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Purchase of property from an nri

Focus (CA-Final Student) (272 Points)

27 March 2015

what points should one keep in mind while purchasing property from an NRI. does the purchaser need to deduct TDS @ 20% for any payment made to NRI w.r.t purchase of property.? if yes, does the individual purchaser also need to obtain a TAN. ?

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CA HAYEDAR SHAIKH (Practice ) (627 Points)
Replied 27 March 2015

“Section 195 states that any person responsible for paying to a non resident any sum chargeable under the act shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by cheque or draft or any other mode, whichever is earlier, deduct income tax thereon at the rates in force.”

As per section 195, tax is to be deducted at source as per the rate in force while making payment to NRI. The rate in force is defined under section 2 (37A) 111 Finance Act. Currently, the effective rate in force is 20%.

It also be noted that the threshold limit of Rs. 50Lakh is not applicable to NRI.

Also there is provision for applying for lowest / Nil TDS certificates.If such a certificate is granted, the person responsible for paying the amount can make the payment with lower/nil TDS.

Before deducting TDS u/s. 195, the buyer should obtain TAN under section 203A of the Income Tax Act, 1961.