Checklist for NRIs planning to purchase property from an Indian Resident

There are numerous legal and taxation requirements for an NRI purchasing real estate in India. If you are planning to acquire land or buying property in India from an Indian Resident, the following checkpoints need to be kept in mind from the perspective of the Indian Income Tax Law:

• During purchase of property by NRI in India, an NRI Buyer is responsible to deduct tax (TDS) if the sale value for transfer of immovable property (other than agricultural land) exceeds INR 50 Lakhs.
• The tax on purchase of property in India initiates in the form of TDS, for which the rate would be 1% on total sale value, provided the Resident Seller has furnished his PAN and the Resident Seller's PAN and Aadhaar are linked. In the absence of PAN or where PAN and Aadhaar are not linked, TDS would need to be deducted at the higher rate of 20%.
• Tax so deducted needs to be deposited electronically within 30 days from the end of the month of deduction in a challan-cum-return Form - Form 26QB. For filing TDS Form 26QB, there is no requirement to obtain TAN, however PAN is mandatory. The NRI Buyers are also required to register themselves on the TRACES portal with their PAN.
• NRI is also responsible to generate TDS Certificate (Form 16B) from TRACES portal and furnish the same to the Seller within 15 days from the due date of filing Form 26QB.
• The Resident Seller can claim the TDS amount as refund by filing a tax return, if the actual capital gain tax payable by the seller is lower than the TDS amount. TDS credit will reflect in the Form 26AS (Annual TDS Statement) of the Resident Seller only if the NRI Buyer successfully completes all the above procedural compliances.

There are separate provisions to be followed in case of an NRI buying property in India from another NRI. Please refer our post on “Checklist for NRIs planning to purchase property from another NRI”.