answers
74 Consultations

5.0 on 5.0

If you are buying property from resident as well as non resident you need to deduct TDS under two sections 194IA for resident and 195 for non resident.

 

Also tax deduction law is different for both resident and non resident.

Declaration of ownership needs to come from owners.

In case of non resident also remember to deduct TDS on sale consideration if no declaration is received from non resident or its AO.

 

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
4065 Answers
70 Consultations

5.0 on 5.0

U/s 194-IA of Income Tax Act TDS is calculated @ 1% if the sale proceed is more then 50 Lakhs  so since there are two owners so there is no need to deduct TDS.

 

In the case of non resident, tax need to be deducted  on sale consideration u/s 195 and tax rate on that will be 20.8 %

 

Poorvi Jain
CA, Indore
140 Answers
1 Consultation

4.8 on 5.0

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