Does an NRI need to deduct TDS when purchasing property in India?
- NRIs must deduct TDS on property purchases in India exceeding ₹50 lakh, as per Indian tax laws.
Query # 1 - I recently purchased a property in Bengaluru at a price higher than the stamp value. The builder informed me that as a Non-Resident Indian (NRI), I am not required to deduct and pay TDS on this transaction. Could you please clarify if this information is accurate? I would greatly appreciate your guidance on whether any specific conditions or exemptions are applicable in such cases.
-Name withheld on request
Under India's income tax law, any individual purchasing an immovable property (excluding agricultural land) from a resident seller is required to deduct TDS at the rate of 1% of the total consideration. This rule applies when the total consideration and the stamp duty value of the property are both equal to or greater than ₹50 lakh. The TDS is calculated at 1% of the higher of the total purchase consideration or stamp duty value, not just the value exceeding ₹50 lakh.
Importantly, this provision does not differentiate between resident and non-resident buyers; it applies equally to both. Hence, as an NRI, you are required to deduct TDS if the transaction meets the above criteria.
The deducted TDS must be remitted to the government by filing Form 26QB within 30 days from the end of the month in which the tax was deducted. Furthermore, buyers are not required to obtain a TAN (Tax Deduction and Collection Account Number) for depositing the TDS for such transactions.
Query #2 - We stayed outside India as NRIs for almost 15 years and returned to India in 2022. I have maintained my foreign bank accounts and am aware that I need to disclose foreign assets and report corresponding foreign income in my Indian tax return. However, my wife is also listed as the second holder in my foreign bank account for operational convenience. Does she also need to disclose these assets in her tax return even though I have already paid tax on the foreign income?
-Name withheld on request
All individuals categorized as resident and ordinarily resident (ROR) in India are required to disclose their foreign assets under Schedule FA in their tax return and report foreign income under Schedule FSI. They may claim foreign tax credit, if applicable, by completing Schedule TR.
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The disclosure requirement in Schedule FA applies to both the beneficial owner and the legal owner. A beneficial owner is someone who has provided the funds for purchasing the asset for their own benefit or another’s. If an individual is both the legal and beneficial owner, they should mark legal ownership in the relevant column.
Since your wife is listed as a joint holder for operational convenience, she qualifies as a legal owner. As such, she must disclose the foreign account in her tax return. However, since you have already reported the values under Schedule FA – Table A1 (Foreign Depository Accounts) in your tax return, your wife may enter ‘zero’ amounts to avoid duplication.
Additionally, under the Common Reporting Standard (CRS), each joint holder is treated as an account holder for information exchange purposes, with the entire account balance attributed to each joint holder. In case of a discrepancy between CRS reporting and Schedule FA disclosure, you may need to explain the data mismatch if an inquiry arises.
Harshal Bhuta, Partner, P. R. Bhuta & Co. CAs
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First Published:30 Dec 2024, 11:17 AM IST
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