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2016

Buying a house from non-resident seller? Important to know the TDS laws

  • TDS rules vary depending on whether you are purchasing house from a resident Indian or an Non-Resident. In our previous blog we talked about the TDS rules linked with purchase of house property from a resident seller. Now, let us understand the TDS rules associated with purchase of house property from an NRI. Tax rules are little more complicated in this case.
  • TDS rules in this case are governed by section 195 of the Income Tax Act 1961. Under this section TDS needs to be deducted irrespective of the value of the property and minimum threshold limit of Rs. 50 lakh does not apply. Let us have a look at some other important points.

Key points in case of purchasing property from non-resident Indian:

  1. As was the case in our earlier post, here also you need to deduct TDS and deposit it with the government within 7 days from the end of the month in which TDS is deducted.
  2. Before making any payment to a non-resident, you need to obtain a certificate in Form 15CB from a Chartered Accountant. Further you also need to file an online declaration in the Form 15CA (undertaking by remitter/you) on the income tax website through your PAN login.
  3. TDS should be deducted at the time of actual payment or credit to the payee/seller whichever is earlier. In case of payments being done in the form of instalments, TDS should be deducted as and when instalment is paid.
  4. Before you deduct TDS, you need to obtain TAN u/s 203A. You can go to https://tin.tin.nsdl.com/tan/ and apply for TAN by filing Form 49B.
  5. You can deposit TDS with the government by filing up Challan 281 through any of the authorized bank branches. For online payment of TDS you can click on https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
  6. Just depositing the TDS is not enough. You are also required to e-file TDS return by submitting Form 27Q. If payment is made on instalment basis then TDS return should be filed on quarterly basis.
  7. After filing TDS return, you should issue TDS certificate also known as Certificate of Deduction of Tax i.e. Form 16A to NRI Seller. This certificate should be issued to NRI Seller within 15 days of due date of TDS returns for the quarter.
  8. Remember to deduct and deposit TDS on time as failure to do so can lead Income Tax Department to impose severe financial penalties.
Financial Management