Browse by Category
Browse by category
Author:taxworry K
Income Tax Pro.
Income Tax Pro.
Seven Answers A Resident Must Know Before Buying Property From A Non Resident?
ince the immovable property sale
by non resident entails payment of sale consideration by the buyer who
is resident Indian , tax has to be deducted at source and paid to
government as per section 195 of the I T Act before paying the sum to
the non resident seller of the property .
1. Who is responsible for deduction of tax?
As per section 195 of the I T Act , the person who is paying any sum to non resident , is responsible for deducting tax before making payment or crediting the payment in his accounts. So, the buyer of the property is responsible for deducting tax.
2.What are the consequences of non deduction of tax?
A resident buyer of the property from a non resident ,but fails to deduct the tax at the time of payment or credit of the amount to his account, shall be liable for penalty equal to the amount of tax not deducted or after deducting not depositing the tax .
A person is also liable for prosecution for such failure.
3.Can the resident buyer be assessed under I T Act for income arising to a non resident?
Yes, Clause ( C ) of section 163(1) of the I T Act says
“
1. Who is responsible for deduction of tax?
As per section 195 of the I T Act , the person who is paying any sum to non resident , is responsible for deducting tax before making payment or crediting the payment in his accounts. So, the buyer of the property is responsible for deducting tax.
2.What are the consequences of non deduction of tax?
A resident buyer of the property from a non resident ,but fails to deduct the tax at the time of payment or credit of the amount to his account, shall be liable for penalty equal to the amount of tax not deducted or after deducting not depositing the tax .
A person is also liable for prosecution for such failure.
3.Can the resident buyer be assessed under I T Act for income arising to a non resident?
Yes, Clause ( C ) of section 163(1) of the I T Act says
“
For the purpose of this Act , agent in relation to a non-resident ,
include any person in India –
(a)…….
(b)……..
(c ) from or through
whom the non-resident is in receipt of any income , whether directly or
indirectly ; or……
So , a buyer through whom the
income to non-resident arises can be treated as agent of the
non-resident and therefore can be assessed as “representative
assessee” as per section 160(1) of the I T Act.
4.What is the amount on which tax has to deduct?
Tax at source on Gross amount of payment or only on the gains.
Supreme Court set the confusion at rest by its order in Transmission Corporation (239 ITR 587) where in it has been ruled that tax should be deducted on the income embedded in the payment.
4.What is the amount on which tax has to deduct?
Tax at source on Gross amount of payment or only on the gains.
Supreme Court set the confusion at rest by its order in Transmission Corporation (239 ITR 587) where in it has been ruled that tax should be deducted on the income embedded in the payment.
But confusion regarding quantum still remains there , regarding the decision about the computation of gain. The points for confusion for the deductor are knowledge of cost. The seller , may also claim exemption u/s 54 or 54EC , which may make his gains tax exempt, in that case there is no need of deduction of tax .Therefore, solution to sort out such problem are taking one of the following steps :
- TDS should be deducted only after making an application in Form 13 before A.O u/s 195(2) for determination of the amount on which tax has to be deducted.
- Even Non Resident seller can also make an application in Form 13 before A.O u/s 195(3) for determination of quantum of tax to be deducted .
5. What is the rate of
deduction?
The rate of deduction in case of 20 % .
plus Education Cess 3 %.
6.When is the amount required to be deducted and
deposited?
The amount is required to be deposited
1. Within one week from the end of month in which the payment
was made.
2. Within two months from the end of
month in which credit was made.
7. What are other formalities under I T Laws to be
done?
1. Get a Tax Deduction Number (TAN )by
applying in Form 49B to Utitsl or NSDL.
2. File a statement
of tax deduction in Form 27Q of the I T Act quoting TAN .
3. Issue a certificate of deduction in Form 16A to the Non
Resident within one month from the end of month in which payment was
made.
Have You Read These Answers?
40 Questions You Ever Wanted to Know About TAN Answered !
30 Questions on eTDS You Can't Afford Not To Know.
What Are The Laws Regarding Repatriation Of Sale Proceeds of Property Purchased by NRI ?
Latest postings
How to Make Gain On ESOP Shares Sale Tax Exempt?
ESOP has come into focus once again on account of its inclusion as benefits chargeable to fringe benefit tax. To know more about it click here.... more >>
ESOP has come into focus once again on account of its inclusion as benefits chargeable to fringe benefit tax. To know more about it click here.... more >>
Are Capital Gains On Sale Of ESOP Shares Listed Abroad Exempt?
www.taxworry.com I am an Indian resident, and had some ESOPs which I had exercised and paid in January 2004. These were paid in USD and mon... more >>
www.taxworry.com I am an Indian resident, and had some ESOPs which I had exercised and paid in January 2004. These were paid in USD and mon... more >>
Which Losses Can Be Adjusted With Salary Income?
here are five heads of income -salary,house property ,business ,capital gains and other sources. Out of these heads, losses may be incurred in any h... more >>
here are five heads of income -salary,house property ,business ,capital gains and other sources. Out of these heads, losses may be incurred in any h... more >>
Can One Claim Relief For Tax Paid In A Country With Which India Has No DTAA?
First Answered on www.taxworry.com I worked in Hongkong for the period of 1/4/2007 to 30/6/2007 on Salary basis in a company. I was transferred in ... more >>
First Answered on www.taxworry.com I worked in Hongkong for the period of 1/4/2007 to 30/6/2007 on Salary basis in a company. I was transferred in ... more >>
How Is The Stock Appreciation Rights Taxed?
Answer published on www.taxworry.comI am working for an IT company head quartered in US, which has given me shares as part ESOP . It was granted to ... more >>
Answer published on www.taxworry.comI am working for an IT company head quartered in US, which has given me shares as part ESOP . It was granted to ... more >>
Finance
Don't get carried away by stock prices
Are stock prices really cheap? Why I’m asking this question. Is... more >>
By Guruprasad V
Are stock prices really cheap? Why I’m asking this question. Is... more >>
By Guruprasad V
Survive and Succeed
This is worst situation no one would like to face in their life t... more >>
By Guruprasad V
This is worst situation no one would like to face in their life t... more >>
By Guruprasad V
Indian IT sector future prospect
I came across many query about Indian IT sector future prospect d... more >>
By manoj k pandey
I came across many query about Indian IT sector future prospect d... more >>
By manoj k pandey
Your Money: McCain vs. Obama
Budget Deficit Now that the government has committed over $1 t... more >>
By surajit Sarkar
Budget Deficit Now that the government has committed over $1 t... more >>
By surajit Sarkar
Central Banks Destroying Traditional Risk Spread Methodologies
According to a recent regulatory filing, Ohio-based First Energy ... more >>
By Rakesh Saxena
According to a recent regulatory filing, Ohio-based First Energy ... more >>
By Rakesh Saxena
Guest contributors
Our sponsors