TDS Applicability on Sale of Property in India by NRI-TDS Compliance & Funds Repatriation

TDS stands for Tax Deducted at Source, and it is a type of tax collected by the Indian government at the time of certain transactions, including the sale of property by Non-Resident Indians (NRIs) in India. Here’s a simplified explanation:

Who is an NRI: An NRI is someone who is an Indian citizen but resides outside India for a specified period of time, or someone who is a person of Indian origin (PIO) or an overseas citizen of India (OCI) residing abroad.

1. Sale of Property: If an NRI sells a property in India, the buyer is required to deduct a certain percentage of the sale proceeds as TDS before making the payment to the NRI seller.
2. TDS Rates: The TDS rates for NRIs selling property in India depend on the type of property and the total sale amount. As of the current Income Tax Laws, the applicable TDS rate is generally 20% of the sale value. However, the actual TDS rate may vary, and it’s important to consult a tax professional for accurate and up-to-date information.
3. Compliance: The buyer of the property is responsible for deducting the TDS and depositing it with the government within a specified time frame. The buyer is also required to issue a TDS certificate (Form 16B) to the NRI seller as proof of the TDS deduction.
4. NRI’s Tax Obligation: The NRI seller needs to include the sale proceeds and the TDS amount in their Indian income tax return. The TDS amount is considered as a tax already paid, and the NRI can claim credit for the same while calculating their total tax liability.
5. Refund of Excess TDS: If the NRI’s total tax liability is lower than the TDS amount deducted, they can claim a refund of the excess TDS while filing their tax return.

It’s important to note that tax laws are subject to change, and it’s advisable to consult a tax professional or a qualified Chartered Accountant or Tax expert for accurate and up-to-date information regarding TDS on the sale of property by NRIs in India.

As per the current tax laws in India, the following TDS applicability rules apply to the sale of property in India by Non-Resident Indians (NRIs):

1. Residential Property: If an NRI sells a residential property in India, the buyer is required to deduct TDS at the rate of 20% on the total sale proceeds, regardless of the sale amount.
2. Non-Residential Property: If an NRI sells a non-residential property (such as commercial property or land) in India, the buyer is required to deduct TDS at the rate of 20% on the total sale proceeds, if the sale amount exceeds INR 50 lakhs.
3. Agricultural Land: If an NRI sells agricultural land in India, TDS is not applicable on the sale proceeds.
4. TDS Certificate: The buyer is required to issue a TDS certificate (Form 16B) to the NRI seller within 15 days from the due date of depositing the TDS amount with the government.
5. Compliance: The buyer is responsible for deducting the TDS and depositing it with the government within a specified time frame. Failure to deduct or deposit TDS may result in penalties or legal consequences for the buyer.
6. NRI’s Tax Obligation: The NRI seller needs to include the sale proceeds and the TDS amount in their Indian income tax return. The TDS amount is considered as a tax already paid, and the NRI can claim credit for the same while calculating their total tax liability.

How to make tds payment on sale of property in India by NRI –

As per the current Income tax laws provisions in India, the following steps can be followed to make TDS payment on the sale of property in India by a Non-Resident Indian (NRI):

Step 1: Calculate TDS Amount – The buyer of the property (who is usually an Indian resident) needs to calculate the TDS amount based on the applicable rate (generally 20%) on the total sale proceeds.

Step 2: Obtain a Tax Deduction Account Number (TAN) – The buyer needs to obtain a TAN, which is a 10-digit alphanumeric number, from the Indian Income Tax Department. This is mandatory for making TDS payments.

Step 3: Deposit TDS Amount – The buyer needs to deposit the TDS amount with the Indian government within 7 days from the end of the month in which the TDS was deducted. The payment can be made online through the Indian government’s website using the relevant Challan form (Challan 281) and selecting the appropriate code for TDS on sale of property by NRI.

Step 4: File TDS Return – The buyer needs to file a TDS return in Form 26Q within prescribed due date as per the CBDT (Central Board of Direct Taxes). The TDS return can be filed electronically through authorized NSDL TIN-Facilitation Centre.

Step 5: Issue TDS Certificate – After depositing the TDS amount and filing the TDS return, the buyer needs to issue a TDS certificate (Form 16B) to the NRI seller within 15 days from the due date of depositing the TDS amount with the government. The TDS certificate can be downloaded online from the Indian government’s website.

It’s important to note that the above steps are general guidelines, and the specific process and requirements may vary based on the individual circumstances and current tax laws. It’s advisable to consult a tax professional or Tax expert or a practicing Chartered Accountant for accurate and up-to-date information and assistance in making TDS payment on the sale of property in India by NRIs.

How to Reduce TDS applicate rate and TDS amount on Sale of Property in India by NRI –

Form 13, also known as the Application for Certificate of Lower Deduction or No Deduction of Tax, can be filed by a Non-Resident Indian (NRI) seller to reduce their TDS (Tax Deducted at Source) liability on the sale of property in India. The process for filing Form 13 and reducing TDS liability is outlined below:

Step 1: Obtain Form 13 – Form 13 can be downloaded from the website of the Indian Income Tax Department or obtained from the Income Tax Office.

Step 2: Fill in Form 13 – The NRI seller needs to fill in the details in Form 13, including their personal information, details of the property being sold, the applicable sections of the Income Tax Act under which they are eligible for lower TDS, and the reasons for seeking lower TDS.

Step 3: Attach Supporting Documents – The NRI seller needs to attach relevant supporting documents to substantiate their claim for lower TDS. This may include documents such as a copy of the sale agreement, PAN card, certificate of residency, and other relevant documents.

Step 4: Submit Form 13 – The completed Form 13 along with the supporting documents needs to be submitted to the Income Tax Officer (ITO) having jurisdiction over the property’s location. This can be done either physically or online through the Indian Income Tax Department’s e-filing portal.

Step 5: Follow-up with the ITO – The NRI seller may need to follow-up with the ITO to ensure that the Form 13 is processed and the lower TDS certificate under section 197 of Income Tax Act 1961, is issued within a reasonable time frame.

It’s important to note that the approval of Form 13 and issuance of Form 15CB is at the discretion of the Income Tax Department, and it’s advisable to consult a tax professional or tax expert or a qualified Chartered Accountant (practicing CA) for accurate and up-to-date information on the process and requirements for filing Form 13 and reducing TDS liability on the sale of property in India by NRIs.

Procedure for filing application for lower deduction certificate u/s 197 of income tax act ,1961

Steps for Registration on TRACES

• Visit the site https://contents.tdscpc.gov.in/;
• Click on Login and select Register as New User option;
• Select ‘Taxpayer’ from the drop-down list;
• After selecting Proceed, the registration form would be displayed;
• Fill in the appropriate information and submit and the registration in TRACES would be done.

• Steps for filing Form 13 post registration on TRACESLogin in TRACES and under ‘My Profile Tab’, register DSC of the authorized person;
• Under ‘Statements / Form’ tab select ‘Request for Form 13’.
• Form 13 would be displayed and the following appropriate details need to be filled up by the applicant –
• Basic details of the Company and authorized person registered on TRACES portal (The same shall be auto-populated)
• Details of existing liability under Income-Tax Act;
• TAN wise details of estimated income/amount to be received from parties during the subject year (for e.g. FY 2019-20) along with relevant section of TDS (e.g. Section 194C, Section 194J etc.);
• Requested rate of TDS proposed by the taxpayer in respect of the estimated income;
• Details of projected income of the subject year (for e.g. FY 2019-20) and immediately preceding financial year (FY 2018-19);
• Details of estimated tax computation of the subject year (for e.g. FY 2019-20) and immediately preceding financial year (FY 2018-19).
• Further, supporting documents are required to be uploaded which include:
• Final Assessment orders for last 4 assessment years;
• Details/workings for estimated income and tax computation (self attested by authorized person) ;
• Audited Financial Statements of last 3 years;
• Projected Balance Sheet & P/L income of the subject year (for e.g. FY 2019-20) and immediately preceding financial year (FY 2018-19) (self attested by authorized person).
• Acknowledged copy(s) of TDS returns filed for last 2 financial years.
• Once all the details are filled up and appropriate documents are uploaded, the applicant is required to submit the Form 13.

• Post submission of Form 13The online Form 13 is processed and is reviewed by the AO;
• The AO reviews the details and documents and asks for clarifications, if any;
• Post AO approval, the application is forwarded to Addl CIT for his approval;
• Post approval by Addnl CIT, the application is sent to CIT for review and final approval
• Post approval by CIT, the application is successfully completed and the process for generation of lower withholding certificated is initiated;
• Once Lower Withholding certificate is generated, the same can be downloaded from TRACES portal.

Repatriation of money outside India by Non-Resident Indians (NRIs) – It refers to the process of transferring funds from their NRI bank accounts in India to their foreign bank accounts or overseas accounts outside of India. NRIs may repatriate money outside India subject to certain rules and regulations set by the Reserve Bank of India (RBI) and other applicable laws. The process for repatriation of money outside India by NRI generally involves the following steps:

1. Determine Eligibility: NRIs need to check if the funds they intend to repatriate are eligible for repatriation as per the regulations of the RBI. Repatriation is generally allowed for funds held in Non-Resident External (NRE) accounts, Foreign Currency Non-Resident (FCNR) accounts, and for certain investments made under the Foreign Exchange Management Act (FEMA) guidelines.
2. Documentation: NRIs need to provide necessary documents for repatriation, which may include a duly filled and signed Form A2 (Application cum Declaration Form) available with the authorized dealer (bank), a copy of the sale deed or agreement for sale, and any other relevant documents as required by the authorized dealer.
3. Compliance with Limits: NRIs need to ensure that the amount being repatriated falls within the limits prescribed by RBI. As per the current regulations, NRIs are allowed to repatriate up to USD 1 million per financial year from their NRO (Non-Resident Ordinary) accounts, subject to payment of applicable taxes and submission of required documents.
4. Taxation: NRIs need to comply with applicable tax regulations while repatriating money outside India. For example, they may need to pay taxes on capital gains or other income earned in India, as per the Indian tax laws. It’s advisable to consult a tax professional or a qualified Chartered Accountant to understand the tax implications and fulfill the tax obligations.
5. Submitting Application: NRIs need to submit the duly filled and signed Form A2, along with the required documents, to the authorized dealer (bank) for processing the repatriation request. The authorized dealer will verify the documents and process the request as per the RBI guidelines.
6. Follow-up: NRIs may need to follow-up with the authorized dealer to ensure that the repatriation request is processed and the funds are transferred to their foreign bank accounts as per the applicable regulations.

It’s important to note that the repatriation process may be subject to changes in the regulations and guidelines issued by RBI or other relevant authorities. NRIs are advised to stay updated with the latest regulations and consult a qualified professional for accurate and up-to-date information on the repatriation process and requirements.

In addition to the steps mentioned earlier, NRIs are required to submit Form 15CA and Form 15CB to the bank for repatriation of money outside India received on the sale of property in India. Here’s an overview of these forms and their requirements:

1. Form 15CA: This form is a declaration of the remitter (NRI) and is used for furnishing information related to remittances which are chargeable to tax in India. Form 15CA is required to be filled and submitted online on the Income Tax Department’s website (https://www.incometaxindiaefiling.gov.in/) prior to making the remittance. It requires details such as the remitter’s name, address, PAN (Permanent Account Number), remittance amount, nature of remittance, tax determination, and other relevant information. Form 15CA can be generated and filled by the NRI or by their Chartered Accountant.
2. Form 15CB: This form is a certification by a Chartered Accountant and is required to be obtained by the NRI for remittances outside India.Form 15CB certifies that the remittance is in compliance with the Income Tax Act and other applicable laws. It requires details such as the remitter’s name, address, PAN, remittance details, and certification by the Chartered Accountant that taxes have been duly paid on the remittance as per the Indian tax laws.
3. Lower TDS Certificates U/S.197 – Section 197 of the Income Tax Act, 1961 provides for the facility of NIL deduction of tax at source or at a deduction at a Lower rate of tax. To avail of this benefit the assessee whose TDS is likely to be deducted on certain receipts should make an application before the TDS Assessing Officer who has a jurisdiction over his/ her/ its case. The assessee/ deductee concerned may apply for a certificate for Nil or lower deduction of TDS on their receipts in Form No 13. Delays in this matter can be avoided by filing the prescribed form correctly and submitting the required details along with the form itself.
4. Guidelines for handling issues related to applications received u/s 197: In order to streamline the procedure of handling the applications received u/s 197 and disposing the same in a time bound manner in consonance with the Citizens’ charter, the commissioner of Income tax (TDS) has issued certain guidelines for the Assessing Officers. In a nutshell, these guidelines make it mandatory for the Assessing Officer to dispose of the applications u/s 197 within a time frame of 30 days from the end of the month in which application complete in ALL respect is received. The section 197 strikes a delicate balance between requirement of ensuring cash flow to the taxpayer and realizing government dues at the earliest. Taxpayers are, therefore, advised to file complete details required for processing the application in the first instance itself. This will expedite the issuance of certificate u/s 197.

It’s important to note that Form 15CA and Form 15CB are required to be submitted to the bank in duplicate, with one copy retained by the bank and the other copy sent to the Income Tax Department. The bank may also require additional documents and information as per their internal procedures.

NRIs are advised to engage a qualified Chartered Accountant to assist with the preparation and submission of Form 15CA and Form 15CB, as these forms have specific requirements and need to be filled accurately to ensure compliance with the Indian tax laws. It’s also crucial to provide accurate information and make all necessary disclosures, including the source of funds and payment of applicable taxes, to avoid any delays or issues in the repatriation process.