Applicable tds on nri selling property
SUKHVIR HOUSING AGENCY
(Querist) 16 June 2013
This query is : Resolved
HELLO TAX EXPERTS
FIRST OF ALL THANKS TO ALL FOR YOUR CONTINUOUS SUPPORT.
QUERY IS :
A NRI IS HAVING A RESIDENTIAL PROPERTY IN MUMBAI, WHAT IS THE TAX IMPLICATION ON HIM
AS I UNDERSTAND THERE IS NEW RULE OF 1% TDS APPLICABLE, IS THIS THE LIABILITY OF THE BUYER TO DEDUCT 1% OF THE CONSIDERATION VALUE AS TDS
SECONDLY AS SELLER IS NRI THERE IS TDS APPLICABLE ON "NRI SELLING PROPERTY IN INDIA". IS THIS AMOUNT ALSO RESPONSIBILITY OF THE BUYER TO DEDUCT TDS AMOUNT.
ARE THES T.D.S. SHOULD BE BEFORE REGISTRATION OF THE PROPERTY OR AFTER REGISTRATION.
YOUR VALUABLE SUGGESTION AWAITED
SUKHVIR
M V Gupta
(Expert) 16 June 2013
NRI for all purposes is on par with a Resident Indian. Under Finance Act, 2013 the buyer of immovable property is required to deduct 1% TDS from the total consideration payable to the seller and deposit in to the IT A/C. TDS should be deducted first and the balance should be paid to Seller.
Anirudh
(Expert) 17 June 2013
Dear Sukhvir,
1. The NRI is liable to pay the capital gains tax on the profits that he will be making in the sale of his house property.
2. If the sale consideration of the property is Rs. 50 lakhs and above, then in that event, the buyer is liable to effect TDS at the rate of 1% on the total consideration. Only the balance (i.e. after deducting 1% from the sale consideration) has to be paid to the seller.
3. The TDS is to be effected at the time of making payment to the seller (it is not dependent upon whether before or after registration).
4. The amount of TDS effected by the buyer is to be deposited by him promptly with the Govt.
vswaminathan
(Expert) 17 June 2013
Querist has mentioned, - "residential property in
Mumbai". In case it is 'unit' of a building comprising "Flats", in one's individual perception, applicability of the new requirement thereto is not at all free from reasonable doubt; hence seems eminently advisable to seek a clarification from the Revenue (i.e. horse's mouth) itself, or in the alternative, better and worth obtaining a well-considered opinion of a competent expert both on Income-tax and property law (Special State law on "Flats").
For the individual viewpoints throwing up the related / impinging facets, for due consideration, if so care to, may look up the personal Blog @ (hyperlink) http://vswaminathan-swamilook.blogspot.in/2013/05/tds-woes-continues-persistently-with-no.html
M V Gupta
(Expert) 17 June 2013
Dear Shri Viswanathanji, I shall be glad to be enlightened on the "reasonable doubt" referred by you.
vswaminathan
(Expert) 18 June 2013
Dear Shri Guptaji
The reasons why, in my humble view, there is a "reasonable doubt", has been set out in some details in the Blog cited.
In case you had any problem, technical or otherwise, in accessing and reading its contents, kindly let me know.
In brief, as attempted to explain therein, in the extant law on income-tax, there are to be found specially framed /structured provisions (these are specifically referred in the Blog)to cover "unit" (in a building comprising Flats / Apartments). On the contrary, those are not found incorporated or made applicable, even by any reference or cross reference, in the new section 194 IA. Hence the "reasonable doubt" in my mind.
My message was purely intended to throw up my thoughts, founded on own courage of conviction,for others to independently consider and form individual opinion.
Be that as it may,as has always been my wont, I have an open mind to listen to contrary views on such intricate points of law. As such, shall be extremely glad to be enlightened should, for any other logical and cogent reasons,self or any other expert were to believe otherwise; that is, even the present terms of Section 194 IA are adequate for anyone to prudently regard it to make the requirement of TDS applicable, beyond any doubt,to transfer of "Flat" as well.
Incidentally, the querist who has started the "ball rolling",will do well to clarify whether his concern pertains to, as doubted, a property in the form of Flat.
vswaminathan
(Expert) 18 June 2013
Add-on
It has been my longstanding (purely personal) conviction that "unit" (Flat) and any other known independent house property are two different "animals"; hence "standrads" to be applied to either are mutually distinct. My 'personal' thoughts and independent viewpoints may be found elabrated in the related Blogs @swamilook. Also, on the website -
http://praja.in/en/blog/m
Anirudh
(Expert) 18 June 2013
In Sec. 194-IA "immovable property" has been defined to mean "any land (other than agricultural land) or any building or part of a building."
One can argue that a "Flat" is not a building. But can anybody say that it is not part of a 'building'? One it is a part of a building, will not get covered under the definition of immovable property? If it gets covered under that definition, will not one obliged to effect TDS under Sec. 194-IA?
vswaminathan
(Expert) 18 June 2013
Sorry , i have nothing more to add or no way to elaborate any further. If so minded, only option, as already suggested, is to seek and obtain a truly competent tax cum property law expert's opinion,to have doubts clarified and ascertain the eminent view to satisfy oneself and safely go by.
vswaminathan
(Expert) 26 June 2013
New comment @following link should be of interest, to few of those enlightened experts herein,in case, as one imagines,
the controversy still remains unresolved; and in wait for any useful further contributory thoughts.
http://feedproxy.google.com/~r/taxguru/CWWK/~3/WXty1gZd42k/tds-transfer-immovable-property-us194ia-incometax-act-1961.html?utm_source=feedburner&utm_medium=email
vswaminathan
(Expert) 26 June 2013
If unable to access above link, recommend to try>
http://vswaminathan-swamilook.blogspot.in/2013/05/tds-woes-continues-persistently-with-no.html
TDS on Transfer of Immovable Property u/s.194-IA of Income-tax Act, 1961
Anirudh
(Expert) 26 June 2013
Dear Mr. Swaminathan,
Do you mean to say that when one transfers the Flat, the provisions of Sec. 194-IA will not be applicable?
Please clarify.
vswaminathan
(Expert) 26 June 2013
Dear Mr Anirudh
The add-on today was only an update, nothing newly said or calling for fresh clarification; whatever I said, or meant to say, may please be found in my longish write-ups on websites.
Anyway, thanks for the inquiry /interest shown.
vswaminathan
(Expert) 26 June 2013
Updates referred are here>
Taxguru:
"TDS on Transfer of Immovable Property u/s.194-IA of Income-tax Act, 1961" *
And Here:
itatonline
"India Will Have The Best Tax Regime In The World: New CBDT Chief" *
*LINKS REQUIRE TO BE ACCESSED , TO KNOW THE CONTENTS
Anirudh
(Expert) 27 June 2013
Dear Mr. Swaminathan,
I went through your blog and found the following:
"government itself considered it necessary hence later amended the law so as to specifically bring within the tax net, the so called asset ,- “unit” of a building. Reference is to the amendments made way back, wef 1-4-1988.
Those are to be found in the then introduced sub-clause (vi) of section 2 (47), and clause (iiib) of Section 27 (both required to be read with clause (d) of Section 269 UA). These are provisions for taxing income from /in respect of “unit” of a building, respectively under the head of capital gains and house property."
I could not find that the term "unit" was used in Sec. 2(47)(vi) or Sec. 27(iiib) at any point of time.
But you say that the term was introduced w.e.f. 1.4.1988. Are you talking about the Wealth Tax Act when you refer to the introduction w.e.f. 1.4.1988?
Else, can you be specific when the term 'unit' was introduced in the Income Tax and under what specific provision.
vswaminathan
(Expert) 27 June 2013
RE "wef 1-4-1988"- not me but my Taxmann's Book on INCOME TAX ACT (2009) says so.
On the balance,personally i have nothing more to add. Instead, will only await to be enlightened by the Experts (-let me make it clear i do not profess or never believed to be one by any true standard).
Any thoughts/ views shared are my personal and independent ones, based / formed on the strength of my own study and understanding;unless otherwise stated.
I quit, in the hope of having made myself fully understood
Anirudh
(Expert) 27 June 2013
Dear Mr. Swaminathan,
With due respect, I am very sorry, after all this now you say "I quit".
But in your blog, which you asked others to visit and understand your view point, you were even critical about the Revenue. You had written thus:
"Even the Revenue , as has never been known to be otherwise, appears to have thus far preferred to lie low and remain mute, thereby creating an impression that all is well with the new provision; and that there is no lacuna(e) or loophole to be plugged in, on the mentioned aspect. So much so, none, be it the tax paying community or advising professionals are no wiser but obliged to continue in a ‘trishanku’ like situation."
When I specifically requested to indicate as to where the term "unit" was used in Sec. 2(47)(vi) or Sec. 27(iiib) as mentioned by you, you said that "not me but my Taxmann's Book on INCOME TAX ACT (2009) says so."
Even in the Taxmann's book on Income Tax Act (2009), the term "unit" does not find a place in the Sec. 2(47)(vi) or Sec. 27(iiib) or Sec. 269UA.
So, I sincerely feel, that without any basis (in fact you have not shown any basis even when specifically asked for), you have assumed that the term "unit" was inserted in the Sections cited by you and on that basis proceeded to say that there was some lacunae in the provision.
vswaminathan
(Expert) 27 June 2013
Having been prompted again, i have to only empathise and point out that had my write-ups been carefully read, it will be realised that I have no where said that, the amended provisions- specfically use the term "unit". Should that be the way it has beern read or understood, sorry, certainly I am not to be blamed.
Still, not because of my innate passion for an analytical approach, but out of sheer compassion, so as to serve the ultimate purpose of being of some use for the common good,would add: Going by my recollection, there are published articles e.g. in Taxmann Journals,in which the objective of the referred amendments of the law have been gone into and dealt with in detail. Having minded to bell the cat, shall try and give the citations in a day or two.
Albeit, regretfully note, you have so far said nothing, much less clearly, about what YOU consider is the right view. And it will be my pleasure to know specically whether, with your seemingly more knowledgeable background and expertise, in your own opinion, there is no lacuna at all in the subject provision; and in other words, has to be taken to have application, beyond doubt,to flats or apartments, on the premise that the term "part of a building" used is clinching enough to anyone rightly forming that opinion.
vswaminathan
(Expert) 27 June 2013
Wish to add that, in giving the opinion requested for,you may please indicate at least briefly in case you have any other special reasons or logic behind. That should enable me / be of help to suitably cover the contra view (you appear to hold out, that too so strongly), in my proposed article on the subject controversy, in one of the websites.
vswaminathan
(Expert) 27 June 2013
Just realied that, in your para beginning "when I specifically requested bla, bla, bla...", there has been an obvious mix up. For, it is contrary to what was clearly mentioned: " RE "wef 1-4-1988"- not me but my Taxmann's Book on INCOME TAX ACT (2009) says so."
Anirudh
(Expert) 27 June 2013
Mr. Viswanathan,
Come on!
In all the replies in this LCI you have harped on the term 'Unit' and according to you the definition of immovable property "any building or part of it" would not cover 'Unit'.
In the blog you have specifically stated that "government itself considered it necessary hence later amended the law so as to specifically bring within the tax net, the so called asset ,- “unit” of a building. Reference is to the amendments made way back, wef 1-4-1988.
Those are to be found in the then introduced sub-clause (vi) of section 2 (47), and clause (iiib) of Section 27 (both required to be read with clause (d) of Section 269 UA). These are provisions for taxing income from /in respect of “unit” of a building, respectively under the head of capital gains and house property."
Now you say that I have read the contents of your blog improperly!
You say "Albeit, regretfully note, you have so far said nothing, much less clearly, about what YOU consider is the right view."
I have made myself very clear right from the beginning that 'flat' will definitely get covered under the definition of immovable property which is given as "any building or part of it".
The NRI is liable to pay the capital gains tax on the profits that he will be making in the sale of his house property.
To further my contention, I said:
"One can argue that a 'Flat' is not a building. But can anybody say that it is not part of a 'building'? Once it is a part of a building, will not get covered under the definition of immovable property? If it gets covered under that definition, will not one obliged to effect TDS under Sec. 194-IA?"
Thus, I have squarely given my view.
I rest my point here.
vswaminathan
(Expert) 02 July 2013
A Rejoinder (ULTIMATE)
It is out of sheer and by way of a gesture of compassion and courtesy to this august group, give my feedback, the last one on the topic,HERE >
http://taxguru.in/income-tax/section-194-ia-writeup.html
I rest here my sincere endeavor to share.
Anuj Gupta
(Expert) 09 September 2013
Here section 194IA shall not come into picture.
Payment to a non-resident is covered under section 195 and not 194IA and hence there is requirement to deduct TDS @ 20.6%
Anuj
femaquery@gmail.com
M V Gupta
(Expert) 14 September 2013
Anuj is correct. Section 194IA applies only to transactions between resident Indians. If the transferor is Non resident (which includes NRI also) the transferee is required to effect TDS of CG under Sec 195 of the IT Act.My enquiery has revealed that the CBDT has issued instructions that the non resident transferor should apply to the Assessing Officer and get the CG to be deducted from the sale price determined and certified. Accordingly the view expressed by me earlier stands corrected.
M V Gupta
(Expert) 14 September 2013
Anuj is correct. Section 194IA applies only to transactions between resident Indians. If the transferor is Non resident (which includes NRI also) the transferee is required to effect TDS of CG under Sec 195 of the IT Act.My enquiery has revealed that the CBDT has issued instructions that the non resident transferor should apply to the Assessing Officer and get the CG to be deducted from the sale price determined and certified. Accordingly the view expressed by me earlier stands corrected.
vswaminathan
(Expert) 26 November 2013
This refers to the numerous comments posted before.
Attention has since been very recently drawn (by an old colleague) to the further comments posted but just came to notice; that is, since i quit , for good, interacting on this particular topic vide my last comment marked “A Rejoinder (ULTIMATE)”
Even so, considering the need, hence to share a few more personal/independent thoughts, for purely the purpose of ‘the common good’:
It is observed that, the subsequent comments seem to have, as per one's understanding (open to correction, if wrong) proceeded on the premise (taking for granted) that the “NRI” referred by the querist will not have the status of a “resident” for Indian tax purposes. With due respect to the concerned learned (really competent) experts , one may have reason to strongly differ.
The reason, if were to be briefly stated, is this :- The question what is the correct or safest premise to proceed with would require to be examined in detail and decided, not offhand, but to begin with, after a proper application of the special tests laid down for the purpose in section 6 of the IT Act. Further, it appears to be beyond doubt that, whether or not the person was a 'resident' would require being determined wprt the “previous year” in which the proposed ‘transfer’ (sale) takes place.
The term/concept of "NRI" is a special creature of the Foreign Exchange Regulations; as such, those also would have to be mindfully gone through and given due weight.
R.V.RAO
(Expert) 22 February 2014
mr.anuj guptaji is right.
in case of sale of imm.property by NRI, TDS is 20% not 1% U/S 195 to be deducted by buyer.
without full payment no seller will sign sale deed at the time of property Regn.
TDS as per IT Act,needs to be deducted at the time of credit/payment whichever is earlier.
Rs50 lacs limit is not applicable for sale by NRI .
10% surcharge is applicable for amounts exceeding Rs1 cr.
vswaminathan
(Expert) 27 February 2014
A Feedback (well-meaning/-intended)
One is obliged to fully empathize with the asserted but cryptic view (albeit with no reasoning) eminently put across / so kindly shared by the expert (s). Even so, if interested, for own enlightenment, and ,in turn, to be truly helpful to the other directly concerned readers (self not being one) , he may be requested to mind and care to look up, -not only what the law is seen/understood to say , in one’s quick perception equivocally,- a plethora of material in public domain-
e.g. here >
"Non Resident Indian - NRI definition - Income Tax Act and FEMA ..."
and HERE
"Special Provisions Applicable to Non-resident Indians - Income Tax ..."
Q
"............With a view to attract investment ....in the scheme of income taxation. Chapter XIIA of the Income Tax Act contains special provisions relating to taxation of non-resident Indians. Non-resident Indian has been defined as an individual being a citizen of India or a person of Indian origin, WHO IS NOT A RESIDENT .....” UQ
