11 April 2011
A non-resident Indian settled in Singapore wants to sell a residential house (long-term asset) situated in Delhi to an Indian resident. Now the Query is : 1. Whether any TDS is deductible by the buyer while making payment to the seller (non-resident Indian) on sale consideration or not. If yes, than under what section and under what rate ?
11 April 2011
" TDS on purchase of property from an NRI
Many taxpayers are not aware that if they make any payment to a non-resident, they are liable to deduct tax at source. Where proceeds of the sale by the non-resident are remitted by a resident purchaser, tax is required to be deducted. In most cases, tax is directly paid by the non-resident. What is the position of law for the resident purchaser in such a case? Sec. 195 would require tax deduction at source on payments to non-resident, which are chargeable to tax in India. The purchaser on purchase of a property from a non-resident is expected to deduct tax “on income by way of long-term capital gains” at 20 per cent. The purchaser cannot know the cost of the asset and cost of improvement to the seller so as to arrive at capital gains unless the non-resident seller co-operates with the purchaser.
But where the tax is directly paid by the non-resident on capital gains, the resident can be liable only for interest on the amount of tax from the date on which tax deduction was due till the date of direct payment as pointed out by the Tribunal in Mrs. Meena S. Patil v Asst. CIT (International Taxation) (2008) 300 ITR (AT) 317 (Bangalore) .
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