The Income Tax Department has amended rules to strengthen the reporting framework for immovable property transactions involving non-resident sellers. Experts say that new changes ease procedural burden but retain the buyer’s obligation to deduct and report tax.
Changes will come into effect from October 1.
Explaining the changes, Amit Maheshwari, Managing Partner, AKM Global, said that these strengthen the reporting framework for immovable property transactions involving non-resident sellers. “The requirement to capture details such as the seller’s overseas address, Tax Residency Certificate and foreign Tax Identification Number or unique identification number, even where an Indian PAN is not available, should provide the tax administration with better visibility and facilitate more effective information matching for cross-border property transactions,” he said.
Experts also said that the new reporting requirements also bring greater visibility to transactions where the consideration is paid in instalments, as the reporting framework now captures the nature of the instalment and links subsequent or final instalments with the earlier acknowledgement. This should make it easier for the tax administration to track cumulative consideration and corresponding TDS compliance.
For taxpayers, however, the change will mean greater documentation and coordination at the transaction stage. Buyers dealing with non-resident sellers will need to collect and maintain the relevant information such as stamp duty value, sale consideration, registration dates, payment etc., and other supporting documents upfront. “Accordingly, parties should align the payment schedule, documentation and TDS process from the outset, particularly in cross-border property transactions,” said Maheshwari.
According to Zeel Jambuwala, Co-Founder & Partner at Aurtus, from October 1, the buyer shall deduct tax and deposit it using only their PAN, through Form 141, a combined challan-cum-statement, within 30 days from the end of the month in which tax is deducted. Such purchases are reported in a new Schedule E to Form 141. Where there is more than one buyer, each buyer must file a separate Form 141. The buyer then issues the seller with a TDS certificate in Form 132.
It is important to note that relief is only procedural. “Tax is still required to be deducted at the rates applicable to the non-resident seller’s capital gains, plus surcharge and cess, and not at the 1 per cent that applies to purchases from residents,” Jambuwala explained. Further, the ?50 lakh threshold also does not apply where the seller is a non-resident. The seller must provide a foreign address, contact number and email ID in all cases. Where the seller does not have a PAN, a tax residency certificate and foreign tax identification number must also be furnished, failing which tax is deducted at a higher rate.
Jayesh Sanghvi, Tax Partner, EY India, explained that from October 1 resident individuals and HUFs buying property from non-residents will no longer need a TAN solely for this transaction. Until now, even a one-time homebuyer had to enter the regular TDS compliance system. The change eases that procedural burden, while retaining the buyer’s obligation to deduct and report tax through the prescribed Form 141 process. “The policy direction is clear- reduce avoidable entry barriers for bona fide property buyers, while strengthening transaction-level reporting and traceability in cross-border real-estate transfers,” he said.
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