NRI investment in Indian real estate has increased manifold, and so have the number of resales of property taking place. However, the number of cases of defaulters where there have been mismatches with tax deducted at source has also increased. In many cases, this has been inadvertently done as the tax laws relating to property sales by NRIs are complex.
Here are a few facts you must know when purchasing property from an NRI:
• When the seller is a resident of the country, only 1% of the deal value is deducted as tax deducted at source (TDS). Also, there is no TDS levied on transactions below Rs. 50 lakh. If the seller is an NRI, though, the TDS is 22.88% of the total value. This is applicable on properties between Rs. 50 lakh and Rs. 1 crore. Even for a value below Rs. 50 lakh, 20.80% TDS is deducted. For properties worth over Rs. 1 crore, the TDS is 23.92%. The buyer is responsible for deducting the TDS value.
• A Tax Deduction and Collection Account Number (TAN) is necessary when buying property from an NRI. A TAN is required to deduct TDS on the sale amount. In the case of joint purchase, every buyer must possess a TAN.
• The money for the purchase should be deposited in Non-Resident External (NRE)/Non-Resident Ordinary (NRO)/Foreign Currency Non-Repatriable (FCNR)accounts only. The account details should be clearly stated in the sale deed.
• It is necessary that the seller has a Permanent Account Number (PAN). However, it is not necessary that the seller possess a TAN.
• The seller ideally should be present at the sale. If they have allotted a power of attorney (PoA) to someone, this person should be a Special PoA.
• In the case of multiple sellers, the buyers must make payments depending on the seller’s share. This will avoid future legal issues that may arise with payment to only one party.
Prestige Group prelaunch apartment is Prestige Aston Park.