TDS for NRIs on property sale in India with rules and exemptions
Non-resident Indians (NRIs) planning to sell property in India must understand the tax implications, especially TDS for NRI on sale of property. The Indian government mandates the deduction of TDS on sale of property by NRI to ensure tax compliance. However, several provisions and exemptions can help NRIs minimize their tax liability.
This guide will explain the TDS for NRI on sale of property, applicable rates, exemption options, and how to navigate the process efficiently.
Understanding TDS for NRI on the Sale of Property
When an NRI sells property in India, the buyer is legally required to deduct TDS on sale of property by NRI before making the payment. This deducted tax must be deposited with the Indian government. The TDS rate depends on whether the property is considered a long-term or short-term capital asset.
Short-term capital gains (property held for less than 2 years): TDS is deducted at 30% plus applicable surcharges and cess.
Long-term capital gains (property held for more than 2 years): TDS is deducted at 20% plus applicable surcharges and cess.
It is important to note that TDS for NRI on sale of property is calculated on the entire sale value, not just the capital gains, unlike in the case of resident Indians.
TDS Calculation for NRIs on Property Sale
Let’s assume an NRI sells a property for ₹1 crore after holding it for more than 2 years. The buyer will need to deduct TDS on sale of property by NRI at 20%, which amounts to ₹20 lakh (excluding surcharge and cess).
If applicable, additional cess and surcharges can increase the effective tax rate to around 23-24%. However, NRIs can apply for a lower TDS deduction certificate to reduce this burden.
How to Reduce TDS for NRI on Sale of Property
NRIs can use the following methods to reduce TDS on sale of property by NRI:
1. Apply for a Lower TDS Certificate (Form 13)
An NRI can request a lower TDS certificate from the Income Tax Department by submitting Form 13 via the TRACES portal. If approved, the TDS rate can be significantly reduced based on the actual capital gains.
2. Claim Exemptions under Sections 54 and 54EC
Section 54: If the NRI reinvests the capital gains into another residential property in India within the specified timeframe, the gains are exempt from tax.
Section 54EC: NRIs can also invest the capital gains in specified capital gains bonds (such as NHAI or REC) within six months of the sale to claim exemption.
TDS Payment and Filing Process
For the Buyer
Deduct TDS for NRI on sale of the property at the applicable rate.
Deposit the TDS amount using Form 26QB within 30 days of deduction.
Issue Form 16A (TDS certificate) to the NRI seller as proof of deduction.
For the NRI Seller
File an Income Tax Return (ITR) to claim a refund if excess TDS on sale of property by NRI was deducted.
If eligible for exemptions, ensure the correct documentation is submitted while filing.
Documents Required for TDS Processing
To ensure the smooth processing of TDS for NRI on sale of property, both buyers and sellers need to have:
PAN card (both buyer and seller)
Sale Agreement
Form 13 (for lower TDS application)
Tax residency certificate (if applicable)
Details of reinvestment (if claiming exemption under Section 54)
Common Mistakes NRIs Should Avoid
Not applying for a lower TDS certificate: Without this, TDS on sale of property by NRI is deducted at the highest rate.
Incorrectly assuming TDS is on capital gains: Unlike residents, NRIs have TDS deducted on the entire sale value.
Not filing tax returns: Even if TDS is deducted, filing an ITR is necessary to claim a refund if eligible.
Failure to issue Form 16A: The buyer must provide the NRI seller with a TDS certificate.
How ‘India for NRI’ Can Help
Selling property in India as an NRI comes with complex tax regulations, but India for NRI ensures a smooth and hassle-free process. Their team of experts assists in understanding TDS for NRI on sale of property, obtaining a lower TDS certificate, and ensuring compliance with tax laws. Whether you need help with TDS on sale of property by NRI, tax exemptions, or filing for a refund, India for NRI provides personalized solutions, saving you time and money while ensuring a stress-free transaction.
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Read MoreTDS for NRIs on property sale in India with rules and exemptions
Non-resident Indians (NRIs) planning to sell property in India must understand the tax implications, especially TDS for NRI on sale of property. The Indian government mandates the deduction of TDS on sale of property by NRI to ensure tax compliance. However, several provisions and exemptions can help NRIs minimize their tax liability.
This guide will explain the TDS for NRI on sale of property, applicable rates, exemption options, and how to navigate the process efficiently.
Understanding TDS for NRI on the Sale of Property
When an NRI sells property in India, the buyer is legally required to deduct TDS on sale of property by NRI before making the payment. This deducted tax must be deposited with the Indian government. The TDS rate depends on whether the property is considered a long-term or short-term capital asset.
Short-term capital gains (property held for less than 2 years): TDS is deducted at 30% plus applicable surcharges and cess.
Long-term capital gains (property held for more than 2 years): TDS is deducted at 20% plus applicable surcharges and cess.
It is important to note that TDS for NRI on sale of property is calculated on the entire sale value, not just the capital gains, unlike in the case of resident Indians.
TDS Calculation for NRIs on Property Sale
Let’s assume an NRI sells a property for ₹1 crore after holding it for more than 2 years. The buyer will need to deduct TDS on sale of property by NRI at 20%, which amounts to ₹20 lakh (excluding surcharge and cess).
If applicable, additional cess and surcharges can increase the effective tax rate to around 23-24%. However, NRIs can apply for a lower TDS deduction certificate to reduce this burden.
How to Reduce TDS for NRI on Sale of Property
NRIs can use the following methods to reduce TDS on sale of property by NRI:
1. Apply for a Lower TDS Certificate (Form 13)
An NRI can request a lower TDS certificate from the Income Tax Department by submitting Form 13 via the TRACES portal. If approved, the TDS rate can be significantly reduced based on the actual capital gains.
2. Claim Exemptions under Sections 54 and 54EC
Section 54: If the NRI reinvests the capital gains into another residential property in India within the specified timeframe, the gains are exempt from tax.
Section 54EC: NRIs can also invest the capital gains in specified capital gains bonds (such as NHAI or REC) within six months of the sale to claim exemption.
TDS Payment and Filing Process
For the Buyer
Deduct TDS for NRI on sale of the property at the applicable rate.
Deposit the TDS amount using Form 26QB within 30 days of deduction.
Issue Form 16A (TDS certificate) to the NRI seller as proof of deduction.
For the NRI Seller
File an Income Tax Return (ITR) to claim a refund if excess TDS on sale of property by NRI was deducted.
If eligible for exemptions, ensure the correct documentation is submitted while filing.
Documents Required for TDS Processing
To ensure the smooth processing of TDS for NRI on sale of property, both buyers and sellers need to have:
PAN card (both buyer and seller)
Sale Agreement
Form 13 (for lower TDS application)
Tax residency certificate (if applicable)
Details of reinvestment (if claiming exemption under Section 54)
Common Mistakes NRIs Should Avoid
Not applying for a lower TDS certificate: Without this, TDS on sale of property by NRI is deducted at the highest rate.
Incorrectly assuming TDS is on capital gains: Unlike residents, NRIs have TDS deducted on the entire sale value.
Not filing tax returns: Even if TDS is deducted, filing an ITR is necessary to claim a refund if eligible.
Failure to issue Form 16A: The buyer must provide the NRI seller with a TDS certificate.
How ‘India for NRI’ Can Help
Selling property in India as an NRI comes with complex tax regulations, but India for NRI ensures a smooth and hassle-free process. Their team of experts assists in understanding TDS for NRI on sale of property, obtaining a lower TDS certificate, and ensuring compliance with tax laws. Whether you need help with TDS on sale of property by NRI, tax exemptions, or filing for a refund, India for NRI provides personalized solutions, saving you time and money while ensuring a stress-free transaction.
Also Read: TDS for NRI On Sale Of Property: Key Considerations and Tax Planning Tips