In Income tax Law, your residential status is divided into resident, non-resident or not ordinarily resident and based on your residential status income is taxed. If you are non-resident and make sale of property situated in India, TDS will get deducted from that income. In this article you will find all about TDS on sale of property by NRI.
Any income earned in India is taxable for a non-resident.
If a property is sold by an NRI in India then the same is taxable in India under the head capital gain.
Capital Gain is further divided into two categories.
If the Property is sold within two years of purchase then it will be taxable as Short term capital gain.
If the Property is sold after holding the property for more than two years then it will be chargeable as Long term capital gain.
Tax rates for long Term and short term Capital gains are different.
How to calculate Capital Gain tax
Find here how to compute capital gain tax
Section 195 deals with TDS on sale of property by NRI.
As per this section any personal responsible for paying to a non-resident, not being company, any amount which is chargeable to tax in India, needs to deduct TDS.
TDS is deducted for sale of property as per the rates of capital gain tax.
Section 115E provides for tax rate of 10% for long term capital gain for non-resident.
For short term capital gain TDS is deducted at normal tax rates.
Please note that the above rates will be increased by surcharge, if applicable.
Time of deduction
The person liable to deduct TDS at the Earlier of:
- Date of Payment
- Date of credit in Account
TDS U/S 195 would also be deducted if there is an advance payment.
You can get tax exemption on Capital gain on sale of property if you invest that receipt as income tax tax.
Other important Points
- Where the person responsible for deduction of TDS consider that the whole amount of payment is not chargeable to tax, he may make an application to the assessing office to deduct TDS on that portion of payment which is chargeable to tax.
- Non resident can claim refund if excess TDS is deducted. They can claim refund by filing income tax return.