Client Name: XXXX (henceforth mentioned as the “Client”)
Facts Involved:
1. Client is a Non-Resident Indian (NRI) intending to transfer immovable property of 1630 sq. ft. gifted by her Father-in-Law Mr. XXXX on 27/12/2005.
2. Total consideration for sale is Rs. 1,45,00,000 approximately.
3. Her Father-in-Law purchased the said property in May 1999 at a consideration of Rs. 4,00,000.
Laws Involved:
Income Tax Act, 1961 read with rules made thereunder.
Discussions:
Client is intending to sell property gifted by her Father-in-Law for a total consideration amounting to approx. Rs. 1.45 Crores. Considering the general provisions, buyer will be liable to deduct TDS at the rate of 20% plus applicable cess which is 4% at present making it a total of 20.8% of Sales Consideration. TDS shall be equivalent to Rs. 30,16,000 (1,45,00,000*20.8%) in such a case.
However, where seller claims that TDS at the applicable rates causes undue hardship on her, then seller may claim deduction of TDS at a lower rate by obtaining a lower TDS deduction Certificate from the Assessing Officer by furnishing necessary documents and submissions. TDS in that case shall be at the rate of 20% plus applicable cess which is 4% at present making it a total of 20.8% of LTCG (Long Term Capital Gain).
LTCG shall be computed based on Indexed Cost of Acquisition of property in the hands of the previous owner i.e. Mr. XXXX*. Indexed Cost of Acquisition is Rs. 1,17,76,750 (40,75,000*289/100).
*Assuming the fair valuation of property as on 01/04/2001 to be Rs. 40.75 Lakhs approx. (Certificate of valuation to be obtained by the seller)
Thus, LTCG shall be Rs. 27,23,250 (1,45,00,000-1,17,76,750).
TDS where seller has obtained lower deduction certificate from the Assessing Officer, shall be Rs. 5,66,436 (27,23,250*20.8%).
Lower TDS deduction Certificate can be obtained by seller or his authorized representative only.
Conlusion:
TDS deductible by Buyer on sale of immovable property can be lowered provided lower TDS deduction certificate has been obtained by client or his authorized representative on her behalf. The same shall be submitted to the buyer for lower deduction of TDS.