The sale of property by non resident Indians and Overseas Citizen of India in India is a common transaction that often involves seeking tax services. The Non Residents visit our CA Firm based in Gurgaon to seek advice about obtaining Lower TDS certificate or NIL TDS Deduction Certificate ( From 13 application ) from the income tax Department. The main purpose of this certificate is to allow relief to NRI from high withholding tax rates and avoid blocking their money with the Income Tax Department.
A. Rate of TDS on Property selling by NRI
Under the Indian Tax laws, TDS provisions apply to various financial transactions, including property sale transaction. If the seller is a
1. Resident Indian : The TDS Rate is 1 % and governed by section 194.
2. Non - Resident : TDS is governed by Non- Resident TDS provisions i.e Sectiorn 195. Under these provisions, TDS apply at the maximum rates on the sale of property. If the property is a
It is important to note that additional surcharge and 4 % cess also apply to the capital gains.
B. Lower TDS Certificate or NIL TDS Certificate
In many cases, the acual tax laibility of the non resident seller is lesser than the proposed TDS on that transaction, resulting in a genuine hardship for the seller . To overcome this situation, the Income Tax Act provides for a Lower TDS Certificate or Nil TDS Certificate for NRI (Or TDS Exemption certificate )under section 197 of the Income Tax Act.
To seek relief in the witholding tax rates, one can apply for a Lower TDS Certificate for a NRI or Nil TDS Certificate with the jurisdictional Income Tax Authority. This application is filed in Form 13, which is an online application process. The applicant needs to prepare and arrange various supporting documents for the Lower TDS Certificate for NRI.
The buyer deducts the TDS as per the rate given in the certificate on receipt of Lower TDS Certificate for NRI. It is important for buyer, purchasing an immovable property from an NRI seller that, Lower TDS certificate specifies only a lower rate of tax, it doesnot give a relief from surchage and cess. Hence buyer should be very cautious about the rate of TDS.
C. Documents required for lower TDS Certificate or Nil TDS Certificate.
The list of documents required for preparation of a lower TDS certificate for NRI application varies depending on the transaction and other facts of the non resient and property. However the following is the standard list of documents required :
we welcome your queries and can be reached out at gaurav.dhingra@dgvasssociates.com
D. Submission Mode of Lower TDS Certificate for NRI
To request a certificate for a lower TDS certificate or NIL Deduction at all, NRI must submit an application using Form 13 electronically. This can be done through two methods
1. using a digital signature.
2. via electronic verification code.
E. Validity Period of Lower TDS Certificate for NRI
When a certificate is issued for a lower TDS or Nil deduction for NRIs, its validity period will be determined by the duration mentioned in the certficate itself. However, if the assessing officer cancels the certificate before its expiry , it becomes invalid. It is essential to note that certificate is only valid for the specified period in the previous year, and it cannot be carried forward forward to future years.
F. To whom is lower certificate issued
When a person applies for the lower TDS certificate for NRI or Nil deduction, it will be issued to the NRI by the income tax department.
The certificate will be addressed to the buyer of property, who is responsible for deduction of tax at time of payment to NRI.
G. Time limit for applying Lower Rate TDS certificate
As per the Income Tax Act 1961, there is no specific time limit mentioned to apply for a lower TDS certificate for NRIs. However in prctice it is advisable to apply for certificate at least 30-40 days before selling the property. This allows sufficient time for the application process, verification and issuance of the certificate.
Our team at Dhingra Gaurav & Associates, specialised in such services and typically takes around 15-20 days to complete the formalities and obtain the lower TDS certificate for NRI and ensures the following benefits for NRI:
H. Benefits of Lower TDS certificate for NRI
For NRIs , selling property in India can be a challenging process due to various taxation and regulatory requirements. One such requirement is tax deduction at source on the sale proceeds of property. However NRIs can benefit from a lower TDS certificate or Nil TDS certificate , which can significantly reduce their tax liability. Some benefits are :
1. Reduced Tax Liability : The primary benefit of the lower TDS certificate for NRIs is reduction in tax liability. With lower TDS certificate, their TDS can be as low as 0 % for short term and long term assets. The TDS is typically deducted at 12.50 % of the sale proceeds for long term capital assets and slab rate for short term capital assets.
2. Quicker Refunds : In the absence of lower TDS certificate for NRI, NRIs may have to pay a higher tax rate than required, which could lead to an excess TDS deduction. This results in a refund claim process, which take considerable time to complete. However with lower tds Certificate , NRIs can avoid overdeduction of TDS, leading to quicker refunds.
3. Compliance : NRIs can ensure compliance with Indian tax laws by obtaining the lower TDS certificate through chosing our services for Lower or Nil TDS certificate.
If you are an NRI planning to sell your property, our advisory related to lower or NIL deduction certificate can help you reduce your tax liability and streamline the tax payment process.
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