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Tax Implications for NRIs Who Want to Sell Property in India

Updated on: 15 Apr, 2022 03:54 PM

In our first part, we already discussed TDS on sale of property by resident u/s 194IA @1%. through this blog we will enhance our understanding on the tax to be deducted by Non-Resident seller. When a NRI makes a sale of property in India the buyer is required to deduct TDS under section 195 of the Income Tax Act 1961. The rate of the tax deduction is not fixed at 1% unlike section 194IA in this case. Rather, it would depend upon the nature of capital gains arising out of the transaction like

Type of Capital Gains TDS should be done at
For Long Term Capital Gains 20% + Cess
For Short Term Capital Gains 30%* + Cess

*No benefit of the slab should be allowed to NRI. Instead, the tax should be deducted at the highest slab rate of 30% presently. One of the key differences apart from the residential status and tax rate is that as per Section 195 of the Income Tax provisions, in this case, TDS needs to be done even if the amount in the transaction involved is less than Rs 50,00,000 (Fifty Lakhs). Whereas if the seller is Resident TDS liability under section 194IA only in case transaction amount is Rs 50,00,000 (Fifty Lakhs) or higher. In addition to the above, the buyer deducting tax under 194IA can deposit tax through Form 26QB. And is not mandatorily required to quote TAN (Tax Deduction and Collection Account Number). But as far as tax deduction by buyer making a purchase of property from NRI seller is concerned it is required to quote TAN compulsorily. We can summarise the discussion done above as under

Seller Resident Non Resident
Section Applicable 194IA 195
Rate of TDS 1% 20% or 30%
Transaction amount Rs 50 lakhs and above Any amount
TAN Mandatory Not mandatory
CA Certification to foreign remittance received (Form 15CB) Not required Required to certify declaration to be filed with the Income Tax Department.
Capital Gains Computation Not necessary Is always computed

For in-depth understanding about TDS on sale of property for residents under section, 194IA read our Blog.

Frequently Asked Questions

Q- Is TDS on property applicable for NRI?

When an NRI is sells property, the buyer is liable to deduct TDS @20%. TDS must be deducted at the time of making payment to NRI

Q- How NRIs can lower TDS on property sale?

The person (other than individual and HUF) is liable to deduct TDS on rent under section 194I

Q- Do NRIs need Aadhaar to sell property?

No NRI does need aadhar to sell property.

Q- How can NRI sell property in India?

NRI if sale property in india which he purchase before 3 years it have to capital gain tax @20%. In case of inherited property cost of previous owner is also considered. NRI is also subject to the TDS @20% on LTCG

Q- What is the TDS rate for NRI?

When NRI invested in certain indian assets he is taxed @ 20%.

Q- How much tax do I pay on sale of property in India?

Rate for sale of property is LTCG is 20% and STCG is added to the taxable income of the assessee and attract tax as per the slab rate.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.