Tax Deduction at Source (TDS) for NRIs Selling Properties to Other NRIs: A Comprehensive Guide
When an NRI (Non-Resident Indian) buyer purchases property from another NRI seller, it is essential to deduct Tax Deducted at Source (TDS) and deposit it with the Income Tax Department. Here is a step-by-step guide to navigate the process effectively.
Tax Deduction at Source (TDS) Process
Determining the Applicable TDS Rate
For non-resident sellers (NRI):
The applicable TDS rate is 20% plus cess and surcharge.
For resident sellers (if the seller provides a certificate from a Chartered Accountant):
The applicable TDS rate is 10% plus cess and surcharge.
Calculating TDS
Once the applicable TDS rate is determined, calculate the TDS as follows:
TDS Sale consideration x TDS rate
TDS Deposit Process
Obtaining a Seller's PAN
Ensure that the seller has a Permanent Account Number (PAN). This is a crucial step before proceeding to fill Form 27Q.
Filling Form 27Q TDS on Non-Resident Payments
Fill out Form 27Q to report TDS on non-resident payments.
Deposit TDS Online
Deposit the TDS online through the following methods:
NSDL website (Direct link unavailable): Please refer to the official NSDL website for the most up-to-date information.
Challan 26QB available on NSDL website: Access and complete the Challan 26QB as per the instructions provided.
Banks authorized by NSDL: Visit your nearest authorized bank branch to make the deposit.
Note: It is advisable to check the latest guidelines and instructions provided by NSDL on their official website.
Time Frame for TDS Deposit
Ensure that TDS is deposited within 7 days from the end of the month in which the TDS was deducted.
TDS Certificate
Generating Form 16A TDS Certificate
Generate Form 16A, the TDS certificate, from the NSDL website. This certificate serves as proof of the TDS deduction.
Providing the TDS Certificate to the Seller
Provide the Form 16A certificate to the seller to document the TDS deduction.
Filing Form 15CA and 15CB
Filing Form 15CA (Information of Remittance)
File Form 15CA online to inform the tax department about the TDS payment. This form should be submitted even if no TDS is deducted if the payment exceeds a certain threshold.
OBTAINING Form 15CB (Certificate from Chartered Accountant)
If the payment exceeds Rupees 5 lakhs, obtain Form 15CB, a certificate from a Chartered Accountant, to validate the transaction.
Documentation and Compliance
Keep the following documents for record-keeping purposes:
Sale deed: Documentation of the property sale.
TDS certificate (Form 16A): A record of the TDS deduction.
TDS payment receipt (Challan 26QB): A record of the TDS deposited.
Form 15CA and 15CB if applicable: Validate the transaction for amounts exceeding 5 lakhs.
Consequences of Non-Compliance
Failure to comply with TDS regulations can lead to severe penalties and interest:
Penalty under Section 2011 of the Income Tax Act: A fine for not deducting and depositing TDS.
Interest under Section 2011A of the Income Tax Act: Interest may be levied on the amount due.
For the latest updates and guidelines, please refer to the official websites of the Income Tax Department and NSDL.