30/01/2025
TDS deduction when buying property from NRI
When you're buying a house from an NRI (Non-Resident Indian), you as the buyer need to deduct some tax before paying them. Think of it like a mandatory advance tax that you need to pay to the government on behalf of the seller.
The amount you need to deduct depends on how long the NRI owned the property:
1. If they owned it for MORE than 2 years:
- You need to deduct 20% of the property price (before July 23, 2024)
- After July 23, 2024, you'll deduct 12.5%
2. If they owned it for LESS than 2 years:
- You need to deduct 30% of the property price
Let's say you're buying a house worth ₹1 crore from an NRI who owned it for 3 years.
- You don't pay the full ₹1 crore to the seller
- Instead, you pay ₹80 lakhs to the seller (after deducting 20%)
- And you pay ₹20 lakhs to the government as TDS
Important points:
- This tax deduction is mandatory
- You must deposit this amount with the government
- The responsibility of deducting and depositing this tax is on you (the buyer)
- If you don't deduct and pay this tax, you could get into trouble with tax authorities.
* Cess & Surcharge will be as per Rules if any applicable.
