Rate of TDS : TDS on Property Sale by NRI

TDS on Property Sale by NRI : When a Non-Resident Indian (NRI) sells property in India, Tax Deducted at Source (TDS) is applicable under the Income Tax Act, 1961. Here are the key aspects you need to know: what rate of TDS is applicable when property sale by NRI in India. Herewith full understanding of TDS on Property Sale by NRI in India.

1. TDS Rate on Sale of Property by NRI

• The buyer is required to deduct TDS at 12.50% (including cess) on the sale consideration if the property is held as a long-term capital asset (held for more than 36 months).(Below, I table showing rate of TDS with Cess and Surcharges )
• If the property is held as a short-term capital asset, the TDS rate is 30% + cess (31.2%) (as per the applicable slab rate for NRIs).

1.1 Provision of Section 115E

• Section 115E of Income Tax Act

Tax on investment income and long-term capital gains.

115E. Where the total income of an assessee, being a non-resident Indian, includes—

(a)  any income from investment or income from long-term capital gains of an asset other than a specified asset;

(b)  income by way of long-term capital gains,

the tax payable by him shall be the aggregate of—

 (i)  the amount of income-tax calculated on the income in respect of investment income referred to in clause (a), if any, included in the total income, at the rate of twenty per cent;

⁶⁵[(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income,–

 (A)  at the rate of ten per cent for any transfer which takes place before the 23rd day of July, 2024; and

 (B)  at the rate of twelve and one-half per cent for any transfer which takes place on or after the 23rd day of July, 2024; and]

(iii) the amount of income-tax with which he would have been chargeable had his total income been reduced by the amount of income referred to in clauses (a) and (b).

2. Conditions for Lower/Nil TDS Deduction

• If the NRI seller expects capital gains to be lower than the sale value (due to indexation, exemptions, etc.), they can apply for a Lower/Nil TDS Certificate from the Income Tax Department under Section 195.
• The buyer can then deduct TDS based on the certificate instead of the flat rate.

3. Exemptions Available for NRI Sellers

• Section 54: Exemption if the capital gains are reinvested in another residential property in India.
• Section 54EC: Exemption if gains are invested in specified bonds (e.g., REC, NHAI bonds) within 6 months.
• DTAA Benefits: If India has a Double Taxation Avoidance Agreement (DTAA) with the NRI’s country of residence, they may claim relief to avoid double taxation.

4. Buyer’s Responsibility

• The buyer must deduct TDS before making the payment to the NRI seller.
• Form 15CA & 15CB must be filed (if the remittance exceeds ₹5 lakhs):
  • Form 15CB: A CA-certified report confirming tax compliance.
  • Form 15CA: Declaration submitted online to the IT Department.
• The TDS must be deposited using Challan  within 30 days of the deduction.
• Then, Buy have to file form NO 27Q (But before filling Form 27Q , buy must have TAN Number )
• In form No 27Q, Buy file this form under section 195 (Other Sum)
• For Filling of form NO 27Q click on Income tax website

5. Penalty for Non-Compliance

• If the buyer fails to deduct TDS, they may face:
  • Interest @ 1% per month (for delay in deduction).
  • Penalty under Section 271C (up to the amount of TDS not deducted).
  • Disallowance of expenditure (if property is bought for business).

6. Filing ITR by NRI Seller

• The NRI must file an Indian Income Tax Return (ITR) if TDS was deducted or if capital gains exceed the basic exemption limit.
• They can claim a refund if excess TDS was deducted.

7. Conclusion :

TDS Rate: 12.5% (LTCG) or 31.2% (STCG).
✔ Lower TDS Certificate: Can be obtained under Section 195.
✔ Exemptions: Section 54/54EC can reduce tax liability.
✔ Buyer’s Duty: Must deduct TDS and file Form 15CA/CB and Form No 27Q
✔ Penalties: Apply for non-compliance by the buyer.

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