Everything You Need to Know About TDS on Sale of Property by NRI

TDS is needed to be deducted from the acquisition or sale of any real estate property. When the Buyer pays the Seller, they will deduct a certain amount (officially referred to as TDS) and then pay the remaining balance to the Seller. The Buyer would subsequently be obligated to submit the sum that has been deducted from their account on behalf of TDS on property purchase from NRI price with the Income Tax Department. The amount that would be deducted would be determined by the Seller’s residency status at the sale. In the case of a resident Indian seller, the amount of TDS on sale of property by NRI to be deducted would be 1 per cent of the Sale Price; however, in the case of a non-resident Indian seller, the number of TDS to be deducted would be dependent on the amount of money received by the Seller.

The residential status of the Buyer would not be taken into consideration, and only the residential status of the Seller would be taken into consideration when calculating the amount of TDS on sale of property by NRI to be deducted.

In accordance with TDS on purchase of property from NRI section 195, the TDS on the sale of real estate by an NRI must be deducted, and it is preferably needed to be deducted on the Capital Gains. The Seller can’t compute their capital gains independently; instead, the Income Tax Officer is responsible for this task.

TDS Payment, TDS Return, and TAN Number

Importance of TAN number for NRI when submitting TDS certificates.

When purchasing a home from an NRI, a slew of legal requirements must be followed. First and foremost, the Buyer must obtain a TAN number to deduct TDS. When purchasing a property from a Resident Indian, a TAN number is not necessary; however, a TAN number is required when purchasing a property from a Non-Resident Indian.

In contrast to a PAN Number, a TAN Number is an abbreviation for Tax Deduction and Collection Account No. Only the Buyer is needed to have this TAN number; the Seller is not obliged to have this number. If the Buyer does not already have a TAN number, he should request one before the deduction of TDS on sale of property by NRI. It is vital to remember that if there are two purchasers, they will be needed to register for a TAN Number.

The Buyer’s responsibility is to deposit the TDS on sale of property by NRI thus collected with the Income Tax Department within seven days after the end of the month in which the Buyer collected the TDS.

This TDS for NRI property sale needs to be submitted with Challan No./ ITNS 281 and maybe deposited online and via a variety of financial institutions.

Following the receipt of the TDS deposit, the Buyer is obliged to submit a TDS Return. This TDS Return must be submitted in TDS on sale of property by NRI form 27Q and must be submitted individually for each quarter in which TDS has been deducted from the gross income. This TDS Return must be submitted within 31 days after the end of the quarter in which the TDS has been deducted unless an extension is granted.

Tax Consequences for Non-Resident Indians (NRIs) Who Sell Property in India

TDS deducted for property purchase by NRI can be paid without visiting India.

The amount of TDS on sale of immovable property by non-resident Indians will be determined by the length of time you have owned the property. It is necessary to pay long-term capital gains tax on property that has been in your possession for more than two years if you sell it after that period. The short-term capital gains tax will apply if a property is held for less than two years. A property’s purchase date by the original owner will be taken into account for computing capital gains on a property that has been passed down through the family before the rate of NRI TDS on the property.

Things That Must Be Taken Care of by the Seller

The Seller should keep the following considerations in mind when it comes to the deduction of TDS for sale of property by NRI.

• Make an effort to get a Certificate from the Income Tax Department to compute capital gains, which would decrease the amount of TDS that must be deducted.


• Several papers, such as the purchase price, the date of purchase, and any costs incurred during renovation or construction, would be needed to be supplied with Form 13 before the TDS on purchase of property by NRI. A certificate for lesser TDS rate on sale of property by NRI deduction will be issued by the Income Tax Officer once he has reviewed the papers and determined that they are satisfactory.


• Unless the Seller can get the Certificate, the TDS on immovable property sale by NRI will be deducted from the Sale Value, which will result in an overpayment of TDS to the government.


• The Seller should collect form 16A from the Buyer in addition to the property registration documents.


• If the Seller wants to reinvest the Capital Gains in India, they may minimize the amount of Capital Gains realized, resulting in lower TDS on sale of property for NRI and tax liability.


• The Seller may also seek a refund of the excess TDS deducted at the end of the year if he does not want to get this Certificate from HMRC.


• It would be necessary for both sellers (co-owners) to submit Form 13 individually to reduce the TDS rate on purchase of property from NRI if there are two sellers.


• The terms of the reduced TDS Certificate apply to both NRIs and holders of OCI cards, and OCI cardholders may take advantage of the benefit in the same way as NRIs.

Things That Must Be Taken Care of by the Buyer

Different taxes that the buyer must pay on behalf of the seller in India.

The Buyer’s responsibility is to bear a great deal of responsibility when purchasing a property from an NRI. The Buyer is required to do the following:

• Rather than deducting TDS at the time of each payment, TDS should be deducted at the time of property registration.


• The TDS on sale of property by NRI above 50 lakhs that has been deducted must be submitted to the Income Tax Department in accordance with the schedule for depositing TDS.


• TDS Returns must also be filed with the Income Tax Department according to the timetable for submitting TDS Returns.


• Immediately after submitting the TDS Return, the Buyer must also provide the Seller with Form 16A. Form 16A is a TDS Certificate, which certifies that the Buyer has deposited the TDS with the Seller and has received the TDS.


• In the event of late payment of TDS, interest at the property purchase from NRI TDS rate of 1 percent / 1.5 percent per month will be charged.


• A Rs. 200 per day penalty will be assessed on anybody who files their TDS Returns beyond the due date. Also possible is a penalty of up to Rs. 1 lakh levied by the Income Tax Officer.


• For Home Loans, TDS on sale of property by NRI is to be deducted when the payment is made to the Seller, rather than when the EMI is paid to the Bank, as is the case with other loans.

How To Avoid Double Taxation on Property Sales by Non-Resident Indians in Two Countries

The double taxation avoidance agreement between India and USA is a blessing for the NRI property sellers.

Many countries pay a tax on the sale of real estate by their citizens, regardless of where the property is located in the world.

Example: If an NRI resident in the United States sells property in India, both the United States and India will impose a tax on the transaction, including the TDS rate on sale of immovable property by NRI. Because the NRI is a resident of the United States, the United States will impose a tax. India will levy tax because the property is situated in India, resulting in double taxation.

Nevertheless, India has engaged in Double Taxation Avoidance Agreements with several other nations to prevent the imposition of double taxation. These agreements stipulate that if a person has paid Tax on Sale of Property in India, they may be eligible to get a tax credit for the TDS on sale of immovable property by NRI in India, which would lower their tax burden in the nation where the property was sold. In this scenario, proper disclosures must be made in the nation where the tax credit is being claimed to be valid.

Consider the following scenario: if you are an NRI resident in the United States and sell a property in India, you would be obliged to report such profits or losses on the sale of property in your United States Tax Return under Section D of Form 1040. Furthermore, when paying taxes to the United States government, you may deduct the taxes you paid to the Indian government (not including the TDS on sale of immovable property by NRI) since India and the United States have a Double Taxation Avoidance Agreement.

NRIs are responsible for the repatriation of money they have earned outside of India. It is worth noting that the TDS on sale of property by NRI below 50 lakhs is the same as above 50 lakhs The NRI would also be needed to submit Form 15CA and Form 15CB to the Bank to repatriate the money earned from the sale of property in India received outside of India. These forms must be prepared from the Income Tax Website and then submitted to the Bank. However, only a Chartered Accountant can prepare Form 15CB, while Form 15CA may be generated by either the NRI or their Chartered Accountant/Chartered Accountant. It is also necessary for the Chartered Accountant to sign and stamp Form 15CB as well.