Tds on Property Purchase From Non Resident – a Deepdive

• Any person who is purchasing property from a non-resident, not being a company or a foreign company shall deduct tax at source either at the time of credit of such income to the account of the payee or at the time of payment whichever is earlier.
• The same is applicable even when any interest is payable by a person in India to a non-resident. However, if the same is payable by the government or any public institution, TDS shall be deducted only at the time of payment.

→ The above provision is applicable whether or not the non-resident has a residence or place of business or business connection in India (or) any other presence in any manner in India.

TDS Deduction

→ Where the seller is a resident of any immovable property (Other than the agricultural land) provided consideration is Rs.50 Lakhs or more – TDS needs to be deducted under Section 194IA at the rate of 1% of the Sale Consideration.

⇨ If both the consideration value and the stamp duty value for the property is less than Rs.50 Lakhs, then TDS will not be applicable.

→ Where seller is a NON-RESIDENT and certificate of Lower TDS Deduction is obtained from Income Tax Officer (Sec 195) in relation to any immovable property – 20% of Capital Gains  along with Surcharge and Cess.

→ Where Seller is a NON-RESIDENT and no certificate obtained from ITO (Sec 195) in relation to any immovable property – 20% of the Sale Consideration along with Surcharge and Cess. 

⇨ It needs to be noted that there is no threshold limit for deduction of TDS under Section 195.

→ Under Section 194IA, where the seller of the property is a resident, there is no need for the buyer to obtain Tax deduction and Collection number (TAN number) in order to deduct to TDS.

→ However, Under Section 195, it’s mandatory for the buyer to obtain TAN number for the purpose of TDS deduction.

→ If the buyer of the property doesn’t have a Tax deduction and Collection Account Number, then he has to obtain the same under section 203A of the Income Tax Act. In order to obtain it, an application in Form 49B ( https://incometaxindia.gov.in/forms/income-tax%20rules/103120000000007919.pdf ) is required to be made.

→ Once the transaction has been completed, buyer of the property needs to furnish the seller with Form 16A – Certificate of deduction of tax at source and issued on deduction of tax by the deductor)

→ The buyer can generate this certificate after filing the TDS return with the Income Tax Department.

Double Taxation

⇨ When a person is non-resident seller of a property, he will be liable to the payment of tax in the country where he is a resident. As the tax has been collected for the party in India, in order to avoid double taxation,

The assessing officer in India upon validation of the application made by the person as per Rule 29BA in the Form 15E electronically either under digital certificate or through electronic verification code, shall issue a certificate specifying that whole of such sum would not be the income chargeable in the hands of the recipient. The certificate is valid for the specified financial year and a fresh application needs to be made upon expiry of the same.

Who can apply?

• Any Non-resident person (Other than a banking company or an insurer) who carries on business or profession in India through a branch, any sum, not being interest or dividends.

Conditions to be satisfied

→ The person has been carrying on business or profession in India continuously for a period of not less than 5 years immediately preceding the date of application and  the value of the fixed assets in India of such business or profession as shown in the books for the previous year which ended immediately before the date of application or where the accounts in respect of such previous year have not been made up before the said date, the previous year immediately preceding the financial year, exceeds Rs.50 Lakhs.

→ The person is not in default or deemed to be an assessee-in –default for any tax.

An NRI can submit Form 13 for deduction of income tax at lower rates or nil deduction on income received in India. If the Assessing officer is satisfied that the total income of the assesse justifies the deduction of income at a lower rate or no deduction of income tax, the AO shall give the NRI lower/nil TDS certificate as appropriate for this purpose.

↠ Digital Signature Certificate (DSC) or E-verification (through Internet Banking or Mobile OTP) is required for the submission of the Form. If the DSC is not registered at the TRACES, payee has to register his/her DSC (in case of NRI Services)

↠ Jurisdictional Assessing Officer will be decided on the basis of State & District provided by the NRI in application of Form 13 and it will be applicable for future purpose as well.

↠  Estimated income computation for the FY which is mentioned in Form 13 must be certified by Self/ Chartered Accountant along with the certificate

↠  Details of income claimed to be exempt and not included in the total income

↠  Estimated income for any of the 4 previous financial years preceding to the current financial year certified by Self /Authorized person in case return has not been filed.

Basic Documents required – Form 13:

1. PAN of NRI
2. Details of number of days spent in India along with copy of passport and visa entry and exit stamps
3. Provision income details for the financial year for which Form 13 has been applied for
4. Income details for the past 3 Financial Years
5. Stamp duty valuation certificate for the property
6. Ownership Proof of the property – In case of Joint property, proof of share by each person or In case of inherited property, copy of will/share certificate
7. If property purchased before 01.04.2001, then SRO MV certificate (or Govt approved valuer certificate with copy of ready reckoner page used) as on 01.04.2001
8. In case any advance received by taxpayer – copy of bank statement showing receipt of advance along with proof of payment of TDS, if any
9. Proof of Jurisdiction of assessee
10. Copy of Tax Residency Certificate and Form 10F 

How to file Form 13?

Step 1: Login to TRACES website with your Login ID – https://contents.tdscpc.gov.in/

Step 2: Go to “Forms” tab and click on request for Form 13 in order to initiate the request

Step 3: Form 13 will be displayed on your Screen. The applicant will be required to fill the following details in the online form:

• Particulars of NRI, Personal details such as residential status, PAN or Aadhar, Email ID, Mobile Number
• Details of Existing tax liability under the Income tax act
• Financial year to which the payments/receipts relate to
• Estimated total income of the Financial Year & Previous Year
• Total Tax payable for the income mentioned above
• If any exemption has been claimed under Section 10, Section 11 or Section 12, then exemption certificate for the same needs to be submitted
• Estimated income for any of the 4 previous financial years, in case returns were not filed
• Where the return for any financial years has been submitted in paper form, the copy of ITR needs to be uploaded
• Details of TAN or PAN or Aadhar Number of the payer, section under which TDS is to be deducted, estimated amount of income/sum to be received and requested rate of deduction.

⇨ After uploading the above, the request for lower/nil deduction will be raised. The Assessing Officer after verification of the Form 13 shall issue the certificate within 1 month from the end of the month in which application is received.

⇨ A Non-resident(NRI) can remit an amount up to One million USD per financial year out of the NRO account/Sale proceeds of assets by producing the evidence documents by the remitter and certificate by a Chartered Accountant in the formats prescribed by Central Board of Direct Taxes .

→ The person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum chargeable under the Rule 37BB of the Act, shall furnish Form No.15CA (where information to be furnished for payments to a non-resident not being a company, or to a foreign company)

• Required information in Part A of Form No.15CA (https://incometaxindia.gov.in/forms/income-tax%20rules/103120000000007842.pdf ), if the amount of payment or the aggregate of such payments, as the case may be, made during the financial year does not exceed Rs.5 Lakhs.
• For any other payments, the information in Part B of Form No.15CA shall be furnished after obtaining either a certificate under section 197 or section 195.
• Part C of Form No.15CA needs to be filled after obtaining a certificate from a Chartered Accountant.

→ Form 15CB is a certificate to be furnished by an Accountant in cases where any payment / aggregate of payments exceeding ₹5 Lakh in a FY, chargeable to income tax is made to a Non-Resident ( https://incometaxindia.gov.in/forms/income-tax%20rules/103120000000007843.pdf )

• It is filed and certified by the Chartered Accountant specifies that it has been examined the agreement (wherever applicable) between Remitters and Beneficiary requiring the remittance as well as the relevant documents and books of account required for ascertaining the nature of remittance and for determining the rate of deduction of tax at source as per provisions of Chapter- XVII-B.

⇨ Form 27Q to be filed by the payer on a quarterly basis on or before due date. (Refer Tax calendar to know due dates – https://incometaxindia.gov.in/pages/deadline.aspx ). It is a TDS Return or Statement containing details of Tax Deducted at Source (TDS) deducted on payments other than salary made to Non-Resident Indian (NRI) and foreigners.