The process of selling a property in India can be complicated for Non-Resident Indians (NRIs), especially when it comes to complying with Indian income tax laws. NRIs selling property in India are required to file TDS returns, and failure to comply with these regulations can result in penalties. If you are an NRI looking to sell a property in India, it is essential to understand how NRIs can file TDS returns on sale of property in India. In this blog, we will outline the process of filing TDS returns for NRIs.
How can NRIs file TDS on Sale of Property in India? Step-by-Step Process
As an NRI, you are required to file TDS returns with the Indian tax authorities within a certain period. Here is the process for filing TDS returns for NRIs:
Step 1: Calculate Tax Liability
To ensure that the sale price is not below the fair market value, the seller must acquire the stamp duty valuation. After obtaining it, the seller should calculate the capital gains and corresponding tax liability using either the stamp duty value or sale consideration, whichever is higher. If there is a loss or a substantial gap between the final tax liability and the TDS, the seller can apply for a lower withholding certificate with justifiable reasons.
Step 2: TAN of the Buyer
During the application process, the seller must provide the buyer’s valid TAN. If the buyer does not have a TAN, they can obtain one within 7 to 10 days by submitting Form 49B. Form 49B is available at any TIN facilitation center, which is set up for receiving e-TDS returns.
Step 3: Collect Documents for Lower Withholding Certificate
To apply for a lower withholding certificate, the seller must complete Form 13 online and provide three sets of documents:
- These include documents related to the proposed sale, such as MOU, stamp duty valuation, purchase agreement showing the cost of acquisition, and bank statements or receipts of payment made during the property purchase.
- Additionally, the seller must provide documents indicating the estimated computation of income for the current financial year, which should include all received or receivable income and corresponding tax liability.
- Finally, documents proving that there is no tax liability due for the past four years must be submitted, including past income tax returns, form 26AS, and any past assessment orders.
Step 4: Register on the I-T portal and file application
After submitting the application, the assessing officer will review it and request further information if necessary before granting or denying the certificate. The processing of the application typically takes about three to four weeks. The department evaluates each case on its individual merits before issuing withholding tax certificates. A lower withholding certificate is valid until the end of the financial year, and the seller must ensure that the payment is made within the timeframe specified in the certificate.
In addition, if the TDS is deducted at a rate higher than the seller’s final tax liability for any reason, the seller can file a tax return and request a refund of the excess TDS deducted. The purpose of the lower withholding certificate is to prevent the seller’s cash flow from being negatively impacted by higher TDS.
What is the TDS on Sale of Property by NRI in India?
The TDS rate applicable to NRIs on the sale of properties owned by them is 20% for long-term capital gain. However, if the property is sold before 2 years, the TDS rate will be based on the NRI seller’s income tax slab rate.
- When selling a property held for more than two years, the buyer is required to deduct 20% as TDS (Tax Deducted at Source) for long-term capital gains.
- On the other hand, if the property has been held for less than two years, the TDS rate for short-term capital gains tax will be based on the NRI seller’s income tax slab.
Surcharges and cess would also be charged on the capital gains.
On What Amount of Property is TDS Required to be Deducted?
Deduction of TDS is necessary for capital gains, which the seller must calculate and communicate to the buyer. The buyer can then apply the relevant TDS rate based on the reported capital gain amount. In case the buyer is not informed of the capital gain amount, it is recommended to deduct TDS on the entire sale price to prevent any shortfall in TDS deduction and subsequent interest and penalties.
Repatriation of Funds
If you’re an NRI and intend to repatriate the proceeds generated from selling a property to your home country, you must submit Form 15 CA and 15 CB. Form 15 CA ensures that taxes have been collected on the fund before it is repatriated abroad. You can complete Form 15 CA on your own, while Form 15 CB must be submitted by a certified authority such as a chartered accountant. NRIs are permitted to remit up to USD 1 million during a financial year outside India.
Due to a complicated tax system and recurrent amendments, understanding tax laws can be confusing and NRIs may be subject to additional fees or miss claiming deductions and other benefits. At SBNRI, we understand this struggle. You can download SBNRI App to connect with our NRI Tax Experts to know more about new TDS/ TCS rules for NRIs. You will also get end-to-end assistance related to NRI tax filing. SBNRI will also help you get a lower TDS Certificate. You can also click on the button below to ask any questions. Visit our blog and YouTube Channel for more details.
The capital gains tax regulations for an NRI are the same as those for a resident individual, with the exception of the TDS provisions. Similar to resident investors, the capital gains tax for an NRI is determined by the duration of ownership and the kind of asset that was sold.
There are several exemptions under the Income Tax Act that can help property sellers save a significant amount. You can reinvest the profit generated from sale of property for the purchase of another property to benefit from these exemptions. Additionally, investing in particular bonds, such as capital gains bonds, can help you obtain exemptions on long-term capital gains tax under Section 54EC.