Manthan Ruparelia & Associates

ITAT Delhi Quashes Section 68 Addition Due to Lack of Cross-Examination

JSM OILFIELDS SERVICES PVT. LTD. v. DCIT (ITA 4093/DEL/2024)

TDS implications for NRIs selling immovable properties:

1. Background:
Compliance with Section 195 of the Income Tax Act requires the buyer to deduct TDS on the full sale consideration unless a lower deduction certificate is provided by the NRI seller.

2. New Rates:
Effective July 23, 2024, buyers of immovable property from Non-Resident Indians (NRIs) must deduct TDS at a revised rate of 12.5%, plus applicable surcharge (10% for sales consideration of Rs 50 L to Rs 1 Cr or 15% for above Rs 1 Cr) and 4% health and education cess, totalling an effective TDS rate of 14.3% or 14.95%.

3. Lower deduction:
As per the provisions of Sec 197 of the Income Tax Act, the seller may obtain a certificate for lower deduction (Form 13) from the Income Tax Department, in case it can be proved that the actual tax would be lower than the TDS deductible as above.

4. PAN has to be obtained by the NRI:
Obtaining a PAN (Permanent Account Number) is mandatory for NRIs who sell property in India for the purpose of TDS (Tax Deducted at Source) on the sale of the property.

5. TAN Number:
The buyer has to apply & get a TAN. In cases where two or more individuals jointly purchase the property, investing funds from their personal sources or through joint loans, each person involved must acquire a TAN.

Once the TAN is obtained, the buyer is required to deduct TDS on every occasion of making payment to the NRI Seller and deposit the TDS amount with the Income Tax Department through e-challan latest by the 7th day of the next month which the payment is made to the Seller.

6. Interest & Penalty:
Non-deduction, delayed deduction, or non-deposit of TDS attracts penalties under Sections 201(1A) and 271C.