Home >Money >Personal Finance >The onus of bearing TDS is on the NRI seller

I’m a resident of India and I want to send some money to my son, who is an NRI. How much money can I send in a year and what will be the tax implications?

—Name withheld on request

Residents of India are allowed to remit up to $250,000 under the Liberalised Remittance Scheme (LRS) in a financial year. This remittance may be used for medical treatment, travel, education, maintenance of close relatives or gifts, etc. Effective 1 October 2020, tax is collected at source (TCS) @ 5% on all remittances under the scheme that are above 7 lakh. In case you don’t provide PAN to the authorized dealer, TCS shall be deducted @ 10%. TCS shall apply on the amount that is in excess of 7 lakh. TCS can be adjusted against your final tax due at the time of filing your income tax return in India.

My friend has a share in some family property in Delhi purchased by his father. My friend has three brothers. Two of them are Canadian citizens and the other is an Indian citizen. Now, they are selling the property through a general power of attorney given to the Indian brother. The buyer’s chartered accountant is saying that he will cut 10% TDS from the shares of all the owners. The total cost of the property is approximately 1 crore. What is the remedy?

—Name withheld on request

Usually, a general power of attorney is issued by an NRI for the sale of a property since he/she cannot be personally present in India. It helps them assign their responsibility to a trustworthy person. However, in case of property sale transactions, even though a power of attorney has been issued, the onus of bearing TDS on the transaction remains on the NRI seller. Also, note that the rate for TDS deduction shall be 20% (additional cess and surcharge as applicable) in this case. If the NRI sellers plan to reinvest the capital gains and therefore do not have any tax dues, they may seek a certificate from the relevant income tax officer for TDS deduction at nil rate or a lower rate.

Archit Gupta is founder and CEO, ClearTax.

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