social-share

7 Facts About Purchasing a Property from Non Resident Indian (NRI)

Posted on October 01 2020

737

Check whether the seller has a PAN: The Permanent Account Number (PAN) is significant for the seller to have. At the time of concluding the transaction, we advise you to take a copy of the PAN card of the seller. If the seller is not having a PAN Card then he needs to apply for it.

TDS @ 20.60% – If you are purchasing a property such as site or house or flat from a NRI, you are required to do a TDS (Tax Deducted at Source) @ 20% on the sale value of the property. For example, if you are purchasing a residential site at Chennai for Rs.1,00,00,000 where you are required to pay Rs.80,00,000 in respect of the seller and Rs.20,00,000 in respect of the Income Tax department.

Attain TAN – After withdrawing the tax (TDS) you are required to address it to the Income Tax department. To address you are required to attain Tax Deduction Account Number (TAN) from the Income Tax department. While addressing the amount you need to quote TAN as well as PAN number of the seller.

File e-TDS return and Issue Form 16A – After the tax deduction (TDS), the buyer needs to file a statement called e-TDS (Form 27Q). Within 30 days from the end of the month in which the payment is made, Form 16A is required to be issued to the seller.

What will happen if no TDS is done? The buyer will have to pay an amount which is equal to the tax amount which is not deducted to the Income Tax Department.

Option for Lower deduction of Tax – Application can be submitted to the Income Tax Department (International Tax Ward) by either the seller or the buyer for the assurance of the tax amount on capital gain. Depending on the certificate of lower deduction issued by the Income Tax Officer, the seller can deduct lower taxes. For example, if the Selling Price is Rs. 1,00,00,000 and the recorded cost of purchase of the site is Rs.80,00,000, the difference of Rs.20,00,000 is also known as capital gain. On getting a certificate from the Income Tax Officer stating that the capital gain is Rs.20 Lakhs and the seller can deduct 20.60% on Rs.20 Lakhs.

Chartered Accountant Certificate– The seller has no other option rather than attaining the lower deduction certificate from the Income Tax officer. In the event, if the seller or the buyer fails to attain the certificate then TDS will be done at 20.60% on the sale value.

How to attain TDS exemption certificate from Income Tax officer in case of purchase of property from NRI?

If you are buying a property such as a site or a house or a flat from a NRI, you are required to do a 20% TDS (Tax Deducted at Source) on the sale value of the property. Application can be submitted to the Income Tax Department (International Tax Ward) by either the seller or the buyer for the assurance of the tax amount on capital gain. Depending on the certificate of lower deduction issued by the Income Tax Officer, the seller can deduct lower taxes.

Apply to Income Tax Officer – Either the seller or the buyer of the property can apply to Income Tax Officer (ITO or higher rank depending upon the value of the transaction), pursuing the lower or NIL TDS certificate. The application needs to be specifically addressed to the concerned ITO, International Taxation wing of Income Tax department. For example, if the PAN of the seller is in the jurisdiction of Chennai Income Tax office then the seller cannot apply to ITO at Kolkata. So, the application is required to be addressed to the respective officers in the respective jurisdiction where the PAN is allotted.

Documents to be filed –

·Duly filled and signed Form 13

·Photo copy of PAN Card of seller

·Proof of residential Status – Passport copy with VISA stamping

·Proof of TDS, Advance Tax paid, if any

·In case Income during the previous 3 years was below taxable limit, an affidavit to that effect

·Copy of the Registered Sale deed (at the time of purchase of property)

·Copy of the sale agreement by virtue of which transaction occurs

·Capital gain calculation

·Proof for exemption/deductions claimed under the head capital gain

·Bank guarantee for the tax liability arising out of the transaction if it is proposed to issue the certificate at 0%

Duration – The entire process will take nearly 20 working days.

If the seller wants to re-invest: In such cases, he requires a bank guarantee for the tax liability which is arising out of the transaction. After making reinvestment of the sale income, he can get the bank guarantee released by producing the documents to the Income Tax Officer. Or else, he can produce the document along with the Form 13 to the Officer after the sale is done. The Officer will issue the NIL TDS certificate when the reinvestment is done within a year previous to the date of the sale.

Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.

With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.

Comments (0)