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TDS on immovable property purchased from NRI

Updated: Nov 12, 2019

Thinking of purchasing immovable property from a non-resident? You should read this before:

We know that the TDS provisions were also made applicable on the purchase of immovable property if the value of transaction is more than Rs.50 lacs via section 194IA. But this covers only where the property is purchased from a resident.

Then what if the property is bought from a Non- Resident person?

In cases where property is purchased from a Non-Resident person, the provisions of section 195 comes in and provisions of section 194IA are not applicable. As per section 195, TDS needs to be deducted on any payment to a non-resident at the applicable rates. In case of property TDS at the rate of 20% plus applicable surcharge and cess need to be deducted. And the TDS needs to be deducted on the total sale consideration and not just capital gains. Also, there is no minimum limit on the transaction value, even if the property is sold for 5 lacs, TDS need to be deducted from the sale consideration.

For Example:

Total Sale Consideration - 1 crores

Purchased by Seller at - 80 lacs

Capital Gains - 20 lacs

TDS will be 20% plus surcharge plus cess on the sale consideration (Rs.1 crores).

Now, you will be surprised by this, because the TDS is higher than the expected capital gains.

How to save this TDS?

In such cases the seller can ask his assessing officer to issue a lower deduction certificate, on the basis of which the buyer will deduct TDS at a rate instructed by the income tax department. This lower deduction application needs to be filed in Form 13 with the jurisdictional assessing officer, international wing of the income tax department.

Similarly if the seller want to invest in another house property and claim the benefit of section 54, the seller can go ahead with the lower deduction certificate in form 13.

Before deducting TDS, the buyer is required to obtain a TAN, because in the case of section 195, TDS cannot be deducted and deposited through PAN.

Are you planning to sell a property and a Non-resident, contact us to assist you in getting the lower deduction certificate and help you in the transaction.


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