Buying Property from an NRI in India FY 2026–27: Complete Tax, TDS & DTAA Guide

By CA Surekha Ahuja

FY 2026–27 brings major procedural and compliance changes for buyers purchasing property from NRIs in India, including PAN-based TDS simplification from 1 October 2026 and revised compliance forms under the Income Tax Act, 2025.

This guide explains the complete tax, TDS, DTAA, repatriation and compliance framework applicable to property purchases from NRI sellers in India during FY 2026–27.

Key Change in FY 2026–27

1 April 2026 – 30 September 2026

• Buyer generally required to obtain TAN
• TDS governed by Section 393(2)(a)

From 1 October 2026

• PAN-based simplified TDS mechanism introduced
• No TAN requirement in eligible cases
• Section 393(2)(b)

Old vs New Section Mapping

Income Tax Act, 1961	Income Tax Act, 2025	Purpose
Section 194-IA	Section 394	Resident property TDS
Section 195	Section 393(2)	TDS on payments to NRIs
Section 195(8A)	Section 393(2)(b)	PAN-based simplified TDS
Section 206AA	Section 402	Higher TDS for no PAN
Section 197	Section 395	Lower/nil deduction certificate
Form 13	Form 128	Lower/nil TDS application
Form 15CA	Form 145	Foreign remittance declaration
Form 15CB	Form 146	CA remittance certificate
Form 26AS	Form 168	Tax credit statement
Form 16A	Form 131	TDS certificate
Form 27Q	Form 144	NRI TDS return
Section 54	Section 123	Residential reinvestment exemption
Section 54F	Section 124	LTCG reinvestment into residential house
Section 54EC	Section 125	Investment in specified bonds

Correct Tax, TDS & Surcharge Rates – FY 2026–27

Category	Final Tax Rate	Practical TDS Rate*
LTCG (holding ≥24 months)	12.5% + surcharge + 4% cess	12.5% + surcharge + 4% cess
STCG (holding <24 months)	Slab rates	Generally 30% + surcharge + 4% cess

*Subject to lower/nil deduction certificate under Section 395.

Correct Surcharge Position for Property LTCG

LTCG Taxable Under Section 112

Total Income	Applicable Surcharge
₹50 lakh – ₹1 crore	10%
₹1 crore – ₹2 crore	15%
Above ₹2 crore	15% cap continues

Cess: 4% on tax plus surcharge.

Enhanced surcharge rates of 25% and 37% do not apply to LTCG taxable under Section 112. Effective surcharge on such gains remains capped at 15%.

Most Important Rule

In NRI property transactions, TDS is generally deducted on the full sale consideration unless the seller obtains a lower deduction certificate.

Although tax is legally deductible on the sum chargeable to tax, buyers commonly deduct on gross consideration to avoid exposure and litigation risk.

Essential Due Diligence Before Purchase

Before payment or registration, verify:

• Encumbrance Certificate
• Complete title chain
• Mutation records
• Seller PAN
• Passport / OCI / PIO documents
• Tax Residency Certificate (TRC)
• Form 10F in DTAA cases

Maintain:

• Agreements
• TDS records
• Bank trail
• Capital gains computation
• Registration documents

for at least 7 years.

Most Important Tax Planning Tool

Section 395 – Form 128

Lower/Nil TDS Certificate.

Why It Matters

Without Form 128:

• TDS may substantially exceed actual capital gains liability
• Seller refund may remain blocked for months

With Form 128:

• TDS aligns closer to actual taxable gains
• Significant cash-flow relief possible

Best Practice

Apply 45–60 days before registration.

TDS Compliance – Before 1 October 2026

Buyer generally must:

• Obtain TAN through Form 49B
• Deposit TDS through ITNS 281
• File TDS return in Form 144
• Issue TDS certificate in Form 131

TDS Compliance – From 1 October 2026

Simplified PAN-based process expected:

• No TAN requirement in eligible cases
• PAN-based compliance
• Challan-cum-statement mechanism
• Simplified certificate generation

Capital Gains Exemptions – FY 2026–27

New Section	Earlier Section	Benefit	Limit
Section 123	Section 54	Residential reinvestment	₹10 crore
Section 124	Section 54F	LTCG reinvestment into residential house	₹10 crore
Section 125	Section 54EC	NHAI / REC bonds	₹50 lakh

DTAA Position – No Direct TDS Relief

India generally retains taxation rights over immovable property situated in India.

Therefore:

• TDS continues to apply in India
• DTAA usually provides foreign tax credit relief later in country of residence

Repatriation Rules

NRI sellers may generally repatriate:

Up to USD 1 million per financial year

subject to:

• Payment of taxes
• FEMA compliance
• Form 145 / Form 146 compliance
• Banking documentation

Key Compliance Risks

Issue	Consequence
Delay in TDS deduction	Interest liability
Delay in TDS deposit	Interest + penalty
Short deduction	Buyer may be treated as assessee in default
No/invalid PAN	Higher TDS exposure
Incorrect filings	Penalty exposure

Interest under Section 401(1A):

• 1% per month for non-deduction
• 1.5% per month for delayed deposit

Final Takeaways

• PAN verification should happen first
• Form 128 is the single most important tax planning tool
• Post-1 October 2026 transactions are procedurally simpler
• LTCG surcharge on property gains is effectively capped at 15%
• DTAA does not remove Indian TDS
• Maintain complete tax and TDS documentation
• High-value transactions should always be CA-reviewed before payment

Final Practical Strategy

Form 128 filed early + PAN verified upfront + post-1 October 2026 execution (where feasible) = the most efficient structure for buying property from an NRI in India during FY 2026–27.

Clause 422, Income-tax Bill 2025: Why NRIs Must Now Treat Tax Reconciliation as Asset Protection

 By CA Surekha S Ahuja

No panic. No noise. Just a quiet change in recovery law that every NRI with Indian assets should understand.

The proposed Income-tax Bill, 2025 introduces Clause 422, a provision that subtly but decisively reshapes the manner in which outstanding tax dues may be recovered. While the authority to recover taxes is not new, the speed and sequencing under the new framework marks a material shift, particularly for Non-Resident Indians (NRIs) who manage Indian assets and compliance remotely.

This note is intended as a professional advisory with an alert element — to help NRIs understand the change clearly, assess their exposure calmly, and take preventive steps where required.

Understanding Clause 422 — What Has Really Changed

Clause 422 consolidates and modernises the recovery provisions that earlier existed across multiple sections of the Income-tax Act, 1961. The most significant change is procedural compression.

Once a tax demand becomes legally enforceable, the tax authorities may initiate recovery actions such as attachment of bank accounts, fixed deposits, rental receivables, or immovable property, where recoverable dues exceed the prescribed threshold.

Importantly, this does not remove the taxpayer’s right to appeal, seek rectification, or obtain relief through due process. However, the practical time gap between demand crystallisation and recovery action has reduced.

Why This Matters More for NRIs

Most NRIs manage Indian tax matters in good faith, relying heavily on tax deducted at source and third-party reporting. While this model works in most cases, it also means that system-driven mismatches, rather than intentional defaults, are the primary source of exposure.

Typical areas where NRIs encounter issues include rental income where TDS under Section 195 is short or incorrectly deposited, property sales where TDS at 30 percent exceeds actual capital gains, refunds withheld due to automated verification or risk flags, and small interest or penalty demands that remain unnoticed on the e-filing portal.

Under Clause 422, unresolved mismatches — not intent — may lead to faster recovery actions.

How Risk Commonly Builds Up in Practice

Experience shows that recovery exposure rarely begins with large tax defaults. More often, it starts with a small difference, an untracked demand, or a pending clarification. In a fully digital environment, silence or delay is interpreted as non-response, allowing the system to move forward.

Clause 422 does not change the law’s intent; it changes the tempo.

Advisory Safeguards NRIs Should Implement

Periodic reconciliation of Form 26AS and AIS is now essential, not optional. This ensures that income, TDS credits, and system records are aligned and that no demand remains unnoticed.

Where income has been under-reported inadvertently or TDS credit has been missed, ITR-U provides a structured and lawful route to regularise matters. Used timely, it prevents minor gaps from maturing into recovery proceedings.

Equally important is maintaining complete DTAA documentation, including a valid Tax Residency Certificate and Form 10F. Proper treaty compliance often reduces excess TDS and avoids refund-driven mismatches that later convert into demands.

What Clause 422 Does Not Mean

Clause 422 does not permit arbitrary attachment of assets. It does not override appellate remedies or dilute taxpayer protections. Compliant taxpayers remain fully safeguarded.

The provision simply reflects an expectation of timely response and data accuracy in a technology-driven tax ecosystem.

Professional Perspective

Clause 422 reinforces a fundamental professional principle:

In a real-time tax system, timely reconciliation is the most effective form of asset protection.

For NRIs holding Indian real estate, rental portfolios, bank deposits, or repatriation-linked investments, compliance discipline is now a strategic necessity, not a procedural formality.

Conclusion

There is no cause for alarm.
There is, however, a clear reason for attentiveness.

Clause 422 does not introduce a new power; it reduces the cushion of time that taxpayers previously relied upon. NRIs who monitor, reconcile, and regularise their tax positions remain on solid ground. Those who delay may find that recovery mechanisms move faster than expected.

Calm compliance continues to be the strongest safeguard.

TDS Credit Denial to NRIs Due to Buyer’s Procedural Error: A Judicial Lifeline and Compliance Blueprint

A Professional Guidance Note for NRIs Selling Property in India

I. Executive Summary

A recent judgment by the Delhi High Court in [NRI v. Union of India & Ors., 2025] has redefined how the Indian tax system must balance procedural compliance with substantive justice. An NRI seller faced a ₹46 lakh tax demand because the resident buyer wrongly deposited 20% TDS in Form 26QB—meant for residents—instead of Form 27Q, applicable for non-resident transactions under Section 195. This error led to denial of TDS credit in the NRI’s AIS and ITR, triggering tax, penalty, and repatriation complications. The Court, however, ruled in favour of the NRI, directing the Revenue to rectify the credit and process refund.

This case holds critical compliance lessons and legal implications for NRIs, resident property buyers, and tax professionals.

II. Legal Framework

1. Section 195 – TDS on Payments to Non-Residents

“Any person responsible for paying to a non-resident... shall, at the time of payment, deduct income-tax thereon at the rates in force.”
— Section 195, Income-tax Act, 1961

• Applicability: Any sum (excluding salaries) paid to an NRI taxable under the Act.

• TDS Rate: 20% on capital gains from property (plus surcharge and cess).

• TAN Requirement: Mandatory for buyer to deduct and deposit TDS under Section 195.

2. Section 199 – Credit of TDS

“Any deduction made in accordance with... Chapter XVII shall be treated as a payment of tax on behalf of the person from whose income the deduction was made.”

• Credit is linked to PAN and Form 26AS/AIS.

• Procedural lapses should not override this statutory entitlement.

3. Form 26QB vs 27Q – The Core Error

Particulars	Form 26QB	Form 27Q
Section Applicable	194-IA	195
Buyer Type	Resident	Resident
Seller Type	Resident	Non-Resident (NRI)
TDS Rate	1%	20% (plus surcharge & cess)
TAN Required	Not Required	Mandatory
TDS Certificate	Form 16B	Form 16A

III. The Landmark Case: Facts & Chronology

Case Citation:

[NRI v. Union of India & Ors., Delhi High Court, W.P. (C) 5216/2025, Decided on May 27, 2025]

Summary Timeline:

Date	Event
1998	NRI (USA-based) bought a Pune property
2015	Agreed to sell for ₹2 crore; buyer deducted 20% TDS (~₹18.68 lakh)
Oct 2015	NRI paid advance tax ₹1.91 lakh and repatriated balance
Mar 2023	Notice under Section 148 issued alleging income escaped assessment
Mar 2025	Assessment order demanded ₹46 lakh tax; penalty u/s 270A initiated
Mar 2025	NRI explained TDS deposited under wrong form (26QB instead of 27Q)
May 2025	Delhi HC ordered correction and refund based on tax paid and law

IV. Key Issues & Legal Interpretation

🔸 1. Substance Over Form

• TDS @20% was deducted and deposited with the government.

• Mistake: Deposit was done in Form 26QB (meant for residents).

• Held: Revenue suffered no loss. Tax liability was discharged.

“A buyer’s procedural error cannot prejudice a compliant NRI seller.”
— Delhi HC, May 2025

🔸 2. Judicial View on SOP vs Statutory Rights

• SOP required buyer’s indemnity and consent to correct the form.

• Court held: Administrative SOP cannot override taxpayer’s statutory right to TDS credit under Section 199.

🔸 3. AIS/26AS Not Reflecting Credit

• Since Form 26QB did not link the TDS to the NRI’s PAN, credit did not reflect.

• The I-T system’s rigidity led to tax demand and penalty—even though funds were with the government.

V. Compliance Advisory for NRIs and Resident Buyers

✅ NRI Seller Compliance Checklist

Action	Why It Matters
Inform buyer you are an NRI	Ensures correct section (195) and form (27Q)
Verify TAN availability	Form 27Q requires TAN—not just PAN
Insist on Form 27Q and Form 16A	Critical for TDS credit in AIS/26AS
Monitor Form 26AS & AIS	Ensure timely credit before ITR filing
File ITR within timeline	Claim TDS credit or refund correctly
Document everything	Avoid disputes in case of future litigation

 Resident Buyer Responsibilities

Task	Risk of Non-Compliance
Deduct TDS @20% + cess under Sec 195	Short deduction leads to penalty
Use TAN & file Form 27Q	Filing 26QB for NRI seller is invalid
Issue Form 16A to seller	Proof of TDS deduction and deposit
Correct any filing errors swiftly	Errors in form type can delay seller’s refund for years
Cooperate in form correction	Courts may compel you to assist if NRI moves legal route

VI. Consequences of Procedural Error

Error	Outcome
Filing 26QB instead of 27Q	TDS doesn’t reflect under NRI PAN
AIS and 26AS mismatch	TDS credit cannot be claimed in ITR
Tax demand under Sec 148	Treated as income escaping assessment
Penalty under Sec 270A	Misreporting of income risk
Delay in refund	Even years after TDS deposited

VII. High Court Decision – Summary of Directions

“Revenue is directed to correct the record and reflect the TDS deposited by the buyers to the petitioner’s credit under the return filed in the Form 26QB with effect from the date, the amount was deposited... compute the amount of refund due... All contrary orders stand set aside.”
— Delhi High Court, May 2025

This ruling upholds:

• Taxpayer’s right to credit under Section 199

• Doctrine of fairness and absence of statutory bar on rectification

• Responsibility of the Revenue to uphold substance over procedure

VIII. Future Compliance & Policy Suggestions

• CBDT Clarification Needed: Permit retrospective mapping of Form 26QB to NRI PAN if TDS is deposited with valid PAN.

• Amendment to TRACES & AIS: Allow automatic re-mapping on submission of affidavit + challan copy.

• TDS Correction Portal: Create an interface for correction of form type errors with NRI consent and buyer indemnity.

IX. Conclusion: Legal & Practical Compass for NRIs

This case sets a precedent in tax administration — affirming that technical lapses should not block legitimate TDS credit, especially when tax is fully deducted and paid. It’s a wake-up call for NRIs and buyers to move beyond mere paperwork and enforce legal clarity at the transaction stage.

“In tax, as in law, intent and evidence must triumph over form.”

By internalizing these lessons and setting clear protocols, NRIs can protect themselves from litigation, wrongful tax demands, and financial stress — while the tax ecosystem moves closer to fair, transparent enforcement.

Guide to Buying Property from NRIs: Revised TDS Rates, Key Compliance Steps, and Practical Challenges

When a person purchases immovable property from a Non-Resident Indian (NRI) in India, they are liable to deduct Tax Deducted at Source (TDS) on the entire sale consideration (on every payment made to the seller), as provided under Section 195 of the Indian Income Tax Act, 1961. It is crucial to understand the Tax Residency status of the seller before proceeding with the transaction since the TDS provisions differ between Resident Indians and NRIs.

Who is an NRI for Income Tax Purposes?

An NRI for Income Tax purposes is defined as a person who meets any of the following conditions:

1. Less than 182 days of stay in India during the Financial Year (FY), or
2. Stayed less than 60 days in India during the FY and less than 365 days in the last 4 FYs (Both conditions must be fulfilled).
3. An Indian citizen who leaves India for employment or as a member of the crew of an Indian ship, and has resided in India for less than 182 days in the FY and less than 365 days in the last 4 FYs (Both conditions must be fulfilled).
4. An Indian citizen or Person of Indian Origin (POI) visiting India, having a total Indian income of less than Rs. 15 lakh (other than income from foreign sources), who has resided in India for less than 182 days in that FY and less than 365 days in the immediately preceding 4 FYs.
5. An Indian citizen or POI visiting India, having a total Indian income of more than Rs. 15 lakh (other than income from foreign sources), who has resided in India for less than 120 days in that FY and less than 365 days in the immediately preceding 4 FYs.

It is advisable for the buyer to verify the Tax Residency status of the seller, as TDS provisions vary for Resident Indian Sellers and NRI Sellers.

TDS Rates on Property Sale

1. Resident Indian Seller:

• The TDS rate for Resident Indian Sellers is 1% on the sale consideration above Rs. 50 lakh.

2. NRI Seller:

• The minimum limit of Rs. 50 lakh does not apply for NRI Sellers. TDS is applicable on all property transactions, regardless of the sale consideration, under Section 195 of the Income Tax Act.

TDS Rates for Sale of Property by NRIs (Before 23.07.2024)

The following table outlines the TDS rates applicable for the sale of immovable properties held by NRIs before 23.07.2024:

Sale Consideration	TDS Rate	Surcharge	Total Tax	Health & Education Cess	Effective TDS Rate
Less than Rs. 50 Lakhs	20%	Nil	20%	4% of Total Tax	20.8%
Rs. 50 Lakhs to Rs. 1 Crore	20%	10% of TDS	22%	4% of Total Tax	22.88%
Rs. 1 Crore to Rs. 2 Crores	20%	15% of TDS	23%	4% of Total Tax	23.92%
Rs. 2 Crore to Rs. 5 Crores	20%	15% of TDS	23%	4% of Total Tax	23.92%
Above Rs. 5 Crores	20%	15% of TDS	23%	4% of Total Tax	23.92%

Example:

If an NRI holds the property for more than 2 years and is selling it for Rs. 1.5 crore before 23.07.2024, the TDS calculation would be as follows:

• Sale Consideration: Rs. 1,50,00,000
• TDS @ 20%: Rs. 30,00,000
• Surcharge @ 15%: Rs. 4,50,000
• Total Tax: Rs. 34,50,000
• Health & Education Cess (4%): Rs. 1,38,000
• Total TDS: Rs. 35,88,000

Thus, the seller will receive only Rs. 1,14,12,000 out of the sale price of Rs. 1.5 crore, with the balance of Rs. 35,88,000 being deducted by the buyer and deposited with the Income Tax Department as TDS.

Revised TDS Rates for Sale of Property by NRIs (After 23.07.2024)

The Finance Bill 2024 has revised the TDS rates for the sale of property by NRIs, effective 23.07.2024. The revised TDS rates are as follows:

Sale Consideration	TDS Rate	Surcharge	Total Tax	Health & Education Cess	Effective TDS Rate
Less than Rs. 50 Lakhs	12.5%	Nil	12.5%	4% of Total Tax	13%
Rs. 50 Lakhs to Rs. 1 Crore	12.5%	10% of TDS	13.75%	4% of Total Tax	14.3%
Rs. 1 Crore to Rs. 2 Crores	12.5%	15% of TDS	14.375%	4% of Total Tax	14.95%
Rs. 2 Crore to Rs. 5 Crores	12.5%	15% of TDS	14.375%	4% of Total Tax	14.95%
Above Rs. 5 Crores	12.5%	15% of TDS	14.375%	4% of Total Tax	14.95%

Example:

If an NRI holds the property for more than 2 years and sells it for Rs. 1.5 crore on or after 23.07.2024, the TDS calculation would be as follows:

• Sale Consideration: Rs. 1,50,00,000
• TDS @ 12.5%: Rs. 18,75,000
• Surcharge @ 15%: Rs. 2,81,250
• Total Tax: Rs. 21,56,250
• Health & Education Cess (4%): Rs. 86,250
• Total TDS: Rs. 22,42,500

Thus, the seller will receive only Rs. 1,27,57,500 out of the sale price of Rs. 1.5 crore, with the balance of Rs. 22,42,500 being deducted by the buyer and deposited with the Income Tax Department as TDS.

Obligations of the Buyer

1. Deduction and Deposit of TDS: The buyer is obligated to deduct TDS at the prescribed rates (either the standard rates or the lower/nil deduction certificate issued by the Income Tax Department) on every payment made to the seller.

2. Application for TAN: The buyer must apply for a Tax Deduction Account Number (TAN). If the property is jointly purchased, all parties involved in the investment are required to obtain a TAN.

3. Deposit of TDS: The TDS must be deposited with the Income Tax Department via e-challan by the 7th day of the next month after payment to the seller.

4. Filing TDS Return: After depositing TDS, the buyer must file the TDS return in the following quarter and download Form 16A to provide to the seller.

5. Penalties for Non-Compliance: Failure to deduct TDS at the prescribed rate can result in penalties under Section 271C of the Income Tax Act. The buyer will be liable for the penalty equivalent to the TDS amount not deducted, along with interest under Section 201.

Advice to Buyers and Sellers

• For Buyers: It is essential to verify the tax residency status of the seller before entering into a property transaction. If the seller is an NRI, TDS must be deducted at the prescribed rates. In case the seller provides a Nil/Lower Deduction Certificate, follow the rates mentioned in the certificate.

• For Sellers: Non-compliance with TDS deduction rules may result in difficulties repatriating the sale proceeds abroad. Additionally, misrepresentation of tax residency status can attract penalties and prosecution by the Income Tax Department.

Navigating TDS on NRI Property Sales in India: A Comprehensive Guide to Rates, Rules, and Compliance Before and After 23rd July 2024

When a Non-Resident Indian (NRI) sells immovable property in India, the buyer is obligated to deduct tax at source (TDS) under Section 195 of the Income Tax Act, 1961. The correct application of this provision is crucial for ensuring tax compliance, avoiding penalties, and facilitating the seller’s ability to repatriate funds abroad. This guide provides a detailed legal and practical analysis of the applicable TDS rates, the impact of changes effective 23rd July 2024, and compliance steps for both buyers and sellers.

1. Who is an NRI for Tax Purposes

Under Indian tax law, an individual is treated as a Non-Resident Indian (NRI) for a financial year if they meet any of the following:

• Stayed in India less than 182 days during the relevant FY,

• OR stayed less than 60 days in the FY and less than 365 days in the preceding 4 FYs.
  Additional thresholds apply for Indian citizens or Persons of Indian Origin (PIOs) visiting India:

Indian Income (excluding foreign)	Residential Status Threshold
Less than ₹15 lakh	Resident if stay ≥ 182 days
₹15 lakh or more	Resident if stay ≥ 120 days

Thus, many overseas Indians selling property in India qualify as NRIs under these tests.

2. TDS on Property Sales – Section 195 Framework

2.1 📅 Transactions Before 23rd July 2024

For properties held for more than 2 years (classified as Long-Term Capital Assets), the base TDS rate is 20%. Surcharge and cess are added based on sale value.

Sale Consideration	Base Rate	Surcharge	Effective TDS Rate (Incl. 4% Cess)
Less than ₹50 lakhs	20%	Nil	20.8%
₹50 lakhs – ₹1 crore	20%	10%	22.88%
₹1 crore – ₹2 crore	20%	15%	23.92%
₹2 crore – ₹5 crore	20%	15% (capped)	23.92%
Above ₹5 crore	20%	15% (capped)	23.92%

Note: As per the Finance Act 2023, surcharge on long-term capital gains is capped at 15%, even if the total income crosses ₹2 crore or ₹5 crore. Earlier, it could go up to 37%.

Example:
Sale Price: ₹1.5 crore

• LTCG TDS @ 20% = ₹30,00,000

• Surcharge @ 15% = ₹4,50,000

• Subtotal = ₹34,50,000

• Cess @ 4% = ₹1,38,000

• Total TDS = ₹35,88,000

• Net to seller = ₹1,14,12,000

2.2 📅 Transactions On or After 23rd July 2024

As per CBDT Notification dated 23.07.2024, the base TDS rate on LTCG for NRIs is reduced to 12.5%. The surcharge cap of 15% remains.

Sale Consideration	Base Rate	Surcharge	Effective TDS Rate (Incl. 4% Cess)
Less than ₹50 lakhs	12.5%	Nil	13%
₹50 lakhs – ₹1 crore	12.5%	10%	14.3%
₹1 crore – ₹2 crore	12.5%	15%	14.95%
₹2 crore – ₹5 crore	12.5%	15% (capped)	14.95%
Above ₹5 crore	12.5%	15% (capped)	14.95%

Example:
Sale Price: ₹1.5 crore

• LTCG TDS @ 12.5% = ₹18,75,000

• Surcharge @ 15% = ₹2,81,250

• Subtotal = ₹21,56,250

• Cess @ 4% = ₹86,250

• Total TDS = ₹22,42,500

• Net to seller = ₹1,27,57,500

3. Importance of Execution Date

The date of execution (transfer) determines the applicable TDS rate—not the agreement date.

 Scenario:

• Agreement Date: 1st June 2024

• Execution Date (Sale Deed): 1st August 2024

🔍 Since execution is after 23rd July 2024, the reduced rate of 12.5% (with capped surcharge) will apply.

4. Buyer’s Legal Responsibilities

 Key Compliance Steps:

1. Obtain TAN – A Tax Deduction Account Number is mandatory under Section 195.

2. Deduct Correct TDS – As per execution date and value brackets.

3. Deposit TDS – By the 7th of the next month via e-challan 281.

4. File Form 27Q – Quarterly TDS return for NRI payments.

5. Issue Form 16A – TDS certificate to the seller.

⚠️ Consequences of Non-Compliance:

Default	Penalty / Interest
TDS not deducted	Equal to shortfall u/s 271C
TDS deducted but not deposited	Interest u/s 201(1A) @ 1–1.5% per month
Incorrect rate used	Entire shortfall becomes buyer’s liability

Example:
TDS deducted @ 1% (wrong) instead of 20.8% on ₹1.5 Cr →
• TDS shortfall ≈ ₹34,38,000
• Buyer liable for penalty and interest on this amount

5. Seller’s Legal and Strategic Considerations

 What NRIs Must Ensure:

• Declare NRI Status: Misclassification can lead to wrong TDS deduction.

• Plan Repatriation: Without valid TDS, Form 15CA/15CB issues may block repatriation.

• Apply for Lower/Nil TDS Certificate: Via Form 13, especially if actual capital gain is much lower than sale consideration.

• File ITR in India: Claim refund, if TDS exceeds tax payable.

⚠️ Without a Lower Deduction Certificate, TDS is deducted on gross sale value, not net capital gain.

Summary Table of Key Rates

Period	Base TDS	Max Surcharge	Effective Max Rate (incl. 4% cess)
Before 23 July 2024	20%	15%	23.92%
On/After 23 July 2024	12.5%	15%	14.95%

Final Advice to NRIs and Buyers

✔️ Buyers must exercise due diligence: get TAN, deduct TDS at the correct rate, file timely returns, and issue certificates.
✔️ NRIs must plan their transactions smartly—seek professional advice, obtain lower deduction certificates, and file Indian tax returns to claim refunds or carry forward losses.

How to Download a Lower Deduction Certificate (LDC) on TRACES: A Professional Guide for NRIs

For Non-Resident Indians (NRIs) who have applied for a lower deduction certificate through Form 13, it is essential to know the proper procedure for downloading the certificate and ensuring that all related TDS filings are accurate. This guide provides a comprehensive, step-by-step process for accessing the certificate and highlights critical considerations to ensure compliance and proper crediting of TDS.

Step 1: Logging into TRACES as a Taxpayer

1. Visit the TRACES Portal:

   • Navigate to the TRACES portal.

2. Choose 'Taxpayer':

   • On the login page, select 'Taxpayer' instead of 'Deductor'.

3. Enter Your Credentials:

   • Use your PAN as the User ID, enter your password, and complete the captcha.

4. Login:

   • Click the ‘Login’ button to access your account.

Step 2: Accessing the 'Statements/Forms' Section

1. Navigate to the Dashboard:

   • Once logged in, go to the dashboard where you will find various menu options.

2. Select 'Statements/Forms':

   • Click on this section to proceed.

Step 3: Viewing the '197 Annexure'

1. Locate the Option:

   • Within the 'Statements/Forms' section, find and click on '197 Annexure', usually found at the end of the list.

2. View All Certificates:

   • Click on 'View All' to display all available certificates.

Step 4: Downloading the Certificate

1. Identify the Correct Certificate:

   • Search for the specific lower deduction certificate, checking details like the Assessment Year and the TAN of the deductor.

2. Enter Necessary Details:

   • You may need to provide additional details such as your PAN and the certificate number.

3. Download the Certificate:

   • Click the download icon to save the certificate, typically in PDF format.

Critical Considerations for TDS Returns and Certificate Validation

Importance of Certificate Validation

• Validation During TDS Return Filing: When filing TDS returns, it is imperative for the deductor (buyer) to validate the lower deduction certificate. Failure to do so can result in the issuance of a demand notice due to discrepancies.

Accurate TDS Return Filing

• Filing Form 27Q Correctly: NRIs must ensure that the TDS return, specifically Form 27Q, is filed accurately. This form is used for declaring TDS deducted on payments to non-residents.

• Impact on Form 26AS and TDS Credit: If the seller (deductee) does not provide an accurate lower deduction certificate or if the TDS return is inaccurately filed, the TDS amount may not reflect correctly in the seller's Form 26AS. This can prevent the seller from receiving appropriate credit for the TDS, potentially leading to complications during tax filing or assessment.

Professional Tips

• Double-check Information: Verify all details thoroughly to ensure that the certificate validation and TDS credit processes are smooth and error-free.

• Seek Professional Advice: Engage with a tax consultant or professional if there are uncertainties regarding the certificate download or TDS return filing processes. This can help prevent errors and ensure compliance with tax regulations.

By adhering to these guidelines, NRIs can efficiently manage the process of downloading lower deduction certificates and ensure accurate and compliant TDS filings. For any further queries or assistance, do not hesitate to consult with a tax professional

Understanding TDS on Payments to Non-Resident Indians (NRIs) for AY 2024-25

Navigating the rules for Tax Deducted at Source (TDS) on payments to Non-Resident Indians (NRIs) can be intricate. This comprehensive guide covers the essentials of TDS under Section 195, including payment procedures to the government, TDS returns, and provisions for lower or nil deduction of TDS.

1. TDS on Payments to NRI (Section 195)

Section 195 of the Income Tax Act, 1961, outlines the requirements for TDS on payments to NRIs. Here’s a detailed breakdown:

Key Points:

• Who Must Deduct TDS?

  • Any person (Resident or Non-Resident) liable to pay any sum to NRIs.
  • Payer: Resident or Non-Resident Indian.
  • Payee: Non-Resident Indian (Individuals) or Foreign Companies.

• Types of Payments:

  • All payments to NRIs except salaries (TDS u/s 192) and certain interest payments (TDS u/s 194LB, 194LC, and 194LD).

• When to Deduct TDS?

  • At the time of credit to the NRI's account or payment, whichever is earlier.

• Threshold Limit:

  • No threshold limit. TDS must be deducted if the NRI's income is taxable in India.

TDS Rates on Different Payments:

Nature of Payment	Rate of TDS
Dividend	20%
Short Term Capital Gains u/s 111A	15%
Short Term Capital Gains other than 111A	30%
Long Term Capital Gains u/s 112A (exceeding ₹1L)	10%
Long Term Capital Gains (other than 112A)	10%
Long Term Capital Gains on Sale of Property	20%
Other Income	Normal Slab Rates
House Property Rent	30%

Note: Education cess (4%) and surcharge apply based on income thresholds:

Income Threshold	Surcharge Rate
Up to ₹50 Lakhs	Nil
₹50 Lakhs to ₹1 Crore	10%
₹1 Crore to ₹2 Crores	15%
₹2 Crores to ₹5 Crores	25%
Above ₹5 Crores	37%

2. TDS on Sale of Property by NRIs (Section 194-IA)

Form 26QB is used for TDS on the sale of property.

TDS Rates for Property Sale:

Sale Value	Long Term Capital Gain Tax	Surcharge	Total Tax	Health & Ed. Cess	Applicable TDS Rates
< ₹50 Lakhs	20%	Nil	20%	4%	20.8%
₹50 Lakhs - ₹1 Crore	20%	10%	22%	4%	22.88%
₹1 Crore - ₹2 Crores	20%	15%	23%	4%	23.92%
₹2 Crores - ₹5 Crores	20%	25%	25%	4%	26%
> ₹5 Crores	20%	37%	27.4%	4%	28.496%

3. TDS Payments to Government and TDS Returns

3.1. TDS Payment:

• TDS deducted on payments to NRIs must be paid to the government within 7 days from the end of the month in which the tax is deducted.
• Example: If TDS is deducted on May 14, it must be paid by June 7.

3.2. TDS Returns:

• TDS returns for payments to NRIs must be filed using Form 27Q. It needs to be filed quarterly:
  • April to June: July 31
  • July to September: October 31
  • October to December: January 31
  • January to March: May 31

Note: Form 26QB and Form 26QC cannot be filed if the payee is a Non-Resident.

3.3. Form 16A:

• Form 16A is the TDS certificate issued by the deductor to the deductee for tax deducted and deposited under Section 195. It should be issued within 15 days from the date of filing.

4. Lower Deduction / NIL Deduction of TDS

NRIs can apply for lower or nil deduction of TDS using Form 13. Here’s how:

• Application: Submit Form 13 to the assessing officer.
• Approval: If approved, the certificate specifies the lower or nil rate of TDS.
• Validity: The certificate is valid for the period specified.

By understanding these guidelines, you can ensure compliance with TDS requirements for payments to NRIs and avoid potential tax issues.