• Claiming TDS refund by NRI

Respected Sir/Madam

My brother is an NRI who lives in U.S. A, he wants to sell his house property in Hyderabad. He came to know that 20% T.D.S and surcharge on the sale value will be deducted. He also came to know that he can claim the refund of the T.D.S while filing the income tax. To claim the T.D.S refund does he have to invest the capital gains in purchasing the new asset before filing the income tax? Can he claim refund of T.D.S even without buying the new asset with the capital gains just by filing I.T returns. He is planning to sell his property in Hyderabad in February 2023, when should he file returns in India, he wants to know the detailed procedure to claim the refund of the T.D.S.
Is it necessary to invest capital gains to claim T.D.S refund by an NRI
Asked 22 days ago in Capital Gains Tax

In case of sale of property in India by NRI, following tax implications and compliances arises

- Buyer is liable to deduct TDS u/s 195 on the amount of consideration at the rate of 20% + surcharge + cess (4%). The rate of surcharge depends on the amount of consideration. The rate of surcharge is NIL upto Rs.50 lacs.

- Buyer is liable to file Form 15CB & 15CA

- Seller can apply for lower TDS deduction certificate and share with the buyer for deduction of TDS at lower rates

- To claim exemption of long term capital gain, seller can invest in a residential house property located in India

- Seller is liable to file ITR in India following the year in which the transaction took place. For FY 2022-23, due date of ITR is 31.07.2023.

 

Income tax is payable on the long term capital gain whereas buyer will deduct TDS on the consideration to be paid resulting into refund of TDS.

If he further reinvest the whole amount of LTCG as per the law and claim exemption then no tax would be payable resulting into refund of TDS.

 

For detailed discussion you may opt for phone consultation

Vivek Kumar Arora
CA, Delhi
4556 Answers
681 Consultations

5.0 on 5.0

Hello,

 

It is commonly seen that in property sale transactions, the actual tax liability of NRI taxpayers is much less than the TDS deducted on the said transaction.

 

As a solution, the income tax provides for a Lower TDS Deduction Certificate under sec 197. This is one of the options available to you by which you can get the benefit of a lower TDS deduction on the property sale transaction.

 

Furthermore, in order to claim the full refund of TDS deducted, you need to check the capital gain amount on the said transaction and invest it in another residential house property in India to claim the long-term capital gain exemption. 

 

I hope this answer satisfies your requirements. 

 

Regards,

CA Hunny Badlani

Badlani & Associates

Hunny Badlani
CA, Madhya Pradesh
2602 Answers
16 Consultations

5.0 on 5.0

Hii

When NRI sale property in INDIA then there are 2 options for income tax

1 calculate income tax before transfer and if tax liability is less then 20.80% then apply to Income tax exemption for lower or nil tds deduction as the case may be 

 

2 after sale calculate income and choose option for tax planning and claim tds refund 

 

Deposit in capital gain account scheme

Reinvestment in other property

Investment in tax saving bonds 

All above depends on case to case which is recommended 

Lalit Bansal
CA, Delhi
763 Answers
59 Consultations

5.0 on 5.0

Hi,

 

You can obtain lower deduction certificate under Sec. 197. In any case, calculated the amount of capital gains and  either invest it in another residential house property in India or in bonds u/s 54EC. 

 

Regards

Prerna

Prerna Peshori
CA, Pune
117 Answers
1 Consultation

5.0 on 5.0

It depends on what amount TDS is deducted and what is the taxable capital gain.

If capital gain is less he can claim refund even without investing in New house or cgas.

 

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
4108 Answers
76 Consultations

5.0 on 5.0

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