Buying an NRI's flat? Know the tax impact.
Individuals who have purchased property from non-residents find themselves grappling with several income tax-related challenges. To begin with, it's difficult to determine the seller's tax status (whether he is a resident or non-resident in India according to the I-T Act).
This is crucial, as tax is required to be deducted at 20% (in come cases even higher) for property purchased from a non-resident, as opposed to 1% where the seller is a tax resident. In case of wrong deduction, penalties apply, and the buyer can face prosecution.
When property is purchased from a resident, according to section 194-IA, TDS obligations kick in only if the sale consideration is above Rs 50 lakh. In case the purchase is from a non-resident, according to section 195, TDS obligations apply in all cases irrespective of the quantum.