Purchasing a property in Indian as an NRI is a dream for many because of lucrative returns and a growing economy. However, property transactions in India revolve around various legal aspects, one of which is the property purchase tax deduction at source.
Section 194 IA of the Income Tax Act deals with the property purchase TDS mechanism. This mechanism aims to ensure proper tax compliance and maintain transparency in all real estate transactions.
In cases where the consideration for the property sale exceeds Rs 50 lakh, the buyer is required to deduct TDS at a 1% rate on the transaction amount and deposit it with the Government of India. In this blog, we will discuss the TDS property purchase provision to ensure all legal and financial concerns are addressed.
Under section 194 - IA of the Income Tax Act, the TDS applies to TDS on property purchases from a resident seller.
Who must deduct the TDS? The person who buys the property.
If the seller of the property is a Non-Resident Indian, then in such a case, the TDS is deducted under Section 195. This section has slightly different rules from Section 194- IA.
The key differences of TDS on a property purchased from an NRI are likewise:
File Your NRIs Taxes the Right Way With Savetaxs!
Non-Indian residents usually have higher TDS deduction rates compared to Indian residents. However, NRIs are eligible for a low TDS deduction certificate under section 197, which allows them to deduct TDS only on the capital gains (if any), reducing the TDS liability.
To do so, the seller must submit:
Note: The process might take around 4-6 weeks, so it is advised to apply early.
Non-compliance with the TDS rules can result in.
Stay Compliant with Indian Tax Laws, Claim Deductions, and Avoid Penalties.
If you are a buyer of an NRI property, please ensure:
When you buy a property from an NRI, the applicable TDS provisions must be met, as failure to do so will result in hefty penalties. NRIs seeking a lower TDS certificate can rely on Savetaxs for assistance. From TDS filing requirements to obtaining a TAN and more, we are here to help you.
As a leading NRI taxation firm, we have been helping NRIs for decades with property transactions, property sales, tax planning, and real estate investments. Our team of CA, CS, and the legal team brings over 30 years of experience to the table; hence, with us, you are in for the best advice.
We are available 24/7 across all time zones. Connect with us today and enjoy a hassle-free and seamless property transaction experience.
Note: This guide is for informational purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult with either a Chartered Accountant (CA) or a professional Company Secretary (CS) from the Savetaxs team, as they are familiar with the current regulations and maintain accuracy throughout the whole process.
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