Rate of TDS : TDS on Property Sale by NRI

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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).
TDS on Property Sale by NRI
TDS on Property Sale by NRI

1. Under which section rate of Tax is mentioned for NRI ?

Ans : Under Section 115E is cover provision regarding Tax applicable to NRI when income consist with interest and Capital Gain.

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.

Contact us if any details require

FAQ :

1. Who is responsible for deducting TDS when an NRI sells property?

Ans : The buyer of the property is responsible for deducting TDS before making the payment to the NRI seller.

2. What is the TDS rate for NRI property sales?

Ans : Long-term capital gains (property held > 24 months): 12.5% (including cess). Short-term capital gains (held ≤ 24 months): 31.2% (30% tax + 4% cess).

3. Can the NRI seller avoid high TDS deductions?

Ans : Yes, by applying for a Lower/Nil TDS Certificate under Section 195 from the Income Tax Department.

4. How can an NRI claim exemptions on capital gains?

Ans : Section 54: Reinvest gains in another residential property in India.
Section 54EC: Invest in specified bonds (REC, NHAI) within 6 months.

5. What forms must the buyer submit for TDS compliance?

Ans : i) Form 27Q (for TDS payment).
ii) Form 15CA & 15CB (if remittance exceeds ₹5 lakhs).
iii) TAN Number for filling of Form No 27Q

6. What happens if the buyer fails to deduct TDS?

Ans : Interest @ 1% per month for delay.
Penalty up to the TDS amount under Section 271C.

7. Does the NRI need to file an ITR in India

Ans : Yes, if TDS was deducted or if capital gains exceed the basic exemption limit. A refund can be claimed if excess TDS was deducted.

8. Can DTAA reduce tax liability for NRIs?

Ans : Yes, if India has a Double Taxation Avoidance Agreement (DTAA) with the NRI’s resident country, they can claim relief.

9.How is the sale consideration calculated for TDS?

Ans : TDS is deducted on the full sale value, but the NRI can later adjust for actual capital gains while filing ITR.

10. Is TDS applicable if the NRI gifts the property?

Ans :No, TDS applies only on sales, not gifts. However, other tax rules may apply.

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