• TDS Deduction while buying unregistered flat from NRI

I am buying an 3 bhk from a seller who is an NRI.The 3BHK is unregistered.
The process would be:
1) I would enter into an MOU with the seller and pay him token amount.
2) The seller would share this MOU with the builder(Godrej) and Godrej would create an Assignment Agreement.
3) After assignment agreement is created I would pay the seller the entire amount.
4) Registration would be between me(buyer) and Godrej and seller would be the confirming witness.

How will TDS be handled in this case since seller is an NRI.

Should I deduct 23 pc tds as specified in multiple articles or only 1 percent TDS ?

Buyer tells me that 23 pc TDS need not be deducted since I will be buying the property from Godrej itself. What is the correct mechanism to proceed in this case
Asked 1 year ago in Capital Gains Tax

- It is an extinguishment of rights in relation to an immovable property. Definition of transfer includes extinguishment of rights. You are liable to deduct TDS u/s 195. Basic rate of TDS is 20.8%. If the value of property is more than Rs.50 lacs, surcharge would be applicable. Seller can apply for lower TDS deduction certificate u/s 197. Sale deed should contain reference of assignment agreement.


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Vivek Kumar Arora
CA, Delhi
4871 Answers
1058 Consultations

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As far as I understand this should be a tri-partie agreement as the NRI would be releasing his rights from the property and accordingly you are paying him the amount and therefore you have to deduct TDS of NRI as when he would have made payment to godrej earlier he would have deducted tds on godrej.


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Thank you.

Naman Maloo
CA, Jaipur
4285 Answers
98 Consultations

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Since the seller is the Non-resident and you are paying consideration to non-resident, the TDS should be at 23%

Prerna Peshori
CA, Pune
197 Answers
11 Consultations

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You need to deduct the TDS treating the seller as a NRI only. The reasoning that you are buying property from the builder is incorrect. The NRI is transferring his right in the immovable property which amounts to capital gain in the hands of the NRI.

Section 195 would be applicable.

Lakshita Bhandari
CA, Mumbai
5687 Answers
913 Consultations

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Hello ,


As per the provisions of the Indian Income Tax Act, if the seller is an NRI, the buyer is required to deduct TDS (Tax Deducted at Source) at the time of payment of consideration for the sale of property.


You, as the buyer, are required to deduct TDS (Tax Deducted at Source) under Section 195 when purchasing the unregistered 3BHK property from an NRI seller. The TDS rate applicable is 20.8% of the sale consideration, subject to any surcharges if the property value exceeds Rs.50 lakh.


However, the NRI seller may apply for a lower TDS deduction certificate under Section 197 to reduce the TDS rate. It is important to ensure that you comply with the TDS provisions and make the necessary TDS payment to the Indian government to avoid any penalties or legal issues in the future.


Additionally, you should also verify whether the NRI seller has obtained a PAN (Permanent Account Number) in India. If the NRI seller does not have a PAN, the TDS rate could be higher.


Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.


Shubham Goyal
CA, Delhi
251 Answers
4 Consultations

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