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RATE OF TDS WHEN FLAT IS PURCHASED FROM NRI AFTER IMPLEMENTATION OF FINANCE ACT (NO 2) 2024

pawar ( ) (44 Points)

07 October 2024

I am going to purchase an immovable property (Flat) from NRI. As per rule buyer needs to deduct TDS while making payment to seller. I want to know , is there any change in rate of TDS to be deducted while purchasing immovable property from NRI after Finance act (No 2) 2024. Please let me know TDS rate applicable after 03 October 2024.

Thanks in advance.

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10 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (179903 Points)
Replied 07 October 2024

As such no change even after said amendment.

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pawar ( ) (44 Points)
Replied 07 October 2024

Thanks Mr. Dhirajlal Rambhia for your reply.

Basic TDS rate prior to Finance Act 2024 for NRI seller was 20 % if sales consideration was 50 lacs. Basic TDS rate would increase depending on sales consideration of the property. At that time LTCG was 20 % .

Now as per Finance act 2024, LTCG across all the assets is 12.5%. You replied that no change even after ammedment. I understand that you are saying there is no chnage in the TDS rate as per Finance Act 2024. It means TDS rate is 20%. BUT LTCG is 12.5%. This is conflicting. Please help in understanding.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (179903 Points)
Replied 07 October 2024

You are correct. But as such no notification has been issued for the change in TDS deduction under the particular section. The rate of tax has both options with indexation and without it.

Secondly seller has option to file lower deduction of TDS with his jurisdictional ITO. Purchaser can rely on the order.

pawar ( ) (44 Points)
Replied 08 October 2024

Hi Mr. Dhirajlal Rambhia

Can you go through Fianance Act (No.2) 2024, particularly Page no 77 to 79 which mentions rates for deduction of tax at source ? On Page no 78, it specifes varous TDS rates for NRI. I will be thankful, if you provide your expert opinion on rate of TDS while purchasing property (Flat) from NRI after reading page 78-79. Property (Flat) under discussion is in possesion of NRI more than 10 years. Act is attached.

Thanks in advance.

Attached File : 541587 20241008110032 finance act no 2 2024.pdf downloaded: 40 times

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (179903 Points)
Replied 08 October 2024

I agree with the bill proposals, but would like to get clarification from ITD over TDS deductions as there are two options available... in the bill... (No notification or clarification given by any deartment as on the date)

Two LTCG tax rate options are offered to individuals or Hindu undivided Families on real estate properties (land or buildings) acquired before July 23, 2024.
- 12.5% tax rate without indexation benefit, or
- 20% tax rate with indexation benefit, whichever is more advantageous.

How can purchaser decide the option chosen by seller while filing ITR?

For the safety on behalf of buyer, he can choose higher TDS deduction rate.

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pawar ( ) (44 Points)
Replied 08 October 2024

Mr. Dhirajlal Rambhia Sir,

I am not income tax expert and now i am little bit confuse after reading your reply. There are two things in the discussion LTCG calculation for IT returns and TDS on sales consideration to be deducted by buyer.

1 Status -Resident Indian or HUF

a. LTCG tax calculation for IT return – As explained by you above there are two options with indexation benefit (20% tax rate) and without indexation benefit (12.5% tax rate).

b. TDS rate – 1% of total sale consideration to be deducted by buyer at the time of purchasing property. There is no change in it.

2Status – Non resident (other than company)

a. LTCG tax calculation for IT return – As per my understanding NRIs do not have option of indexation benefit. They have to file income tax return with 12.5% tax rate. Correct me if i am wrong.

b. TDS rate – My question was how much TDS buyer should deduct while purchasing property ?

Thanks for your patience and reply.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (179903 Points)
Replied 08 October 2024

For NRI Individuals and HUFs the option of indexation for the properies purchased before 23.07.2024 is available as in case of resident individuals & HUFs.

We generally ask sellers to get lower tax deduction certificates as that benefits the seller for lower deduction of tax over LTCG rather than deducting tax over full consideration.

In case this certificate is not obtained by the seller from the Income Tax Department, the TDS should be deducted on the Total Sale Price and not on the Capital Gains. Therefore, it is very important for the seller to obtain this certificate from the Income Tax Officer.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (179903 Points)
Replied 08 October 2024

Another option is::

The application can be made by the resident buyer of the property (under Section 195(2) of the Income Tax Act) to determine the portion of income liable for a tax deduction.

pawar ( ) (44 Points)
Replied 09 October 2024

Mr. Rambhia,

Thanks for your inputs. But my doubt was on rate of TDS on property (Flat which qualifies for long term holding period) purchased from NRI after 23 July 2024. I have found TDS rate as 12.5% of sales consideration. This has been specifed on income tax website. See attached TDS rate table published by income tax department on their website.

Attached File : 541587 20241009122957 tds rates displayed on income tax website.pdf downloaded: 81 times