There is a flat on sale from an NRI which costs around INR 48 lakh. The seller mentioned that he will open a Capital Gains Account Scheme (CGAS) Type A account in which the purchase amount can be transferred. Since it is a CGAS Type A account, the buyer doesn’t need to deduct the 20% TDS. Is it possible and true or will the buyer have to deduct TDS?






Avanthika Avanthika
Answered on February 05,2020

The Income Tax Act requires a buyer of a property to deduct TDS at the time of making a payment to the seller of the property. As per section 194IA, this TDS is deducted at the rate of 1% and this provision is applicable when both the transferor and transferee are resident in India. In this case, TDS applies if the consideration for the property exceeds INR 50 lakh.

Where a resident makes a purchase of a property from a non resident, TDS is deducted at the rate of 20% (plus cess and surcharge, as applicable) in case of long term capital gains and at the rate of 30% (plus cess and surcharge, as applicable) for short-term capital gains. There is no minimum threshold applicable for deduction of TDS; therefore, TDS will apply where the consideration is less than INR 50 lakh as well. This is laid down as per the provisions of section 195 of the Income-tax Act, 1961.

Where the non-resident intends to claim capital gains exemption or where his total income is below taxable limit, he may request that no TDS be deducted from the payment made to him. For this purpose, he has to make an application to the assessing officer of the income tax department.

Upon receiving the application, the assessing officer will satisfy himself that a lower rate or no TDS must be deducted. He will then issue a certificate specifying the same. The NRI will them submit this certificate to the buyer. The buyer shall keep a copy of the certificate and deduct tax accordingly.


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