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At what rate a person has to deduct TDS

At what rate a person has to deduct TDS (Tax deducted at source) when buying a house or any other immovable properties from resident Indian? (Excluding agriculture land) (Section 194-1A) and from Non-Resident Indians (Section 195)

A person is required to deduct TDS if he purchases any immovable property like flat, house, apartment, shop etc. from a resident Indian (Excluding agriculture land) if sale consideration or stamp duty value whichever is higher is equal to or exceeds INR Five million and if the seller is a non-resident Indian then from the very first rupee (INR 1) TDS is required to be deducted

To decide the applicable TDS rate, first of all, one need to work out Residential status need to be as per section 6 of The Income Tax Act, 1961. Once it is worked out that whether a seller is a Resident Indian or a non-Resident Indian, the rate of TDS applicable will be as under,

For the Resident seller of India:

If the seller does not have PAN (Permanent Account Number) (Section 206 AA), TDS to be deducted @ 20% of sale consideration or stamp duty value whichever is higher

If the seller does have PAN but has not filed its ITR (Return of Income) for past two financial years before the financial year in which sale transaction took place then TDS to be deducted @ 5% of sale consideration or stamp duty value whichever is higher (Section 206AB)

If the seller has a PAN and filing its ITR for past two financial years before the financial year in which sale transaction took place then TDS to be deducted @ 1% of sale consideration or stamp duty value whichever is higher (Section 194-1A)

If the seller is a non-resident Indian individual and if the property is held for a period of 2 years or more then the gain arising to the non-resident is long-term in nature and taxable @ 20% (plus surcharge and cess), TDS is to be deducted as under, (Section 195) If the sale consideration is between INR zero to INR 5 million TDS @ 20.8 % If the sale consideration or stamp duty value whichever is higher is between INR 5 million to INR 10 million TDS @ 22.88 % If the sale consideration or stamp duty value whichever is higher is above INR 10 million TDS @ 23.92% Section 206AA (TDS at a higher rate if PAN not provided) is not applicable in case of a NRI as per the notification by Government of India.

For any query or assistance, you may send an email at the id letstalk@mjsheth.com

Author : Manish J. Sheth
Published : 31-10-2022

Disclaimer

This blog is meant purely for educational/research and discussion only to give a general understanding. Any subsequent amendments or changes to the law may change the tax implications. It is not legal advice and should not be treated as such. You may not rely on the information on this blog as an alternative to legal advice from your attorney or other professional service provider. Any use, reference to, distribution or reliance on the content of this blog may be done by reader at their own risk and the author is not responsible for any loss or damage incurred to the reader.

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