Dear Professional Seniors & Friends,
This post of #MCQ_Self_Challenge is on concept applicability of TDS on #Property_Transaction_by_Non-Resident to be self answered by participants to take self challenge. Property transactions by non residents in India are very prevalent as Non residents are leading investor in real estate in India. Tax laws in India are interpreted in many ways which confuse many of our non residents and facing lot of difficulty in selling and buying property in India. This MCQ post may offer the best interpretation of law to safeguard the interest of Non resident entering into property transaction in India.
The detailed answer of these MCQs shall be posted next day for the self assessment of the participants.
MCQ 13.1: S, a non resident, selling his House Delhi for Rs. 6 crore on 28th February, 2018 to B, a resident Individual. The property was purchased by S in January, 2015 for Rs. 5 crore. Which of the following statement is correct?
A) B, is not liable to deduct any TDS as S is having no capital gain.
B) B is supposed to deduct TDS @ 1% on the gross value of transaction.
C) B On the request of S, deducted 20% on capital gain amount as calculated.
D) B do not have any option but to deduct TDS @ 20% plus surcharge on the value of consideration
E) None of the above.
MCQ 13.2: If in MCQ 13.1, B is also a Non resident and not having any residence and place of business in India. Which of the following statement is correct?
A) Same answer as in MCQ 13.1.
B) No TDS as both buyer and seller are non resident.
C) No TDS as Buyer is not resident and not having any residence and place of business in India.
D) No TDS but S needs to file his return of Indian in India.
Answer MCQ Self Challenge #0013
Property transactions by non residents are very prevalent in India. Tax laws in India are interpreted in many ways which may confuse many of our non residents and they are facing lot of difficulty in selling and buying property in India. This MCQ post may offer the best interpretation of law to safeguard the interest of Non resident entering into property transaction in India.
Answer to MCQ 13.1: E-
Answer to MCQ 13.2: A-
Practical Analysis for MCQ 13.1 & MCQ 13.2 : To answer the above MCQ, we have to following interpretation of law:
1. As per Section 195(1) Any person paying to NR any sum chargeable under ITA is required to deduct income tax thereon at rate in force;
2. Explanation 2 of S-195(1) clarified that any person means resident, non resident whether or not having residence or place of business or business connection or any other presence in India.
3. As per Section 9(1) all income deeded to accrue or arise in India whether directly or indirectly through any property or assets in India.
4. As per Section 195(2) Any person paying to NR any sum chargeable under ITA and if he considers that the whole of such sum would not income chargeable to tax, then he may approach to AO to get an order from AO so as to determine the sum on which he should deduct income tax. However, final liability shall be assessed in the hands of recipient.
5. As per Section 197(1) recipient has also right to approach to AO for lower or no deduction of income tax.
6. As per clause (iii) of Section 2(37A), rate in force for the purpose of section 195 is rates specified in the Finance Act of the relevant year or treaty rate whichever is beneficiary to the recipient.
7. In view of the above, MCQ 13.1 is relating to the capital gain transaction, B is required to deduct tax on the gross amount at least @20%. But the parties have two options; Option I: B can go to AO as per point no 3 above and take an order to find out the amount on which he is liable to deduct income tax; OR Option II: S can go to AO to take certificate of lower or no deduction as per point no. 4 above.
Hence, Correct answer is (E) None of above i.e. parties may like to opt for any of the two option as it seems there may not be any CG arising out of this transaction.
Answer (D) may not fully correct as it mention B do not have any option but he has option to opt for 195(2).
8. In MCQ 13.2, S is also non resident so it is transaction between NR to NR, however as per point no. 2 and 3 above, any person includes even NR and property is located in India, therefore the correct answer (A) the same as in MCQ 13.1.
(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as professional opinion; you can definitely have your own opinion.)
Regards – CA Sanjay Kumar Agrawal
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