TDS on Sale of Property by NRI Form 27Q TDS
TDS on Sale of Property by NRI– It has become quite common in India nowadays. Indians are going abroad for higher studies. They settle there after getting the dream jobs they were looking for.
They have stayed abroad for a few years and now intend to sell their parental house. They plan to take their parents back abroad with them. It has been very common these days and the number is soaring high day by day. These kinds of citizens are called Non Resident Indians(NRIs).
Today, we will learn about the crucial aspects for NRIs regarding TDS on the sale of property by NRI. We will also discuss the importance of Form 27Q TDS from the buyer’s perspective. So, we will try to analyze this from both’s perspectives i.e. Buyer & Seller(NRIs only) of immovable property.
What is TDS on Sale of Property by NRI?
TDS on Sale of Property by NRI is an advance tax. The buyer of immovable property must deduct it from an NRI as per the Indian Income Tax Laws. The deduction is made when the payment is made to the NRI for the proposed sale of property. The balance amount is then paid directly to the NRI.
As an NRI, you must pay Capital Gain Tax if you sell immovable property in India. But here the liability to deduct TDS on the Capital Gains only lies with the Buyer of immovable property.
Most importantly, you should remember that TDS will be deducted only when there are Capital Gains from the sale of property. It should be calculated only on the Capital Gains amount and not on the total sale proceeds.
How is TDS Calculated on Purchase of Property from NRI?
One should keep in mind that deducting TDS is the liability of the Buyer. However, the NRI Seller ultimately must submit an application in Form 13. They need to request the concerned ITO to calculate the likely capital gains arising from the proposed property sale.
It may be short-term capital gains or long-term capital gains depending upon which applicable TDS rate would be decided.
The buyer must deduct TDS. However, the NRI seller declares the rate of TDS and the amount on which it is to be deducted. The concerned ITO calculates this after receiving the application. The application is in Form 13 from the NRI Seller.
TDS on Sale of Property by NRI Calculator
In this case, TDS on Sale of Property by NRI is primarily determined by the two main factors such as a) the residential status of the Seller and b) the nature of Capital Gains on the proposed sale;
| Nature | Descriptions | Applicable TDS Rate |
|---|---|---|
| Long Term Capital Gains | Property held for more than 2 years | @20% |
| Short Term Capital Gains | Property held for less than 2 years | As per applicable Tax Slab but max TDS @30% |
However, surcharge and education cess are applicable on the above.
Now, let us see the effective TDS rate for long-term capital gains arising on the property sale by NRI.
| Particulars | Sale Price less than 50 Lakh | 50 Lakh to 1 Crore | More than 1 Crore |
|---|---|---|---|
| Long Term Capital Gains Tax Rate | 20% | 20% | 20% |
| Add: Surcharge | NIL | 10% | 15% |
| Total Tax Rate | 20% | 22% | 23% |
| Add: Health & Education Cess on above | 4% | 4% | 4% |
| Total TDS Rate | 20.80% | 22.88% | 23.92% |
TDS on Sale of Property by NRI below 50 Lakhs
The TDS rate for a property sold by an NRI is not based on the sale value. Instead, it depends on the nature of capital gains. Rather it depends upon the nature of capital gains i.e. if the property is held for more than 2 years, it is liable to TDS rate @20%(LTCG). If the property is held below 2 years, it is liable to the TDS rate. The rate is as per the applicable tax slab(STCG).
But the Surcharge rate will vary upon the sale proceeds as you can find in the above table.
So, let’s assume a hypothetical case for a property sold by NRI for Rs. 50 Lakh and check the TDS on sale of property below 50 Lakh shall be as below.
The property was held for more than 2 years and the Sale proceeds are Rs. 50 Lakh and Stamp Duty value is Rs. 52.50 Lakh
| Sale proceeds(Rs) | 50,00,000.00 |
| Stamp Duty/ Registered Value | 52,50,000.00 |
| Higher of two | 52,50,000.00 |
| Less: Indexed Cost of Acquisition | 40,00,000.00 |
| LTCG | 12,50,000.00 |
| So, amount of TDS @20% | 2,50,000.00 |
| Add: Surcharge @10% | 25,000.00 |
| Add: Health & Education Cess @4% on Rs.2,75,000/- | 11,000.00 |
| Total TDS amount to be deducted(Rs.) | 2,86,000.00 |
| Therefore, applicable TDS Rate | 22.88% |
Are you interested in some important topics below?
TDS on Sale of Property by NRI below 50 Lakhs
To avoid TDS on Sale of Property by NRI, he must apply in Form 13 to the concerned ITO(Assessing Officer). This is required for Lower/NIL TDS as per Section 197 of the Income Tax Act. This applies to such sale receipts.
Based on such application, the Assessing Officer shall issue a certificate. This certificate will mention the specific TDS amount. The buyer of the property may deduct this amount while making the payment to the NRI seller.
This will help the NRI reduce his tax liability. This is true if the NRI does not fall into the higher tax bracket. It also prevents unnecessarily locking his money towards the Government.
If the NRI does not obtain a Lower/NIL TDS certificate from the concerned Assessing Officer, the buyer will deduct TDS. The deduction will apply to the entire sale proceeds. This will not be limited to the capital gains only.
This will increase the total tax liability of the NRI seller. It is advisable for an NRI seller to apply for a lower or nil tax certificate. This should be done as per Section 197 of the Income Tax Act,1961.
Download Form 13 Below:
TDS on Sale of Property by NRI at a glance
- NRI Seller: This clause shall be applicable only when the Seller is an NRI;
- Liability of TDS:TDS is to be deducted by the Buyer of property U/S 195 of the Income Tax Act;
- TDS on Capital Gains: TDS shall be applicable only when there arises any Capital Gains to the NRI Seller and on the amount of capital gains if the NRI obtains a Lower Deduction Certificate(LDC U/S 197 of the Income Tax Act);
- Threshold Limit: There is no threshold limit for deduction of TDS;
- Sale Proceeds: TDS shall have to be deducted on the whole sale proceeds if the NRI does not obtain the LDC Certificate after submitting Form 13. Otherwise TDS should be deducted on the Capital Gains only as declared by the NRI seller;
- Rate of TDS: Rate of TDS shall be 20% for LTCG and applicable tax slabs for STCGS;
- Form 13: The NRI has to make an application in Form 13 to the concerned ITO for lower TDS or NIL tax such as LDC Certificate U/S 197;
- Assessing Officer: The ITO shall calculate Capital Gains accordingly and issue a certificate;
- Calculation of Capital Gains: Capital Gains on sale of property is calculated based on Sale value and Registered/Stamp Duty value which ever is higher;
- TDS Amount: Applicable TDS rate does not depend upon the amount of sale proceeds;
- Surcharge: Surcharge rate will vary depending upon the sale value consideration.
How to Deduct TDS on Sale of Property by NRI?
TDS has to be deducted at the time of making payment to the NRI Seller. Most importantly the rate and amount of TDS must be mentioned in the Sale Deed between the two parties. It is a must for property buying from an NRI.
Thereafter, the buyer shall deposit the TDS amount on the 7th day of the next month. They have to file the TDS return in Form 27Q within 30 days after the end of the quarter. An exception is made for the March quarter, which is to be filed before 31st May.
What is TDS on Sale of Property by NRI Form 27Q TDS Online?
Form 27Q TDS is an online statement of TDS return filed for tax deducted by the Buyer while making payment to the NRI seller for the purchase of property from him.
Form 27Q contains the details of TDS deducted by the buyer. This is for making payments to Non-Resident Indians and Foreigners, excluding salary payments. Every person who makes payments to NRIs and Foreigners must file Form 27Q TDS return online. The form should contain all the relevant details.
You do not need to file Form 27Q. This is true if you have paid a salary to such NRI persons or Foreigners. Salary payment is permitted without form 27Q.
Form 27Q TDS Online meaning?
The buyer of the property has to file a TDS return online in Form 27Q after deducting and depositing TDS. The form must mention all the relevant details of the payer and payee. It is to be filed on a quarterly basis before the expiry of the due date.
Form 27Q contains the following details of both the Buyer & Seller and TDS details:-
- Payer’s Details(Buyer of Property from NRI)
- Name of the Payer;
- Address;
- Contact Details;
- PAN Number;
- TAN Number( It has to obtain a TAN No. from NSDL);
- Financial Year and Assessment Year;
2.Payee’s Details (NRI Seller of the property)
- Name of the Payee;
- Full address;
- Contact Details and Email id;
- PAN Number;
3. Challan Details
- TDS Amount deducted;
- TDS deposited;
- Challan Serial No;
- BSR Code;
- Date of deposition;
- Amount of Surcharge & Cess;
- Interest amount if any.
What is the Due Date for Filing Form 27Q TDS Online?
The due date for Payment of the TDS so deducted is the 7th of the subsequent month. For March, it is the 30th of April. The due date for filing the Form 27Q TDS return for every quarter is as follows:
| Quarter | Period | Due date for Filing Form 27Q TDS |
|---|---|---|
| Q1 | 1st April – 30th June | On or before 31st July |
| Q2 | 1st July – 30th September | On or before 31st October |
| Q3 | 1st October – 31st December | On or before 31st January |
| Q4 | 1st January – 31st March | On or before 31st May |
Is the Buyer required to give TDS Certificate to NRI Seller?
Yes, as per the Act, the Buyer must give the non-resident seller a TDS certificate in Form 16A. This must be done after filing the TDS return in Form 27Q.
Form 16A must be given to the NRI seller. It has to be provided within 15 days from the end of the quarter. This timing is connected to when the TDS return in Form 27Q was filed.
