TDS Purchase of Immovable Property From NonResidents—Certain TDS Related Issues

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The Tax Publishers Income Tax--TDS Purchase of Immovable Property From Non-Residents--Certain TDS Related Issues CA. Nisha Bhandari Whenever any immovable property is purchased from a non-resident, income by way of capital gain may arise in hands of such non-resident and purchaser may be liable to deduct tax at source while making payment to non-resident seller. The learned author highlights some of the TDS related issues arising while making payment to non- residents on purchase of immovable property from him. 1. Tax required to be deducted under Section 195 while making payment to non-residents According to Section 195(1), any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest other than interest referred to in Section 194LB or Section 194LC or Section 194LD or any other sum chargeable under the provisions of this Act other than salary shall, at the time of credit or at the time of payment, whichever is earlier, deduct income-tax thereon at the rates in force. As per Section 2(37A)(iii), TDS rate under Section 195 would be the rate of income-tax as specified in -- (a) Finance Act of the relevant year; or (b) Double Taxation Avoidance Agreement entered by Central Government under Section 90; or (c) Agreement notified by the Central Government under Section 90A. whichever is most beneficial shall apply. In case of payment to non-residents TDS shall be increased by surcharge and cess, if any applicable. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Income Tax--TDS

Purchase of Immovable Property From Non-Residents--Certain TDS Related Issues

CA. Nisha Bhandari

Whenever any immovable property is purchased from a non-resident, income by way of capital gain may arise in hands of such non-resident and purchaser may be liable to deduct tax at source while making payment to non-resident seller. The learned author highlights some of the TDS related issues arising while making payment to non- residents on purchase of immovable property from him.

1. Tax required to be deducted under Section 195 while making payment to non-residents

According to Section 195(1), any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest other than interest referred to in Section 194LB or Section 194LC or Section 194LD or any other sum chargeable under the provisions of this Act other than salary shall, at the time of credit or at the time of payment, whichever is earlier, deduct income-tax thereon at the rates in force.

As per Section 2(37A)(iii), TDS rate under Section 195 would be the rate of income-tax as specified in --

(a) Finance Act of the relevant year; or

(b) Double Taxation Avoidance Agreement entered by Central Government under Section 90; or

whichever is most beneficial shall apply.

In case of payment to non-residents TDS shall be increased by surcharge and cess, if any applicable.