TDS on Sale of Property by NRI | FSK India
TDS on Sale of Property by NRI?
If you’re a Non-Resident Indian (NRI) looking to sell property in India, you’ll need to understand the basics of real estate transactions and taxes. This guide is here to make things easier for you, focusing on Tax Deducted at Source (TDS) and its impact on your taxes. We’ll break down TDS, understand capital gains, talk about Lower TDS Certificates, and explore exemptions and deductions under Sections 54 and 54F of the Income Tax Act. As an NRI, it’s important to know these details to make smart choices and follow Indian income tax rules.
How Much TDS on Sale of Property by NRI?
When an NRI sells property, the buyer will deduct a certain amount of income tax, known as Tax Deducted at Source (TDS), from the payment. This is done at a fixed rate of 20%. If the capital gains are lower, the TDS rate matches the actual gains rate, which affects your overall tax liability. The buyer is responsible for ensuring TDS compliance.
Capital Gains on Sale of Property by NRI?
Capital gains are a key factor in tax implications. These are calculated by subtracting the cost of buying the property from the selling price. These gains determine the TDS. For NRIs, long-term gains are taxed at a fixed 20%, while short-term gains are taxed based on the total income tax slab rates in India. Understanding this calculation is important for NRI property transactions.
Lower TDS Certificate for NRIs:
The Lower TDS Certificate is a document issued by the Income Tax Department that allows NRIs to receive income at a reduced TDS rate. This certificate can help minimise TDS deductions. To get this certificate, you’ll need to make a case to the tax authorities, explaining why a lower deduction rate should be allowed. Key factors considered include the nature of the property, how long you’ve owned it, and other relevant details. Getting this certificate can significantly affect your overall tax situation.
Exemptions and Deductions: Sections 54 and 54F
Section 54:
This section of the Income Tax Act allows NRIs to claim an exemption for long-term capital gains when selling a house property. To take advantage of this exemption, NRIs must invest the gains in a new property within specific timelines and adhere to certain geographical restrictions. Selling the new property within three years may cancel the exemption.
Section 54F:
This section allows NRIs to claim an exemption for long-term gains, excluding residential house property. Like Section 54, this provision has conditions related to the purchase or construction timeline, geographical requirements, and ownership limits. Full exemption requires investing the entire sale receipt, highlighting the importance of strategic financial planning.
Who is considered as NRI in India?
Any person who have lived more than 182 days or more in a Financial Year, outside India is considered as NRI.
Need help in NRI related Income Tax Queries? Call us on +91-175-5031685 or fill out this basic information we will reach out to you.
Getting Professional Help!
Given the complex nature of TDS regulations and tax exemptions, it’s advisable for NRIs to seek professional guidance from tax experts. Compliance with Indian tax laws is crucial to avoid financial setbacks and penalties. Professional advice can be invaluable in navigating this complex area and making informed decisions that align with regulatory requirements.
Selling property in India as an NRI requires careful consideration. We at FSKINDIA.COM can help you in a very easy and convenient manner to help you sell or buy any property in India.
Conclusion - TDS on Sale of Property by NRI
In conclusion, selling property in India as an NRI involves understanding TDS regulations, capital gains calculations, and available exemptions under Sections 54 and 54F. By leveraging tools like the Lower TDS Certificate and seeking professional tax guidance, you can simplify the process and optimize your tax savings. Compliance with Indian tax laws is key to a smooth and hassle-free transaction. Contact our experts for tailored assistance today!
FAQ's - TDS on Sale of Property by NRI
TDS on Sale of Property by NRI
When an NRI sells a property in India, the buyer must deduct TDS (Tax Deducted at Source) before making the payment. The applicable TDS rate depends on the capital gains:
- Short-Term Capital Gains: TDS is deducted at 30% of the total gains.
- Long-Term Capital Gains: TDS is deducted at 20% of the total gains after indexation benefits.
TDS on Sale of Immovable Property by NRI
For immovable property sales, the buyer is responsible for deducting TDS and depositing it with the Income Tax Department.
- The buyer must obtain a TAN (Tax Deduction and Collection Account Number).
- TDS must be deducted based on whether the gains are short-term or long-term.
- If the sale value exceeds ₹50 lakh, additional surcharge and cess may apply.
TDS on Sale of Property by NRI Form 27Q
Form 27Q is used to file TDS deducted on payments made to NRIs, including the sale of property. Key details to note:
- It is submitted quarterly to report the TDS deducted and deposited.
- PAN of both the NRI seller and the buyer is mandatory.
- The form must include details such as payment amounts, deduction rates, and transaction dates.
TDS Rate on Sale of Property by NRI
- Short-Term Capital Gains: TDS is deducted at 30% of the total gains.
- Long-Term Capital Gains: TDS is deducted at 20% (with indexation benefits).
- Surcharge and health & education cess may increase the effective TDS rate if the transaction value is high.
- The rate can vary if the seller provides a lower deduction certificate from the Income Tax Department.
How much Tax I will have to pay on Selling Property in India?
If you are selling a property after holding it for more than 2 Years then Tax rate will be @ 20% (Long term Capital Gain)
If you are selling property before 2 Years then it will Short Term as per Tax Slab of your Income in India.
I don’t know how to file Income Tax Return in India, what Can I do?
No need to worry about the Income Tax Filling. Tax filing Experts at FskIndia will file the Income Tax Return for you.
Click here to apply for NRI Income Tax filing In India.
Will I get refund of the Tax Deducted by Buyer out of the Sale amount?
In most of the cases Yes, The buyer deducts TDS AT 20% OF Sale Value and the Tax is Payable on the Profit earned on Sale of property. So the excess amount deducted by the Buyer will be refunded to your Bank Account.
Index:
Read More Articles!
