When an NRI (non-resident Indian) sells a property in India, the buyer has to deduct TDS (tax deducted at source) and deposit the same with the tax department. However, unlike in the case of buying property from a resident, TDS has to be deducted on the amount of capital gains rather than the whole value of the property. However, to avoid the hassle of calculating capital gains and reducing the chances of error, the buyer generally deducts the TDS on the entire sale value.
In the case of NRI sellers, the buyer needs to deduct TDS at the rate of 20% post indexation in case of long-term capital gains. If the property is sold before 2 years, short-term capital gains tax will be applicable. In case of short-term capital gains, TDS must be deducted at the rate of 30%.
The calculation of capital gains may not be easy and straightforward. Apart from this, the buyer might face issues with respect to determining the residency stat