Obtaining Lower Tax Certificate

The sale of property by Non-Resident Indians (NRIs) and Overseas Citizen of India (OCIs) in India is a common transaction that often involves seeking tax and legal services. One of the first services that NRIs seek is obtaining a Lower TDS Certificate or Nil TDS deduction Certificate (Form 13 Application) from the Income Tax Department. This certificate allows NRIs to receive relief from high withholding tax rates and avoid blocking their money with the Income Tax Department.

Under Indian tax laws, TDS provisions apply to various financial transactions, including property sale transactions. If the seller is a
Resident Indian: The TDS rate is 1% and governed by section 194IA.
Non-Resident: TDS is governed by Non-Resident TDS provisions, i.e., section 195. Under these provisions, TDS rates apply at the maximum rates on the sale amount of property. if the property is a:
Long-term capital asset: When an NRI sells a long-term capital asset, the applicable rate is 20% on consideration
Short-term capital asset: Where the NRI sells property which is considered a short-term capital asset then the slab rate will apply on the capital gain.

For NRIs (non-resident Indians), selling property in India can be a challenging process due to various regulatory and taxation requirements. One such requirement is tax deduction at source (TDS) on the sale proceeds of the property. However, NRIs can benefit from a lower TDS certificate or Nil TDS Certificate (or TDS Exemption Certificate), which can significantly reduce their tax liability. Let’s take a look at the benefits of the lower TDS certificate for NRIs or Nil TDS Certificate:

Reduced Tax Liability: The primary benefit of the lower TDS certificate for NRIs is a reduction in tax liability. Typically, TDS is deducted at a rate of 20% of the sale proceeds for long-term capital assets and a Slab rate for short-term capital assets. However, with the lower TDS certificate (or TDS Exemption Certificate), NRIs can avail of a lower tax rate or Nil tax rate, which can be as low as 0% for long-term capital assets or short-term capital assets.
Quicker Refunds: In the absence of the lower TDS certificate for NRI, NRIs may have to pay a higher tax rate than required, which could lead to an excess TDS deduction. This results in a refund claim process, which can take considerable time to complete. However, with the lower TDS certificate, NRIs can avoid over-deduction of TDS, leading to quicker refunds.
Time-Saving: Obtaining a lower TDS certificate for NRI can save a considerable amount of time and effort. The certificate can be obtained by submitting an application and supporting documents to the Indian Income Tax Department. Professional CA firms in Gurgaon and Faridabad specializing in such services can also help NRIs obtain the certificate quickly and efficiently.
Compliance: NRIs can ensure compliance with Indian taxation laws by obtaining the lower TDS certificate. The certificate ensures that the tax liability is paid correctly, and there is no risk of non-compliance or legal consequences.

The list of documents required for the preparation of a Lower TDS Certificate for NRI Application varies depending on the transaction and other facts of the non-resident and property. However, the following is a standard list of documents and information that are generally required for a lower TDS certificate for NRI or Nil TDS certificate:

Income Tax Login Details of NRI/Foreign Citizen (if not created then need to be created)
Registration on the Lower TDS Application Portal, i.e., TRACES (for filing Form 13 online)
Agreement to Sell with Buyer (for sale of property)
TDS Account Number (TAN) and TAN Letter of Property Buyer. Buyers can apply online, and they can get it in 3-4 days by filing Form 49B with the Income Tax Department.
Copy of Passport of NRI
SR value of the property being sold (documentary evidence or website reference)
Property Acquisition and Purchase related documents (i.e., Sale Deed, Agreement with Builder, Allotment Letter, etc.)

Note : It is advisable to apply for the certificate at least 30-40 days before selling the property. This allows sufficient time for the application process, verification, and issuance of the certificate.