TDS process for NRI property seller

Pointwise Answer is as follows

1.) Is it correct that the TDS deducted is reflected on my Form 26AS only after Step 4 and not after Step 3?

Ans: Yes, Its correct , it will reflect in your 26AS only after processing of step-4 i.e. filling & processing  of Form-27Q.

2) In case the TDS deducted does not appear on my 26AS, can I still file my ITR evidencing my TDS credit using the Challan receipt only?
Ans : In challan TAN no. is mentioned (id of buyer not yours), you can not claim it with challan receipt. 

3) Which Challan should the buyer use for depositing the deducted TDS for NRI seller? Is it Challan No. ITNS 281?
Ans: Yes, It is the ITNS 281.

4) Can the buyer perform steps 3 and 4 on the same day? In other words, can the buyer submit TDS return using Form 27Q on the same day after depositing the TDS using Challan or does the income tax portal allow TDS return to be submitted only in the next quarter?
Ans : No, It can not be done on same day. It can be filed once Quarter is over.

5) Is any confirmation or acknowledgement slip generated after Form 27Q is submitted by the buyer? If yes, I can ask the buyer to provide me a copy of such an acknowledgement just as a proof of Form 27Q submission.


Ans : Yes, acknowledgement slip generated after Form 27Q is submitted by the buyer. You can take a copy from buyer.

6) I would like to avoid the scenario of chasing the buyer to submit Form 27Q after the sale proceedings and hence the reason for my questions above. Is there anything else I can do to ensure avoiding such a scenario?
Ans : This is the process as per Income Tax Act, there is no other option. Additionally Buyer has to also fill Form-15CA before remitting you the sale consideration.

7) In case the sale gets cancelled after TDS deposition by the buyer due to unforeseen circumstances and we are required to execute a cancellation deed, whose responsibility is it then to reverse the TDS deposited? I understand that it is again the buyer's responsibility to submit a TDS refund request from the TRACES website to get his refund. Is this correct? Which specific Form must be used for this purpose for an NRI seller?
Ans : Depends on whether TDS return is filled or not & some other points too, can discuss in detail on the basis of complete information. Once TDS is credited to your PAN No., you have to file Refund request not the buyer. 

1. Yes

2. You can show in the ITR but TDS credit will be given only when it get reflected in the Form 26AS

3) Yes under section 195

4. No. TDS return is filed on quarterly basis after completion of the quarter

5. Buyer can download the copy of acknowledgment and share with you

6. Ask buyer to file the TDS return timely otherwise late fees of Rs. 200 per day would be levied for the period of the default. Also ask him to deposit the TDS on the date of deduction and share copy of challan with you. Alternatively apply for lower tax deduction certificate so that less amount should get blocked.

7. Buyer can claim the refund

- Buyer has to file Form 15CB/15CA and transfer the proceeds to the NRO Account of the seller

-  On sale of immovable property on or after 23.07.2024, no benefit of indexation would be available to the NRI seller

For detailed discussion you may opt for phone consultation

Please refer to our responses to your respective questions inline below :

Q1) Is it correct that the TDS deducted is reflected on my Form 26AS only after Step 4 and not after Step 3?

Yes, this is correct. The TDS deducted will appear in your Form 26AS only after:

1. The buyer files the TDS return using Form 27Q (Step 4).
2. The TDS return is processed by the Income Tax Department.

Simply depositing the TDS through Challan (Step 3) does not update your Form 26AS. The reflection happens only after the TDS return (Form 27Q) is successfully filed and processed.

Q2) In case the TDS deducted does not appear on my 26AS, can I still file my ITR evidencing my TDS credit using the Challan receipt only?

No, you cannot claim the TDS credit in your ITR using just the Challan receipt provided by the buyer. The TDS credit is available only when:

1. The TDS is reflected in your Form 26AS, and
2. A valid Form 16A (TDS certificate) is issued by the buyer.

If the buyer fails to file Form 27Q, you won’t be able to claim the TDS credit. You must ensure that the buyer completes all steps, including filing Form 27Q and issuing Form 16A, to avoid complications.

Q3) Which Challan should the buyer use for depositing the deducted TDS for NRI seller? Is it Challan No. ITNS 281?

Yes, the buyer should use Challan ITNS 281 for depositing the TDS. The relevant details are:

• 
  Nature of payment: Code 195 (TDS on payment to Non-Resident).
• 
  Section: 195 (Income from NRI sellers for property sale).

The buyer must ensure they select the correct section and purpose code, as any error can cause issues in processing and crediting the TDS to your account.

Q4) Can the buyer perform Steps 3 and 4 on the same day?

No, the buyer cannot file Form 27Q on the same day as depositing the TDS using Challan. Here's why:

1. It takes about 1-2 working days for the Challan payment to be processed and reflected on the TRACES portal.
2. The TDS return (Form 27Q) can only be filed after the Challan details (e.g., Challan number, date) are updated in the system.

The buyer can typically file Form 27Q after the Challan payment has been processed by the bank and acknowledged by the Income Tax Department.

Q5) Is any confirmation or acknowledgment slip generated after Form 27Q is submitted by the buyer?

Yes, once the buyer files Form 27Q, the following are generated:

1. 
   Acknowledgment Number: A unique number confirming the successful submission of the TDS return.
2. 
   Form 16A (TDS Certificate): Once Form 27Q is processed, the buyer can download Form 16A from the TRACES portal and provide it to you as proof of TDS deducted and credited.

You can request the buyer to share the acknowledgment number immediately after filing Form 27Q as interim proof and the Form 16A certificate once available.

Q6) How to ensure the buyer completes the process (Form 27Q submission) after the sale?

To avoid chasing the buyer, you can:

1. 
   Include a clause in the sale agreement: State that the buyer is responsible for deducting TDS, filing Form 27Q, and providing Form 16A within a specific timeframe (e.g., 15-30 days). Non-compliance can lead to legal consequences.
2. 
   Retain a portion of the sale consideration: Hold back a small portion of the payment until the buyer provides proof of TDS deduction and filing (e.g., Form 27Q acknowledgment or Form 16A).
3. 
   Obtain post-dated acknowledgment from TRACES: Request the buyer to provide the TRACES acknowledgment number as soon as they file Form 27Q.

Q7) If the sale gets cancelled after TDS deposition, who is responsible for reversing the TDS?

If the sale is cancelled and the buyer has already deposited TDS, the following applies:

1. 
   Responsibility for TDS refund: The buyer must apply for a refund of the deposited TDS. This is because the buyer is the deductor and depositor of the tax.
2. 
   Procedure for refund: The buyer must file a TDS refund request on the TRACES portal.

   • In such cases, a revised TDS return (Form 27Q) is required to nullify the earlier TDS filing.

3. 
   Form to be used: The buyer will use Form 26B on TRACES to claim the refund of the excess TDS deposited.

Summary :

• Ensure the buyer applies for a TAN number before proceeding with the TDS deduction.
• Verify that the buyer uses Challan ITNS 281 and deducts TDS at the applicable rate (14.3% for amounts between ₹50L and ₹1Cr).
• Insist on proof of Form 27Q filing (acknowledgment number) and request Form 16A after processing.
• Include specific clauses in the sale agreement or hold back part of the consideration to ensure the buyer’s compliance.
• In case of sale cancellation, assist the buyer in applying for a TDS refund but clarify that the responsibility lies with them.

If you need help with further clarity on TDS compliance, feel free to ask!

Thanks
Damini

1. It is only quarter succeeding the date of transaction  

2. For Q4 of 2024-25, it would be 01.04.2025

3. TDS is deducted on the date of payment. The same issue will arise on the payment of last installment. Also practically not possible.

For detailed discussion you may opt for phone consultation

• 
  Form 27Q can only be filed in the next quarter, not on the same day as TDS deposit.
• For Q4 FY 2024-25, Form 27Q filing starts from 01.04.2025; the due date is 31.05.2025.
• 
  Holding sale consideration until Form 27Q acknowledgment or Form 16A is issued is not advisable, as TDS is deducted at the time of payment. The issue arises when the last installment is paid, making it practically difficult. Instead, include a contractual clause requiring the buyer to complete TDS compliance within a specified timeframe.
  
  

  For detailed, personalized advice, consider a phone consultancy. Hope you find the information helpful. You are free to contact me for further discussion. If you could spare two minutes of your time to write a review, it would be greatly appreciated and bring immense happiness to read it. Thank you. Shubham Goyal

   

Thank you for your follow-up questions. Here's the information you requested:

1) Timing of Form 27Q Submission After TDS Payment:

After deducting and depositing TDS, you are required to file Form 27Q for the respective quarter. The due dates for filing Form 27Q are as follows:

• 
  Q1 (April 1 - June 30): Due by July 31
• 
  Q2 (July 1 - September 30): Due by October 31
• 
  Q3 (October 1 - December 31): Due by January 31
• 
  Q4 (January 1 - March 31): Due by May 31

Therefore, while you can prepare and submit Form 27Q after depositing the TDS, it must be filed by the due date of the respective quarter. But you can start submitting the return only post the quarter is ended. For Instance, if you have deposited the TDS sometime in Q1 (April-June 30)- then, you can prepare and submit the return only pots June 30th.

2) Availability of Form 27Q Submission for Q4 FY 2024-25:

The facility to submit Form 27Q for Q4 FY 2024-25 (January 1, 2025 - March 31, 2025) will be available after the quarter ends. You can file the return anytime between April 1, 2025, and the due date of May 31, 2025. If the portal currently does not allow submission for Q4, it is likely because the quarter is still ongoing.

3) Holding a Portion of Sale Consideration Until Form 27Q Acknowledgment/Form 16A Issuance:

Holding a portion of the sale consideration until Form 27Q is filed and Form 16A (TDS Certificate) is issued is a common practice to ensure compliance. However, this means that part of the payment may be received in the next financial year, potentially affecting the financial reporting for both parties.