Is TAN Required for Purchase of Property from NRI?

My cousin asked me to check is TAN required for purchase of property from NRI. After discussing with a few of my friends, I was sure that yes, a TAN is required for the purchase of property from an NRI. Read on to know the reasons behind it.

Is Tan Mandatory for Buying Property from NRI?

Since the buyer is responsible for deducting TDS, they must have a valid TAN. TAN is necessary because the buyer needs to deposit the deducted tax with the Income Tax Department and file TDS returns. A regular PAN is not sufficient for this purpose.

When purchasing a property from an NRI, the buyer must deduct TDS under Section 195 of the Income Tax Act. This rate mainly depending on whether the capital gain from the sale is a short-term or long-term capital gain:

• Short-Term Capital Gains (property held for less than 2 years): TDS is deducted at 30%.

• Long-Term Capital Gains (property held for more than 2 years): TDS is deducted at 20%.

This tax is deducted from the entire sale amount and not just the profit or capital gain. The buyer must apply for a TAN before making the payment to the NRI seller online through the NSDL (National Securities Depository Limited) website by submitting Form 49B. 

Alternatively, the buyer can apply for TAN through authorised centres by submitting a physical copy of Form 49B. After deducting the required TDS, the buyer must file a TDS return and issue a TDS certificate (Form 16A) to the NRI seller. This document acts as proof of tax deduction and allows the seller to claim a tax credit.

If the buyer fails to obtain a TAN and deduct TDS, they may face penalties and interest from the Income Tax Department. The buyer is considered liable for the tax, so compliance is crucial. I hope this resolves your query.

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Is it mandatory to provide tan for buying property from NRI?

Yes, a Tax Deduction and Collection Account Number (TAN) is typically required for the purchase of property from a Non-Resident Indian (NRI) in India under certain circumstances.

Is Tan Mandatory for Buying Property from NRI?

When an NRI sells a property in India, the buyer is required to deduct tax at the source before making the payment to the NRI seller.

This tax deduction is done under Section 195 of the Income Tax Act, 1961. The buyer is required to obtain a TAN and use it for making the tax deduction at source (TDS) on the sale consideration payable to the NRI seller.

However, if the property transaction qualifies for an exemption from TDS under relevant provisions of the Income Tax Act (such as if the sale consideration is less than the specified threshold), then a TAN may not be required for the purchase of property from an NRI.

Your query about is TAN mandatory for buying property from NRI is solved.

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The Income Tax Department issues TANs, also known as Tax Deduction Account Numbers or Tax Collection Account Numbers. Let me tell you that they are alphabetic numbers with 10 digits. If you are a person in charge of holding or receiving tax at source (TDS), then you must receive the TAN (TCS). So let’s gid in deep to know if is TAN required for purchase of property from NRI.

Is TAN number required to buy property from a NRI?

The buyer requires a Tax Deduction and Collection Account Number in addition to a Permanent Account Number (PAN). The seller needs it in order to complete the transaction (TAN). You cannot deduct the tax, also known as tax deducted at source (TDS), that you as a buyer are required to pay without a TAN. If they do not possess the mentioned numbers, both sides may request the same. Also, keep in mind that both buyers should have TANs if you're buying this home with your wife. If there is more than one seller, each of them must create PANs.

How much TDS you must deduct for the property purchase?

You may need to deduct more than 20% of the transaction fee of the trade as TDS, based on the transaction value.

• If the deal's worth is less than Rs 50 lakh, deduct TDS at a rate of 20.80%.

• If the price of the property is between Rs.50 lakh and Rs.1 crore, deduct TDS at the rate of 22.88 percent of the transaction value.

• If the property's value is more than Rs 1 crore, deduct TDS equal to 23.92 percent of the total value.

What things to keep in mind before buying a property?

• You must pay the TDS money to the income tax department within seven days following the month in which the transaction occurs. 

• You must also file a TDS return and give the vendor Form 16A after paying the money to the government.

• Be careful to only transfer the money from the sale into the seller's FCNR (Foreign Currency Non-Repatriable) account, NRE (Non-Resident External) account, or NRO (Non-Resident Ordinary) account.

I hope you understood if is TAN required for purchase of property from NRI or not.