Long Term Capital Gain on sale of Flat by NRI

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  1. niting_98

    niting_98 New Member


    I have recently sold my flat in Mumbai that I had purchased in June of 2009. Since I am an NRI, I am not familiar with Indian Income Tax rules and regulations. I am dealing with local chartered accountant and originally, I was told that 20% will be deducted as TDS on total sale value of the property and then the CA came back and said that it should have been 20.60%, so we had to do special letter to take out additional TDS amount. Everything I have read on here and other websites, says 20%.

    Can you please help and tell me if th TDS for long term is 20% or 20.6%?

    Nitin Gandhi
  2. ZED

    ZED Well-Known Member

    Rate of TDS shall be 20% u/s 195 and the same shall be increased by education cess and Secondary and Higher Education cess @ 2% & 1% of the TDS, respectively.
    Hence effective rate is 20.60%

    Further the basic rate of TDS [20%] shall be increased by surcharge @15% of the TDS, if the amount is more than 1 crore.

    [First we will use the base rate 20%] then apply surcharge thereon (if applicable) and then apply cess on base rate + surcharge.

    NOTE; The rates of DTAA are inclusive of cess and surcharge, there is no need to add them again.

    Extracts from Finance Act 2016

    The amount of income-tax deducted in accordance with the provisions of–– *(i) item 1 of this Part, shall be increased by a surcharge, for purposes of the Union,––
    (a) in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Incometax Act, being a non-resident, calculated at the rate of fifteen per cent. of such tax;
    [*This case is covered under item 1]

    Extracts from Finance Act 2016

    “Education Cess” at the rate of two per cent. and “Secondary and Higher Education Cess” at the rate of one per cent. shall continue to be levied in all cases covered under Part III of the First Schedule. In the cases covered under Part II of the First Schedule, there will be no levy of the Education Cess and Secondary and Higher Education Cess on tax deducted or collected at source in the case of domestic company and any other person who is resident in India. Both the cesses would continue to apply on tax deducted at source in the case of salary payments. These would also continue to be levied in the cases of persons not resident in India and companies other than domestic company.
  3. niting_98

    niting_98 New Member

    Thank you for your detail explanation along with the official excerpt from the Indian Income Tax manual.
    ZED likes this.
  4. niting_98

    niting_98 New Member

    Hello Zed, Can you please take a look at the link I am sharing and let me know if this ruling applies to NRI individuals and whether the change is retro active from beginning or from certain effective date of the transaction? Appreciate your feedback and thank you in advance.

    I also want to know if you are a CA and has your own practice and if so, where is your practice?

  5. ZED

    ZED Well-Known Member

    The new rule 37BC is applicable w.e.f 24.06.16.
    Further, this rule will apply only to those non residents (other than company/foreign co.) who do not have PAN.
    If they have PAN and fail to provide the same then tax deduction shall be as per S.206AA [S.206AA overrides S.90]

    Only income from Interest, Royalty, FTS and payment on transfer of Capital asset are covered in the ambit of Rule 37BC.

    Kindly note that these provisions are under Income Tax Rules ,1962. In case the provisions of S.90 [DTAA] is applicable then we will have to see as to whether there is requirement under the DTAA to furnish PAN or not because provisions of S.90 over-rides all the provisions of the Income Tax Act and the Income Tax Rules are subordinate to the Income Tax Act.
    Obtaining PAN is easy and cheap.

    I am practicing as a tax consultant and I have virtual office (why should I restrict myself to some physical boundary?) Through net I take cases all across the India.

    I may be contacted through email
    [email protected]
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