TDS on Purchase of Property from a Non-Resident
Introduction
When purchasing an immovable property (land or building) from a non-resident, the buyer is required to deduct Tax Deducted at Source (TDS) under Section 195 of the Income Tax Act, 1961. The applicable TDS rate depends on whether the capital gain is short-term or long-term and is subject to additional surcharges and cess.
This article provides a comprehensive guide on TDS implications before and after 23rd July 2024, applicable rates, surcharge impact, and special provisions.
Definition of Short-Term & Long-Term Capital Gain
Short Term Capital Gain (STCG)
If the property is held for less than 24 months before being sold, the gain is treated as short-term capital gain and taxed at slab rates applicable to non-residents.
Long Term Capita Gain (LTCG)
If the property is held for 24 months or more, the gain is classified as long-term capital gain and taxed at 12.5% without indexation or 20% with indexation.