(Last Updated On: May 29, 2022)

Lower Tax Deduction Certificate for NRI

If NRI is selling property in India he should apply Lower Tax Deduction Certificate for NRI u/s 197 of Income Tax Act of India to avoid excess deduction of TDS on sale of property leading to blockage of funds

Video on Lower Tax Deduction Certificate of NRI

Contact us Taxheal@gmail.com Apply lower TDS Certificate of NRI

Why Lower TDS Certificate should be applied by NRI ?

Particulars	Rs
Sale Consideration of Property	1,25,00,000
Less Indexed Cost ( of Purchases Cost of property ) Assuming property is sold after holding for 2 years	1,20,00,000
Long Term Capital gains	5,00,000
Actual Tax Liability 20.8% ( 20%+Cess 4%) on Capital Gains of Rs 5,00,000	1,04,000
But if Lower Tax deduction certificate is not taken then as per Section 195 of Income tax Act buyer will deduct TDS @ 23.92% ( 20%+SC 15%+Cess 4%) on Sale Value of Rs 1,25,00000	29,90,000

Though, NRI can claim the refund of excess TDS of Rs 28.86 Lakh ( Rs 29.90- Rs1.04 Lakh) through filing of ITR. However, it is a time taking process and case may be selected for scrutiny by income tax department due to large refund. If TDS deducted on full amount, Non-resident money will be blocked with Income Tax Department for a long time, which causes loss of bank interest also.
Hence, this is a genuine hardship on the Non-residents (NRIs, OCIs) in relation to their property sale transactions in India.

What is TDS certificate for NRI?

To overcome the problem of excess deduction of Tax of NRI, Income Tax Act provides for Lower TDS Certificate (or also called as TDS Exemption Certificate) under section 197 of Income Tax Act.
This certificate is to be applied before execution of sale deed and receipt of amount from buyer. ( However Advance can be received on sale of property on which TDS at actual rate is deducted by the Buyer)

What are the requirements for applying Lower Tax deduction Certificate for NRI ?

TAN of Buyers
PAN of Sellers
Agreement to sell
Copy of Passport of NRI/Foreign Citizen Seller (along with latest few years internal pages)
Property Acquisition & Purchase related documents (i.e. Sale Deed, Agreement with Builder, Allotment Letter, Possession Letter, Receipts etc;)
Income Tax Return Copy of last 4 years , or Need to do computation of Tax if ITR not filed
Circle Value of property
Various other supporting documents as per the facts of the case

How can I get a lower tax exemption certificate online for NRI?

NRI needs to apply in Form 13 for lower TDS Certificate or TDS Exemption Certificate – Section 197

NRI needs to apply in Form 13 for lower TDS Certificate or TDS Exemption Certificate – Section 197
NRI Lower TDS Certificate is applied and issued online by income Tax department.
NRI applicant need to prepare and arrange various supporting documents for this Lower TDS Certificate. All the documents are submitted with Form 13 Application online.
On submission of documents, the application moves to the Jurisdictional TDS Certificate Officer. The officer review the application and seeks clarifications if any.
On satisfying all the concerns, the officer processes the certificate and allow Lower TDS to the NRI/Foreign citizen in relation to the transaction.
On receipt of the Lower TDS Certificate u/s 197 (or TDS exemption certificate) the buyer deducts the TDS as per Certificate.
Hence, through this process NRI/Foreign citizen gets TDS relief before the sale transaction, and avoid blocking of their money with Income Tax Department.

FAQs on Lower Tax Deduction Certificate for NRI

Q: Who is the Jurisdictional Officer for lower TDS Certificate Application Processing?

Ans: The lower TDS Certificate application (Form 13) can be processed by any officer (of Income Tax Officer level) in International Tax Jurisdiction. It is not necessary that officer will be of same jurisdiction where the PAN is lying or where the property is lying. This officer can be anywhere. The headquarter of International Tax is in Delhi.

Q: Which Jurisdiction the Lower TDS Certificate application is sent for processing? Does it has any connection with location of property or present jurisdiction of NRI seller?

Ans: Lower TDS certificate application is a separate process which is done by a separate officer. It is not necessary that the Lower TDS Certificate officer will be in same city where the property is. Also, it has no relevance that what is the present tax jurisdiction of the applicant NRI Seller. The Lower TDS Certificate application is assigned to a separate jurisdiction. A Chennai/Hyderabad/Mumbai property transaction lower TDS Certificate can be processed by Delhi Tax Jurisdiction.

Q: Whether Lower TDS Certificate is processed for amount received in advance by the NRI seller?

Ans: Lower TDS certificate application is generally processed by the Jurisdictional Officer on the amount to be received. However, if there is any minor amount is received by the Seller at the time of sale agreement, then generally the officer allow and process TDS Certificate on total sale transaction including advance received. However, as a precaution, NRIs Seller should avoid taking big amount at the time of sale agreement signing.

Q: How much time it takes for processing of NRI Property Sale Lower TDS Certificate?

Ans: The process involves few steps i.e. allotment of an officer to the case (happens technologically), reviewing of file and raising queries by the officer, again queries if any, processing of file and sending to the jurisdictional senior authority for approval, processing & uploading certificate. According to the quickness at the Jurisdictional Officer level it may take 15 days to 45 days time.

Q: For how long period a Lower TDS Certificate is valid for? What If agreement with buyer gets cancelled after obtaining Lower TDS Certificate?

Ans: Once a lower TDS Certificate is issued by the Jurisdictional Officer, it is valid from the date of issuance to March 31 of that financial year. If agreement with buyer is cancelled after obtaining the lower TDS Certificate (or during the process of application is filed) then a fresh application needs to be filed with new buyer. Lower TDS Certificate is buyer TAN specific, hence, with change of buyer application also need to be filed for new buyer.

Q: Can Lower TDS Certificate for NRI Property Sale Transaction be generated at Nil rate if there is loss on sale of property? Is there any basic minimum rate for Lower TDS Certificate under the provisions of Income Tax Laws?

Ans: Technically, a Lower TDS Certificate cannot be generated at Nil rate. It can be any decimal percentage but it cannot be generated nil. Further, as per the Income tax provisions there is a provision of Nil certificate, however, practically, in local Commissionerates a minimum rate has been decided (e.g. 3%) even if there is a long term capital loss on sale of property .

Contact us Taxheal@gmail.com Apply lower TDS Certificate of NRI

Hope you have got the anwer of following questions of Lower Tax Deduction Corticate for NRI

How NRIs can lower TDS on property sale?

How can I get lower TDS deduction for NRI certificate?

Who are eligible for lower tax deduction certificate?

How do I get a lower withholding tax certificate?

Refer also www.IncomeTaxindiagov.in

What is liability under Income Tax , if property purchased from Non resident

Tax on Sale of Property by NRI in India

ACQUISITION AND TRANSFER OF PROPERTY IN INDIA BY NRI

No TDS u/s 195 on Commission paid to NR agents for export : ITAT

No TDS U/s. 195 on commission paid to USA based payee for services rendered outside India : ITAT