Tax implications and process when buying property from NRI
This query is : Resolved
02 February 2023
I am buying an under construction apartment in Bangalore from the landowner's share. The title and other documents of the apartment are clear. There are 4 owners of that apartment - Mother, Son1, Son2, Daughter (who is a NRI). Mother has the power of attorney from Son1, Son2, NRI Daughter for the purpose of sale of apartment in the society built on their land, signed and registered at sub-registrar office. Does the Power of Attorney need to be certified by the Indian Consulate/Embassy of the country in which the NRI Daughter resides?
I have already paid 10% of property sale consideration to the Mother's bank account for signing the sale agreement.
Now I got to know from a bank employee that I am supposed to pay the amount individually to each of the owner's account proportionate to their ownership share (so 2.5% each to the 4 individuals account instead of 10% to the account of POA holder) and while paying the NRI Daughter's share, I am supposed to withhold 22.88% of that payment as TDS (and pay it to Income Tax department). The same process would apply to future payment by me as well as the loan amount paid by the bank.
In case I don't deduct the 22.88% TDS from the NRI Daughter's share (pay her 100% of her share's sale consideration), the income tax department may ask me at any point in future to pay that TDS from my own pocket and also levy a 12% penalty from me for failing to deduct the TDS.
Is my understanding correct or am I missing something?
Did I make a mistake paying 10% to the POA holder (Mother)? Should I get that refunded and make payment of 2.5% to each individual, deducting 22.8% from the NRI Daughter's share?
I have already paid 10% of property sale consideration to the Mother's bank account for signing the sale agreement.
Now I got to know from a bank employee that I am supposed to pay the amount individually to each of the owner's account proportionate to their ownership share (so 2.5% each to the 4 individuals account instead of 10% to the account of POA holder) and while paying the NRI Daughter's share, I am supposed to withhold 22.88% of that payment as TDS (and pay it to Income Tax department). The same process would apply to future payment by me as well as the loan amount paid by the bank.
In case I don't deduct the 22.88% TDS from the NRI Daughter's share (pay her 100% of her share's sale consideration), the income tax department may ask me at any point in future to pay that TDS from my own pocket and also levy a 12% penalty from me for failing to deduct the TDS.
Is my understanding correct or am I missing something?
Did I make a mistake paying 10% to the POA holder (Mother)? Should I get that refunded and make payment of 2.5% to each individual, deducting 22.8% from the NRI Daughter's share?
02 February 2023
1 As the power of attorney is registered at sub registrar office no need for Embassy sign.
2 you are supposed to withhold 22.88% of that payment as TDS (and pay it to Income Tax department). The same process would apply to future payment by me as well as the loan amount paid by the bank.
3 yes, you are liable to pay TDS amount and penalty in cases of non deduction.
2 you are supposed to withhold 22.88% of that payment as TDS (and pay it to Income Tax department). The same process would apply to future payment by me as well as the loan amount paid by the bank.
3 yes, you are liable to pay TDS amount and penalty in cases of non deduction.
02 February 2023
Do I need to follow some separate process like obtaining a TAN for deducting this TDS?
02 February 2023
Do I need to make separate payments to 4 individual's accounts in proportion to their ownership or a single payment in the POA holder (Mother's account) would work?
02 February 2023
No TAN required pay through 194QB challan.
TDS has to be made for 4 individuals.
Yes, make payment to individual account.
TDS has to be made for 4 individuals.
Yes, make payment to individual account.
02 February 2023
Seems like 194QB Challan is applicable only for resident sellers.
https://taxguru.in/income-tax/section-194q-tds-purchase-goods-exceeding-rs-50-lakhs.html
"Section 194(Q) is not applicable if the seller is an NRI" according to https://www.bajajfinservmarkets.in/markets-insights/income-tax/articles/section-194q-of-income-tax-act.html
https://taxguru.in/income-tax/section-194q-tds-purchase-goods-exceeding-rs-50-lakhs.html
"Section 194(Q) is not applicable if the seller is an NRI" according to https://www.bajajfinservmarkets.in/markets-insights/income-tax/articles/section-194q-of-income-tax-act.html
02 February 2023
Landowner is saying they are paying the tax but not following this TDS process. Will this create a problem for me as the buyer?
02 February 2023
Sec 194 IA of the Income Tax Act, 1961 applicable for sale of property.
In case of NRI section 195 applicable hence TAN is required for TDS remittance.
As a buyer you need to deduct TDS otherwise documents will not be registered.
In case of NRI section 195 applicable hence TAN is required for TDS remittance.
As a buyer you need to deduct TDS otherwise documents will not be registered.
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