Project - #makeknolwedgefree
Hi Sir,
We are planning to buy a house property worth 1.03 Cr agreement value in the joint name and joint home loan of myself and my husband. The property is also in the joint name of husband and wife and they have an Indian Pan card. However, their status is NRI. As per the rule banks says upto 23.7% TDS would be deducted on this. However, the owner is saying that since the property is 8-9 year old there is not much Captial Gains on it. Also, he is planning to invest all the capital gains in bonds so that there would be no TDS for him. I have the below doubts:-
1. What things / documents should we ask from him for his investment in bonds. (Worried coz buyers are liable to pay TDS & dont want any income tax notice for not giving TDS)
2. Will there be no TDS if he invests all capital gains or there will be 1% TDS which is standard in India ?
3. Will no TDS be deducted at all or will TDS be deducted and he will have to claim it back in ITR ?
4. Any other specific points would you like to highlight if buying property from an NRI (as we are not fully aware of all the rules)?
Thanks in Advance for your reply.
Thanks & Regards,
Kirti
Project - #makeknowledgefree
By - Amlan Dutta.
1.What things / documents should we ask from him for his investment in bonds. (Worried coz buyers are liable to pay TDS & dont want any income tax notice for not giving TDS)
Why should you even want to know whether he will get capital gain exemption or not
This has no bearing on deduction of TDS
See you have to do TDS on capital gains whatever be the amount …if he has Capital gains of 20 Rs , you will have to do 20 % ( or the right percentage as per section 195 ) TDS …whether he got exemption pays tax on 20 Rs capital gains or enjoys exemption by investing in bonds, why should you even care ………
(Just for example say he has capital gains of 50 lakhs and enjoys exemnption by investing all 50 lakhs in NHAI bonds under 54 EC and somehow has no other income and therefore liable for nil tax, do you think it means nil TDS .Absolutely no, the TDS is solely governed by what the capital gains is and TDS percentage on it as governed by section 195 , that’s all
Sy 20 % is the rate as per section 195 , then 10 lakhs TDS has to be done even if his tax liability is nil
If they claim that their tax liability or investments of capital gains to enjoy exemption is in any way even remotedly connected to TDS deduction or percentage of deduction, they are just trying to take buyer for a ride
Don’t fall for these crap because like you rightly examine the onus is on the buyer and not the seller for deduction of TDS …and seriously if they have no tax liability why should they be scared …TDS will be to their credit and with nil tax liability all the TDS deducted will be seeked as a refund by them by filing a simple return ..In above case , if his tax liability is nil , he can seek refund of 10 lakhs TDS by filing refund return
Simply put , the rules state that you do TDS on capital gains and if he does not give you certificate , then do 20 % TDS on sale value
He has to take the certificate of capital gains from the assessing officer
2. Will there be no TDS if he invests all capital gains or there will be 1% TDS which is standard in India ?
Like I already explained , what he does with his gains is his lookout and has no bearing on deduction of TDS
Section 194 IB for 1 % of TDS on sale value exceeding 50 lakhs is not applicable ( that is for purchase from resident ) ..here purchase is from NRI
TDS on NRI purchases is to be deducted irrespective of the transaction value of the property( unolike domestic transfers where only TDS has to be deducted if the sale value exceeds 50 lakhs ) ......Section 195 clearly stipulates that the buyer is to deduct 20 % TDS on capital gains after obtaining a certificate from seller the capital gains arising from the sale. The seller has to contact his income tax officer to get the details of capital gain. The seller has to give this certificate of gains to the buyer who has to obtain a TAN number compulsorily before deducting 20 % TDS on capital gains . In case this certificate is not given by the seller to the buyer , then the buyer shall deduct 20 % TDS on whole sale valuE
3. Will no TDS be deducted at all or will TDS be deducted and he will have to claim it back in ITR ?
Like already stated you will deduct TDS and he can claim o credit of such deducted TDS in return for meeting tax liability …whether he gets back TDS depends on tax liability ( if no tax liability then surely he is entitled to refund ) but that does not mean no TDS on your behalf
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