Siddharth Kushwaha (5 Points)
01 October 2019Hi,
I am buying a property from an NRI. He applied for lower witholding tax certificate. As per certificate i need to pay TDS at 6.99 percent(excluding surcharge and education cess). Surcharge applcable is 0 as income as capital gain does not exceed 50 lakh. My query is only regarding health and education cess applicable. I think it should be addition 4 percent but seller's CA is saying no cess is applicable.
Kapadia Pravin
(17259 Points)
Replied 01 October 2019
Siddharth Kushwaha
(5 Points)
Replied 01 October 2019
Hi Sir, please check below link
https://www.incometaxindia.gov.in/Pages/faqs.aspx
under faqs for tax deducted at source
question: what are the payments covered under the TDS mechanism and the rates for deduction of tax at source?
it mentions that for category B i.e. Non resident tds payments for amounts below 50 lakh has health and education cess applied at 4%.
CATEGORY B - WHEN RECIPIENT IS NON-RESIDENT OR FOREIGN COMPANY
| Aggregate payment or credit subject to TDS during the financial year 2019-20 → |
If recipient is non-resident Individual/HUF/AOP/BOI/Artificial juridical person
|
| | If recipient is non-resident co-operative society/ firm | | If recipient is non-domestic company | | |
| | Rs.50 lakh or less | More than Rs. 50 lakh but not more than Rs. 1 crore | More than Rs. 1 crore | Rs. 1 crore or less | More than Rs. 1 crore | Rs. 1 crore or less | More than Rs. 1 crore but not more than Rs. 10 crore | More than Rs. 10 crore |
| Nature of payment | TDS (inclusive of SC: Nil, Health & Exducation cess: 4%) |
Kapadia Pravin
(17259 Points)
Replied 02 October 2019
Suresh Thiyagarajan
(Student)
(3986 Points)
Replied 02 October 2019
1. TDS u/s 195 needs to be deducted @ 20% for the transfer of Immovable property. If non-resident applied for a lower rate of tax then based on the rate given in the certificate provided by such non-resident TDS needs to be deducted.
2. Now, the question is whether Edu cess and surcharge should be added to the rates provided in the certificate.
3. Under sec 197 non-resident can apply for deduction of TDS at a lower rate by making an application u/s 197 in form 13. Form 13 will contain the final tax liability (including Edu cess). So, the final rate as provided in the certificate will be the final tax liability for the non-resident assessee.
4. In your case, 6.99% (precisely) arrived by the AO through form 13 information will be the final effective tax rate of the non-resident assessee. This further does not requires education cess or surcharge. In the normal parlance (no certificate u/s 197) effective rate of tax would be 20% plus surcharge plus Edu cess. In this case, this will not be applicable.
5. However, as explained by Mr. Pravin, why take a risk for 0.28%. But logically speaking the above argument holds good.
Please correct me if the above solution has an alternative view.
Siddharth Kushwaha
(5 Points)
Replied 02 October 2019
Thank You Pravin and Suresh your expalanation has clarified my doubts.
Dr M K KHURANA,Professor ,Mech
(2 Points)
Replied 23 September 2023
i had not deducted and paid surcharge on lower TDS rate under sec 197 as per advise of seller but now got demand notice for amount equal to education cess only
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