27Q: TDS on Sale of Property by NRI

The income arising from the sale of the property is taxable under capital gains for residents and NRI (Non-Resident Indians).

If you purchase a property from an NRI, you’re required to deduct TDS under section 195 of the Income Tax Act. TDS is applicableI depending on whether it’s short-term or long-term capital gains.

How much TDS is applicable?

Long-term capital gains are taxed at 20%, while short-term gains are taxed at the applicable income tax slab rates for NRIs based on total income taxable in India.

The buyer of the property is liable to deduct the TDS at the rate in force as they make the payments to the NRI. The rate in force means the rate at which a particular type of income is taxable under the provisions of the Income Tax Act. Hence TDS rate is the same as applicable to capital gain income.
Even if any advance is being paid for the purchase of property, TDS is required to be deducted.

In addition, surcharges and cess are also applicable to capital gains.

Tax will be applicable even in the case of inherited properties for NRIs. Make sure you consider the date of purchase of the original owner. In such a case, the property’s cost shall be the cost to the previous owner.

The buyer of the property must comply with mandatory reporting requirements.

  1. Get the TAN number: The buyer of the property must have a TAN number for the deduction of TDS.
  2. Deduct TDS: As a buyer, if you’ve deducted a TDS, you’re required to deposit TDS to ITD within 7 days from the end of the month in which the TDS has been deducted.
  3. File TDS Return: After deducting the TDS, now buyer of the property must furnish a quarterly TDS Return in Form 27Q.
  4. Issue Form No.16A: The buyer must also provide Form 16A to the seller of the property within 15 days of filing the TDS Return. Further, the buyer can download the certificate from the TRACES.

Can a seller apply for a Nil rate/lower rate TDS certificate?

As the computation of capital gains has to be done by an assessing officer rather than the seller himself. Yes, the NRI can apply for tax deductions at lower rates from the AO of income tax. The seller can apply in Form 13 to obtain a Nil/lower rate TDS certificate.

Then, the seller (NRI) is required to give this certificate to the buyer and the buyer will deduct the TDS as per the rates mentioned in the income tax certificate.

But what if the certificate is not obtained by the seller from the AO? then the TDS will be deducted on the applicable TDS rate than a lower date. So, it is quite important for the seller to obtain this certificate from the AO.

Read more about TDS on Sale of property by NRI - Learn by Quicko.

Property was never completed, in the process of getting refund through RERA. Looks like they are only going to refund the amount paid to builder, not the TDS paid to Income Tax department, not sure how it works. Does TDS eventually goes to the builder? I was paying 1% of demand amount to IT department. Is it possible to get the TDS back?

No worries. The TDS will reflect in your 26AS and AIS / TIS. Based on that you can file ITR and get back your TDS amount. Ensure you collect the challan for TDS payment and Form 27Q (after respective Quarter finished). You are entitled to keep the records.

Thanks @Srikanth Last TDS was paid July 2018, paid around Rs. 40k total in TDS since Oct 2013. How do I file ITR? Can I still claim starting from 2013?

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I think you need professional help. Wait for Quicko response.

ok thanks I managed to log in to income tax e filing but it’s not very user friendly.

Hi @khadanja

As rightly said by @Srikanth, the TDS will be reflected in your form 26AS for AY 2023-24, so you can claim the same as tax credits while filing your ITR.

However, you cannot claim the TDS since 2013.

In case you want more clarity, you can Ask an Expert.

Hope this helps.

Do I need to log in to TRACES to claim TDS refund for last year or income tax e filing portal. Do I require a physical token for traces?

Hi @khadanja

You can claim the TDS while filing your ITR.

What will be the Nature of remittance in form 27Q when buying property from NRI having long term capital gains?

Form 15A/15B is only required when buyer is doing outward foreign remittance, correct?
If the payment to seller is made in Indian Bank account then 15A/15B is not applicable, correct?

Hey @Ankit_Gupta1,

The nature of remittance will be long-term capital gains. Moreover, the filing of Form 15CA/CB depends on the transaction amount.

You can connect with the respective bank to confirm the requirement of Form 15CA/CB.

You can also Book a MEET, if you want our assistance in filing Form 27Q.

Hope this helps!