Don’t forget to do TDS while Buying Property from an NRI

 

If you’re a Resident Indian buying property from a Non-Resident Indian (NRI), you’re not just signing a deal – you’re also taking on some serious tax responsibilities under the Income Tax Act.

Here’s what you must know:

1. TDS @ Full Sale Value, Not Just Gains
Unlike resident transactions (where 1% TDS applies), buying from an NRI falls under Section 195 – meaning TDS is deducted on the entire sale amount, not just the capital gain.

2. TDS Rate Varies:
• Long-term capital gain (property held > 2 yrs): 12.50% + surcharge + 4% cess
• Short-term gain: Taxed as per applicable slab rate (~30%+)

3. You (the buyer) Must:
• Obtain a TAN (Tax Deduction Account Number)
• Deduct TDS before payment
• Deposit TDS using Challan ITNS 281
• File TDS Return (Form 27Q)
• Issue Form 16A to the seller

4. Lower/NIL TDS Option:
The NRI seller can apply for a Lower Deduction Certificate (Form 13) from the IT Department to reduce the TDS burden.

5. Repatriation?
The seller will need Form 15CA/15CB (from a CA), along with proof of tax compliance for funds to be remitted outside India.

Surcharge will be :
10% in case Sale Value above 50L and up to 1 Cr;
15% in case Sale Value above 1 Cr and up to 2 Cr; and
25% in case Sale Value above 2 Cr and up to 5 Cr;