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TDS on Property

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TDS on Property refers to the requirement of deducting tax at source (TDS) on certain property transactions as per the provisions of the Income Tax Act, 1961 in India. TDS on property transactions was introduced to ensure that the government collects taxes on property transactions at the time of payment, thereby preventing tax evasion. Overall, TDS on property transactions is aimed at ensuring tax compliance and revenue collection by the government, and it is important for both buyers and sellers of property to be aware of their obligations under the TDS provisions.

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Description

TDS (Tax Deducted at Source) on property transactions for NRIs (Non-Resident Indians) is a tax provision implemented by the Indian government to ensure that taxes are collected at the source itself when certain types of transactions occur. This provision is governed by the Income Tax Act, 1961, and it applies to various transactions, including property transactions involving NRIs.

  1. Applicability: TDS on property transactions is applicable when an NRI sells a property located in India. It is also applicable when an NRI purchases a property from a resident Indian.
  2. Rate of TDS: The rate of TDS applicable on property transactions involving NRIs can vary depending on various factors such as the type of property, its value, and the nature of the transaction. As of my last update, the TDS rate on the sale of property by an NRI is typically 20% of the sale value. However, this rate may be subject to change based on amendments to the tax laws.
  3. Responsibility for Deduction: The responsibility for deducting TDS lies with the buyer of the property. In the case of a property sale by an NRI, the buyer must deduct TDS from the payment made to the NRI seller. Similarly, in the case of a property purchase by an NRI from a resident Indian, the NRI buyer is responsible for deducting TDS.

NRIs involved in property transactions in India need to understand and comply with TDS provisions to avoid any legal or tax-related complications. Consulting with a qualified tax advisor or chartered accountant can provide specific guidance tailored to individual circumstances.

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When TDS (Tax Deducted at Source) is applicable on property transactions involving NRIs (Non-Resident Indians), the following documents are typically required:

  1. TDS Certificate:
    • Form 16B: This certificate is issued by the buyer (deductor) to the seller (NRI) as proof of TDS deducted on property sale proceeds. It includes details such as the amount of TDS deducted, PAN of the deductor and deductee, property details, and TDS payment details.
  2. Sale Deed:
    • A copy of the sale deed or transfer document is required to confirm the details of the property transaction, including the sale price, date of sale, and property location.
  3. PAN Card:
    • PAN (Permanent Account Number) card of both the buyer (deductor) and seller (NRI) is required for TDS deduction and reporting purposes.
  4. Property Registration Documents:
    • Copies of property registration documents, including the title deed and other relevant agreements, are needed to verify the ownership and details of the property being sold.
  5. Proof of NRI Status:
    • Proof of Non-Resident Indian (NRI) status, such as a valid visa or work permit from the country of residence, may be required.
  6. Bank Account Details:
    • Details of the NRI’s bank account where the TDS refund, if any, will be credited.
  7. Form 26QB:
    • This is the challan-cum-statement for TDS deposited on the sale of property. It includes details such as the buyer and seller’s PAN, property details, TDS amount, and payment details.
  8. Foreign Inward Remittance Certificate (FIRC):
    • FIRC is required if the sale consideration is repatriated outside India. It serves as proof of the source of funds received from abroad.
  9. Capital Gains Tax Calculation:
    • If applicable, documents related to the calculation of capital gains tax on the property sale proceeds should be provided.
  10. Power of Attorney (POA) (if applicable):
    • If the NRI has appointed someone in India to represent them during the property transaction, a Power of Attorney document may be required.

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