TDS on purchase of immovable property from non resident

  • Ashok Vaswani by Ashok Vaswani
  • 6 years ago
  • Taxation
  • 0

Are you planning for a purchase of immovable property from a Non Resident Indian?  You better check the Tax implications before you complete the transaction as you could land up in jail or end up paying a hefty fine.

You must ensure that you deduct the correct amount of TDS on purchase of immovable property from non resident


  • The number of days stayed in India determines the residential status for income tax purposes
  •  A resident of India is an individual who stays in the country for at least 182 days in a fiscal year, or at least 60 days in a fiscal with 365 days or more during the previous four years
  • If an individual who is also an Indian citizen takes up employment overseas, the period of 60 days is replaced by 182 days
  •  If a person is not a tax resident of India, he is a non-resident

Individuals who have purchased property from non-residents are finding themselves in serious income tax related problems.
To start it is difficult to determine the seller’s tax status ( non-resident or resident in India according to the I-T act).
This is crucial, as tax is required to be deducted at 20% for any property purchased from a non-resident Indian, as opposed to 1% when the seller is an Indian resident.

In case of incorrect deduction, the buyer will have to pay penalties and also may have to face prosecution.

When property is purchased from a resident Indian, the TDS obligation is only applicable in case the sale consideration is above Rs 50 lakhs( as per section 194-IA).

In case where property is purchased from a non-resident, TDS obligations is applicable as per section 195.

From June 2018 the I-T department has been asked to closely monitor property purchases from non-residents. They will take penal action wherever necessary.

How to check if the seller is a non-resident

People who are not well informed often get confused about the Tax laws regarding Residency.

Typically the non-resident seller does not reside in India, where the property is located.

In some cases the seller sends property documents along with PAN card or Aadhar card and fixes a date to meet to complete the sale transaction.
These cards mislead a lay person as he is unable to determine the residential status.

It is important to directly ask the seller if they are a non-resident.

One can further ask the seller for their I-T returns or passport to determine the number of days they have stayed in India.
In case the seller is reluctant to give his passport details, he should be asked to get a certificate from his chartered accountant stating that he is a tax resident of India.
A written undertaking can also be taken from the seller stating that he is a Resident ( although this will not offer absolute protection to the buyer ).

If the seller has given a power of attorney to someone else, it is very likely that the seller is a non-resident.

Tax residency is determined based on the number of days the person has spent in India in the relevant financial year.
If the sale transaction is done during the earlier part of the year, it is difficult to determine the resident status conclusively.

Issues regarding TAN

Before the buyer can deduct tax at source, the buyer has to register online for TAN, but there is no process for surrender.
Even though it may be a one-time payment of TDS for purchase from a non-resident, the buyer still has to file a nil return every quarter and bear the costs for such filing returns.
However, the buyer can apply to the TDS officer for his jurisdiction to cancel his TAN. In the absence of any prescribed form, he can use a plain paper to explain his position and request for cancellation.

To be continued – wait for Part 2

Clickbric Properties helps you to purchase properties from non-resident Indians and ensures that you dont get into any problems with the Income Tax department.

We also offer free advice to persons who are planning to purchase properties from non resident Indians.

This post has been copied from the Times of India and the credit goes to them.

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