Purchasing residential property from nri
Abi
(Querist) 17 February 2015
This query is : Resolved
Dear Sir/Madam,
I am planning to buy a residential property from NRI Gentleman in Pune. As I understand if the property agreement value is more than 50LK I am required to deduct 1% TDS from the agreed amount and credit the rest to Seller. The NRI has provided his PAN card details and has NRO account with ICICI bank. Now bank is asking seller (NRI) to pay some 20% tax and asking me (buyer) to obtain letter from CA of seller about his tax liabilities. The whole matter is pretty confusing. I request expert opinion on following:
1. How much TDS needs to be paid to IT department for this transaction?
2. Who needs to bear this tax for which TDS needs to be paid/cut? Seller or Buyer?
3. NRI gentleman has PAN card and he shared the same as well. Is there anything more the Seller needs to take care in terms of Tax?
4. Is there any consent letter kind of thing is suggested from Seller or CA of Seller in this regard?
5. Appreciate if the GR/Circular of such transaction also can be made available for reference.
6. What is the capital gain tax rule applicable to Seller, considering seller is NRI and dont file IT returns in India?
Thanks in anticipation of help.
Kind Regards,
Abi
Guest
(Expert) 17 February 2015
Dear Mr. Abi,
The bank has rightly advised you for deduction of 20% as TDS, as the provisions of Sec. 194-IA is not applicable in an NRI case. The TDS in the case of NRI seller is regulated under Sec. 195. As such, concession of TDS of 1%, as in the case of resident Indians holding PAN Card, is not available in NRI case, even if he holds a PAN Card. Further, the tax liability of 20% on the sale consideration in the case of an NRI cannot be ignored, even if the property is less than 50L. Besides, Education Cess and Higher Education Cess has also to be deducted from the payment to the NRI. Still further, Surcharge @ 10% will also be applicable if amount paid to NRI exceeds Rs 1 crore.
Anirudh
(Expert) 17 February 2015
The bank has no role to play in this at all.
If you are the buyer, and if you are satisfied that the property is free from all encumbrances and has a clear title, then all that you have to do is (i) get the sale deed executed and registered by the Seller (NRI) in your favour (ii) pay to the seller 99% of the agreed consideration by cheque/demand draft (iii) the remaining 1% remit to the Government as TDS by quoting the PAN number of the seller.
That's all to it. Nothing more, nothing less.
You are in no way concerned with the capital gain etc., of the seller.
All that you have to ensure is that the consideration shown in the sale agreement is not in any way less than the guideline value/circle rate. (Pl. note, it is not enough that you pay the stamp duty on the basis of guideline/circle rate, while showing the consideration less than the circle rate/guideline value in the sale deed. If you do so, then the difference between the guideline value and the actual consideration shown will be treated as 'income from other source' in your hands and it will be taxed in your hands).
T. Kalaiselvan, Advocate
(Expert) 19 February 2015
I agree with the views of expert Mr. Anirudh. You do not have to go beyond what is prescribed on your side in this transaction. Let the vendor take care of his capital gains taxes as applicable or let his auditor do that work for him and not you. You restrict yourself to the sale transaction of the property alone in which if you are required to go for TDS @ applicable rates, you may comply that requirement alone.
