Purchase of Immovable Property

What are the rates of deduction of taxes in case if an NRI purchases a property in India?

Ans.

 

Purchased property from Resident

Purchased property from Non-Resident

Long Term or Short Term Capital Gains

Long Term Capital Gains

Short Term Capital Gains

Rates of Taxes

Deduct Tax @ 1%
(if Sale Consideration exceeds Rs.50 lakhs)

Deduct Tax @ 20%*

 

Deduct Tax @ 30%*

 


*plus applicable surcharge and cess

NRI purchases property on November 1, 2015 from a Resident Indian for a Sale Consideration of Rs.70 lakhs. Are there any tax obligations for the NRI at the time of purchasing property?

Ans.

In the above scenario, the sale consideration exceeds Rs.50 lakhs. Therefore, as per Section 194IA of the Act, NRI will have to deduct tax @ 1% and deposit the same in the Government Treasury in the form of challan cum statement (Form 26QB) within 30 days from the end of the month of deduction of tax. 
In addition, he has to produce a certificate of such tax deduction in the prescribed form to the Resident within 15 days from due date of furnishing the challan cum statement as above.

NRI purchased a property worth Rs.80 lakh from a Resident Indian on February 5, 2012. Is he required to deduct tax before making the payment to the Resident?

Ans. Section 194IA of the Act which provides for 1% deduction of tax is applicable w.e.f. June 1, 2013. Accordingly, in the above situation, NRI is not liable to deduct tax before making the payment.

NRI purchases a property from a Builder in India on instalment basis. The following is the payment schedule for the property: On July 17, 2016 - Rs. 20 Lakh, on October 2, 2016 - Rs. 35 Lakh and on February 5, 2017 - Rs. 35 Lakh. Total - Rs. 90 Lakh. Is NRI liable to deduct tax on the aforesaid payments to the Builder?

Ans.

In the above case, aggregate consideration payable by NRI exceeds Rs. 50 lakh. Therefore, NRI must deduct tax @ 1% on payment of each instalment to the Builder (irrespective of the individual instalment amounts not exceeding Rs. 50 lakh).

Will the NRI be required to obtain a Tax Deduction Account Number (TAN) for facilitating the tax deduction?

Ans.

No, he is not required to obtain a TAN. He can facilitate tax deduction on the basis of his PAN, provided he is selling the property to a Resident Indian.

However, in case the NRI is selling the property to another NRI, he will have to obtain a TAN to deposit the amount of tax deducted by him.

What is the procedure for paying such tax deducted into the Government Treasury in the above case?

Ans.

NRI shall need to follow the below steps:

Step 1: NRI needs to fill in an online challan cum statement (Form 26QB) through which he can make an online payment.
Alternatively, he can make the payment subsequently after uploading the Form 26QB by approaching one of the AD Banks to make the necessary payment. 

Step 2: A Challan Identification Number shall be generated once the payment has been successfully made. 

Step 3: Subsequently, NRI needs to register himself on the TRACES website as a tax payer and generate Form 16B as a certificate for tax deduction.

Step 4: Form 16B shall have to be shared with the Seller of the property.