Kolkata resident Deepak Kumar Agarwal, director of Suvridhi Capital Markets, says his sister wanted to buy a house in South Kolkata. She is a housewife (earns from interest income), has a Permanent Account Number (PAN) and files returns regularly.
After negotiation, the final price was fixed at Rs 68 lakh and an advance of Rs 5 lakh was paid. Then, a chartered accountant advised her to deduct 20 per cent of the apartment value as Tax Deducted at Source (TDS, Rs 13.6 lakh), as the seller was a non-resident Indian (NRI).
He said she should then take the seller's Tax Deduction and Collection Account Number (TAN) and deposit the tax within the stipulated time with the income tax (I-T) department. However, the seller's chartered accountant advised something else.
And before a solution could be reached, the seller had to return. Agarwal's sister does not know if the deal will go through. She can now only think of cancelling the deal.
Vaibhav Sankla, director at tax consultancy firm H&R Block, says in such cases the process of TDS is complicated. Normally, TDS rules are applicable only if you are a business entity. However, the rule is applicable even for rent being paid to an NRI for occupying his/her house.
"If a house owner is an NRI, the tenant should deduct 30 per cent TDS from the rent before paying it. And, submit that amount with the tax department, which the house owner can claim as a refund when he files his tax returns. Recovering tax from NRIs is difficult; hence, the onus of deducting tax shifts to residents who transact with NRIs, irrespective of being an individual or a business entity," explains Sankla.
This apart, there are many rules that can confuse individual payers. Some of these are listed in the following slides.
Text: Neha Pandey Deoras, Business Standard
Image Courtesy: AP