Lower TDS Certificate For NRI

A Lower TDS Certificate for NRI is a special authorization issued by the Indian Income Tax Department. It allows Non-Resident Indians (NRIs) selling property in India to reduce or eliminate the Tax Deducted at Source (TDS) on the sale proceeds. This certificate is valid for a specific period and applies to a particular transaction.Obtaining this certificate helps NRIs manage their cash flow. Normally, TDS is deducted on the full sale value, even though capital gains tax applies only to the profit. This often results in excess tax being deducted, which the seller can only recover after filing an income tax return.

As per the recent update by CBDT on September 27, 2023, Non-resident Indians (NRIs) looking to prevent tax deductions on the income earned in India now have a revised procedure to obtain tax deductions at source (TDS).Unlike resident Indians, NRIs cannot avoid the deduction of TDS using Form 15G/H. Instead, they must apply directly to the assessing officer for issuing a zero TDS certificate.

Let’s understand what is the procedure for NRIs to obtain TDS certificates.

How to Apply for a Lower TDS Certificate (Form 13)?

NRIs must submit an online application (Form 13) to the Assessing Officer (AO) in the relevant jurisdiction.

• The application can be filed in the jurisdiction linked to the PAN or where the property is located.
• Each seller must apply separately if multiple sellers are involved.

Documents Required for the Application

Approval Process & Timelines

• The Assessing Officer (AO) reviews the application and may request additional documents.
• Certificate is issued online after approval, downloadable from the income tax portal.
• Processing time: 30-60 days after submission.
• The certificate remains valid until the financial year-end, unless canceled earlier.

TDS Deduction with the Certificate

• The buyer must deduct TDS at the rate specified in the certificate.
• Minimum TDS rate: 3% (without further approval).
• For a lower rate, approval from the Commissioner of Income Tax (CIT) is required, which is possible.

For an NRI selling property in India, the TDS rates depend on whether the property is classified as a long-term capital asset or a short-term capital asset.

Long-Term Capital Asset (LTCG):

• If the property has been held for more than 2 years, it qualifies as a long-term capital asset. The TDS rate on long-term capital gains is 12.5% (plus applicable surcharge and cess).

Short-Term Capital Asset (STCG):

• If the property is sold within 2 years of acquisition, it is considered a short-term capital asset. The TDS rate for short-term capital gains is 30% (plus applicable surcharge and cess).

TDS Rates with Surcharge and Cess

The TDS rate mentioned above is subject to additional charges as follows:

Health and Education Cess:

• 4% of the TDS amount.

Surcharge:

• Depending on the amount of capital gain, there may be an additional surcharge. For individuals, the surcharge on TDS for the sale of property can range from 10% to 25%, depending on the income level.

Procedure for TDS Deduction by the Buyer

The process for TDS deduction and remittance involves the following steps:

1. Deduction by Buyer: The buyer is responsible for deducting TDS from the transaction value at the time of payment to the seller.
2. Payment to Government: The buyer must remit the deducted TDS to the government within a specified time frame. Generally, the payment should be made within 7 days from the end of the month in which the TDS is deducted.
3. Issuance of TDS Certificate (Form 16A): Once the TDS is deposited, the buyer must provide a TDS certificate (Form 16A) to the seller. This certificate serves as proof of the TDS payment.
4. Filing of Income Tax Return: NRIs must include the capital gains in their Income Tax Return (ITR) for the relevant year and claim the TDS amount as a credit while filing the return.

Possibility of Lower TDS Deduction

In certain circumstances, an NRI can apply for a lower or nil TDS deduction if the actual tax liability is lower than the standard TDS rate. This can be done by applying to the Income Tax Department under Section 197.

• The NRI seller must submit an application (Form 13) to the tax authorities.
• The tax authorities may issue a certificate for a lower or nil TDS deduction if they are satisfied with the application.

TDS Payment & Filing Requirements

• TAN Requirement: The buyer must obtain a TAN (Tax Deduction and Collection Account Number) to make the TDS payment.
• Deposit of TDS: The deducted amount must be deposited with the tax authorities through a challan linked to the TAN, not the PAN.
• TDS Return (Form 27Q): The buyer must file Form 27Q to report the TDS deduction.
• Form 16A: After TDS payment, the buyer must issue Form 16A to the seller to enable the seller to claim credit.

1. Expertise in Indian Taxation Laws:

Our team of experienced Chartered Accountants (CAs) and tax professionals has in-depth knowledge of Indian tax regulations, including TDS provisions under Section 195.

We ensure that your application for a Lower or Nil TDS Certificate is accurate, complete, and compliant with the Income Tax Act.

2. Timely and Efficient Service:

We understand the importance of time when selling property in India. Our team works diligently to secure your Lower or Nil TDS Certificate well before the property sale is finalized.

This ensures a smooth transaction and avoids delays caused by incorrect or excessive TDS deductions.

3. Customized Solutions for Your Needs:

Whether you need a Lower TDS Certificate for long-term or short-term capital gains or a Nil TDS Certificate to claim exemption from tax liability, we tailor our services to meet your specific requirements.

We analyze your tax liability and guide you on the best approach to reduce or eliminate TDS deductions.

4. Client-Focused Approach:

Your satisfaction is our priority. We take the time to understand your unique situation and provide personalized solutions to meet your needs.

Our goal is to make the TDS compliance process hassle-free and efficient for you.

At Zenify Consultancy Services, we are committed to providing comprehensive and expert services to ensure that NRIs comply with all TDS and tax-related requirements when selling property in India. Our team of qualified Chartered Accountants ensures that your tax obligations are met smoothly, efficiently, and without any hassles.
Whether you are selling property in India for the first time or have dealt with similar transactions before, our team is here to help you every step of the way.

1. Guidance on TDS Rate and Calculation

Correct TDS Rate: We will help you determine whether the capital gains from your property sale are classified as long-term or short-term. Based on this classification, we will calculate the applicable TDS rate to ensure accuracy and compliance with tax laws.

Capital Gains Calculation: Our experts will assist you in calculating the exact capital gains by considering factors such as the acquisition cost, sale price, indexation benefits, and improvements made to the property. This ensures that TDS is deducted only on the accurate capital gain amount and not the entire sale value.

2. Assistance in Obtaining PAN

PAN Requirement: To ensure that TDS deductions are made at the correct rate, it is mandatory for you, as an NRI seller, to have a valid PAN. If you don’t have a PAN, we will guide you in applying for one.

PAN Application: If you need assistance with the application process, we will ensure you have all the necessary documents and help you complete the process smoothly. Having a PAN card ensures that TDS is deducted at the correct rate and simplifies tax return filing in India.

3. Ensuring Timely TDS Deduction and Remittance

Buyer’s Obligation: While the buyer is legally responsible for deducting TDS at the time of sale, we will guide you to ensure that the buyer complies with this requirement. We’ll help communicate the necessary tax-related details to the buyer.

Remittance to the Government: Our team ensures that the deducted TDS is remitted to the Income Tax Department within the prescribed time frame, within 7 days from the end of the month in which the TDS is deducted.

4. Filing of TDS Returns (Form 26QB)

Buyer’s Responsibility: The buyer must file TDS returns through Form 26QB, a statement of TDS paid on the sale of property. We will help you confirm whether the buyer has filed this form correctly, which is a crucial document for verifying that TDS has been paid.

Monitoring the Process: Our team will ensure that the TDS filing process is tracked meticulously, so the correct TDS Certificate (Form 16A) is issued. This certificate is essential when filing your income tax return in India.

5. Issuance and Tracking of TDS Certificates (Form 16A)

TDS Certificate (Form 16A): After the TDS is deducted and remitted, the buyer must issue the TDS certificate (Form 16A). This certificate serves as proof of the TDS deduction and is required when filing your tax return.

Verification: We will help ensure that the TDS certificate is issued accurately and that all details match the TDS deductions made. In case of discrepancies, we’ll advise you on how to rectify them with the buyer or the authorities.

6. Filing Income Tax Return (ITR)

Income Tax Return Filing: After TDS is deducted, you must file an Income Tax Return (ITR) in India to report the capital gains and claim the TDS paid as a credit. We will assist you in preparing and filing the correct ITR form which reflects the capital gains from the property sale.

Claiming Refunds: If the TDS amount deducted exceeds your actual tax liability, we can help you file for a tax refund, ensuring that you get back the excess TDS credited against your income tax return.

7. Advising on Exemptions and Deductions

Capital Gains Exemptions: NRIs can claim exemptions under sections like Section 54 or Section 54F of the Income Tax Act if the capital gains are reinvested in another residential property. We will guide you on how to avail these exemptions and ensure all the necessary documentation is in place.

Lower TDS Deduction: If your actual tax liability is lower than the TDS deducted, you may apply for a lower TDS certificate under Section 197. We will assist you in filing Form 13 and liaising with the Income Tax Department to secure the lower deduction. We will ensure a steady and faster process for such deduction.

8. Assisting in Applying for Lower TDS Certificate

Lower TDS Certificate: If your actual tax liability is lower than the TDS deducted, it would be beneficial for you to apply for a lower TDS certificate under Section 197. We will assist you in filing Form 13 and liaising with the Income Tax Department to secure the lower deduction. We will ensure a steady and faster process for such deduction.

9. Resolving Disputes and Handling Notices

TDS Related Disputes: If you face any issues related to TDS deductions, such as incorrect deductions or failure of the buyer to remit the TDS, we will help resolve these disputes. We’ll contact the tax authorities, file rectification requests, and ensure compliance with the applicable laws.

Handling Tax Notices: In case you receive any tax notices related to the property sale or TDS deductions, our team will represent you before the tax authorities and resolve any issues or clarifications required.

10. General Tax Planning for NRIs

Long-Term Tax Planning: We also provide long-term tax planning strategies, helping you structure future property transactions in India for better tax efficiency. Our team ensures that you take advantage of available tax-saving mechanisms and exemptions.

Reinvestment Strategies: We will assist you in identifying tax-saving reinvestment strategies, such as reinvesting in property or bonds, to minimize your capital gains tax liability.