Navigating TDS Obligations for Non-Resident Indian Property Sellers
In the intricate realm of property transactions involving non-resident Indians (NRIs) selling their holdings in India, a perplexing question often arises: Must the buyer initiate Tax Deducted at Source (TDS) procedures even for nominal amounts exchanged during the signing of the purchase agreement? Or does the TDS obligation solely manifest during the final payment when executing the sale deed?
TDS, a crucial facet of any payment to NRIs, encompasses amounts subject to taxation under income tax laws. Ideally, when buyers can precisely determine the seller’s capital gains and feel confident about it, the deduction should focus on the capital gains rather than the entire sale consideration. In reality, lacking a lower or nil tax deduction certificate from tax authorities, buyers often resort to TDS on the gross sale consideration to avert potential classification as an assessee-in-default.
Buyers find themselves bound by legal provisions to carry out TDS at the earliest, either at the payment date or the income credit date. Notably, token amounts constitute part of the sale consideration. Consequently, even when an NRI divests property and receives payment for such a token, the buyer assumes the obligation to deduct tax, surcharge, and cess (presuming gains align with long-term capital gains). Failure to deduct tax during the token payment, opting to do so only during the final settlement, renders the buyer liable for interest on the omitted TDS sum.
A perplexing query emerges in the current fiscal year scenario, where an NRI son anticipates an income of approximately ₹8 lakh from rent and bank interest, coupled with a capital gain of about ₹3 crore from property sale. The conundrum? Which Income Tax Return (ITR) form befits his unique situation?
Referencing Rule 12 of the Income Tax Rules, 1962, the appropriate ITR form aligns with an individual’s income type and other criteria. Given that the son hasn’t amassed income under the ‘profits and gains of business or profession’ category, he must file his income return using Form No. ITR-2. This form caters to both resident individuals and NRIs, offering a streamlined approach to fulfilling taxation obligations.
In unraveling the intricacies of TDS obligations and the labyrinth of ITR forms, the dynamics of property transactions and taxation become clearer for NRIs and buyers alike.
