Introduction

Tax Deducted at Source (TDS) on rent paid to a Non-Resident Indian (NRI) landlord is governed by Section 195 of the Income Tax Act, 1961. If you are paying rent to an NRI landlord, it is essential to comply with TDS deduction regulations to avoid penalties. This article explains the applicable TDS rate, lower TDS deduction process, Form 15CA & 15CB requirements, determination of NRI status, impact of DTAA, Budget 2017 amendments, and consequences of non-compliance, with an example for clarity.

How to Determine Whether a Landlord is an NRI

Before deducting TDS, the tenant must verify if the landlord qualifies as an NRI under the Income Tax Act, 1961. A landlord is considered an NRI if:

1. Stay in India: The landlord stays in India for less than 182 days in the relevant financial year.
2. Past Stay Record: If the landlord was in India for less than 365 days in the preceding four years and less than 60 days in the current financial year, they are considered an NRI.
3. Self-Declaration: In some cases, the landlord can provide a self-declaration (Along with CA Certificate) stating their residential status, which the tenant can verify with relevant documents (passport, visa, or foreign address proof).

If the landlord is an NRI, the tenant must deduct TDS under Section 195, rather than Section 194I applicable to resident landlords.

TDS Rate on Rent Paid to NRI

As per Section 195, the applicable TDS rate on rent paid to an NRI is 30% (plus applicable surcharge & cess) on the gross rent amount. Unlike resident landlords, where TDS is deducted at 10% under Section 194I, rent paid to an NRI is subject to a higher rate.

Impact of DTAA (Double Taxation Avoidance Agreement)

If the NRI landlord resides in a country that has a DTAA (Double Taxation Avoidance Agreement) with India, they may be eligible for a lower TDS rate. The landlord can claim DTAA benefits by:

1. Providing a Tax Residency Certificate (TRC) from their country of residence.
2. Furnishing Form 10F and a self-declaration stating they are eligible for DTAA benefits.
3. Ensuring compliance with Section 90/90A of the Income Tax Act for DTAA applicability.

For example, under DTAA with the USA, the TDS rate may be reduced to 15% instead of 30%, depending on the agreement terms.

Example of TDS on Rent to NRI

Assume Mr. Sharma, an Indian resident, is paying a monthly rent of ₹1,00,000 to his NRI landlord.

• TDS Calculation: ₹1,00,000 × 30% = ₹30,000
• Monthly payment after TDS deduction: ₹1,00,000 – ₹30,000 = ₹70,000
• The deducted TDS of ₹30,000 must be deposited with the Income Tax Department.

If DTAA applies and the TDS rate is 15%, then:

• TDS Calculation: ₹1,00,000 × 15% = ₹15,000
• Monthly payment after TDS deduction: ₹1,00,000 – ₹15,000 = ₹85,000

Lower TDS Deduction Process

If the NRI landlord’s actual tax liability is lower than the 30% TDS rate, they can apply for a Lower Deduction Certificate (LDC) from the Income Tax Department. Here’s how:

1. Application by NRI Landlord: The landlord must apply for a lower deduction certificate (Form 13) from the Assessing Officer (AO).
2. Certificate Issuance: The AO reviews the landlord’s tax liabilities and issues the certificate specifying a reduced TDS rate.
3. Tenant’s Compliance: The tenant can deduct TDS at the lower rate mentioned in the certificate.

Form 15CA & 15CB Requirements

For any payment made to an NRI, compliance with Form 15CA & 15CB is mandatory before remittance:

1. Form 15CA: A declaration by the payer (tenant) to be submitted online before making the remittance to an NRI landlord.
2. Form 15CB: A certificate issued by a Chartered Accountant (CA) certifying that the tax deduction is in compliance with the Income Tax Act.
3. Submission: If the remittance exceeds ₹5,00,000 in a financial year, both Form 15CA & 15CB are required. Otherwise, only Form 15CA is sufficient for smaller amounts.

Budget 2017 Amendment Impact

Budget 2017 introduced stringent compliance measures for TDS on payments made to NRIs, emphasizing stricter enforcement of Form 15CA & 15CB. The following changes were made:

1. Expanded scope of TDS deduction: TDS compliance for rental payments to NRIs is closely monitored, making it necessary for tenants to deduct and deposit TDS accurately.
2. Strengthened penalties: Non-deduction or non-payment of TDS now attracts higher interest rates and penalties.

Consequences of Not Deducting TDS on NRI Rent

Failure to deduct or deposit TDS can lead to serious tax implications, including:

• Interest on Late Deduction/Deposit:
  • 1% per month for failure to deduct TDS.
  • 1.5% per month for failure to deposit TDS after deduction.
• Penalty Under Section 271C: The tenant may be liable to pay an equivalent amount as a penalty.
• Disallowance of Rent Expense: If TDS is not deducted, the rent paid may be disallowed as a business expense for tax purposes.
• Tenant in Default: If the tenant fails to deduct and deposit TDS, they will be considered a “defaulter” and held liable for the unpaid tax amount, along with penalties and interest.

Conclusion

Compliance with TDS on rent paid to NRI landlords is crucial to avoid penalties and legal issues. If you are unsure about tax deductions or need assistance with a lower TDS application, consult N C Agrawal& Associates, CA in Delhi and Noida to ensure seamless compliance.

You can also read our Article on TDS applicabilty on sale of property by NRI by clicking here

For expert advice, reach out to N C Agrawal & Associates, offering specialized tax and compliance services for residents and NRIs.

Tax Deducted at Source (TDS) is a mechanism by which the government collects tax at the source of income. The payer deducts a certain percentage of the payment as tax and remits it to the government on behalf of the payee. The TDS rates and applicable sections under the Income Tax Act for the Financial Year (FY) 2024-25 (Assessment Year 2025-26) are outlined below:

TDS Rate Chart for FY 2024-25 (AY 2025-26):

Section	Nature of Payment	Threshold Limit (₹)	TDS Rate (%)	Effective Date
192	Salary	As per income tax slab rates	As per slab rates	–
192A	Premature withdrawal from EPF	₹50,000	10%	–
193	Interest on securities	₹10,000	10%	–
194	Dividend	₹5,000	10%	–
194A	Interest other than on securities	₹40,000 (₹50,000 for senior citizens)	10%	–
194B	Winnings from lotteries, crossword puzzles, etc.	₹10,000	30%	–
194BA	Winnings from online games	No threshold	30%	–
194BB	Winnings from horse races	₹10,000	30%	–
194C	Payment to contractors/sub-contractors (single transaction)	₹30,000	1% (Individual/HUF), 2% (Others)	–
194C	Payment to contractors/sub-contractors (aggregate in FY)	₹1,00,000	1% (Individual/HUF), 2% (Others)	–
194D	Insurance commission	₹15,000	5%	–
194DA	Payment in respect of life insurance policy	₹1,00,000	5%	–
194EE	Payments from National Savings Scheme	₹2,500	10%	–
194F	Payments on account of repurchase of units by Mutual Fund or Unit Trust of India	No threshold	20%	Up to 30-09-2024
194F	Omitted	–	–	From 01-10-2024
194G	Commission on sale of lottery tickets	₹15,000	5%	–
194H	Commission or brokerage	₹15,000	5%	Up to 30-09-2024
194H	Commission or brokerage	₹15,000	2%	From 01-10-2024
194I(a)	Rent for plant and machinery	₹2,40,000	2%	–
194I(b)	Rent for land, building, furniture, etc.	₹2,40,000	10%	Up to 30-09-2024
194I(b)	Rent for land, building, furniture, etc.	₹2,40,000	2%	From 01-10-2024
194IA	Payment on transfer of certain immovable property other than agricultural land	₹50,00,000	1%	–
194IB	Payment of rent by certain individuals or HUF	₹50,000 per month	5%	Up to 30-09-2024
194IB	Payment of rent by certain individuals or HUF	₹50,000 per month	2%	From 01-10-2024
194IC	Payment under specified agreement	No threshold	10%	–
194M	Payment of certain sums by certain individuals or HUF	₹50,00,000	5%	Up to 30-09-2024
194M	Payment of certain sums by certain individuals or HUF	₹50,00,000	2%	From 01-10-2024
194O	Payment of certain sums by e-commerce operator to e-commerce participant	₹5,00,000	1%	Up to 30-09-2024
194O	Payment of certain sums by e-commerce operator to e-commerce participant	₹5,00,000	0.1%	From 01-10-2024

Key Changes Effective from 1st October 2024:

• Section 194H (Commission or Brokerage): TDS rate reduced from 5% to 2%.
• Section 194IB (Rent by Individuals or HUF): TDS rate reduced from 5% to 2%.
• Section 194M (Payments by Individuals or HUF): TDS rate reduced from 5% to 2%.
• Section 194O (E-commerce Transactions): TDS rate reduced from 1% to 0.1%.
• Section 194F (Repurchase of Units by Mutual Funds or UTI): This section has been omitted.

These changes aim to simplify tax compliance and reduce the burden on taxpayers. It’s essential to stay updated with these modifications to ensure accurate TDS deductions and adherence to tax regulations.

if you further need to study the detail about TDS deposit dates and tds return filing process, the same can be read at TDS Deposit dates and Return Filing

Dear Taxpayer, ANIL KAUSHAL (BOSPKXXXXL)
It is observed that you have claimed deduction under section 80GGC of Rs 500000 in your ITR for A.Y. 2023-24. It is requested that the claim may be verified and mistake, if any, may be rectified by updating the ITR for A.Y. 2023-24 by 31.03.2025.

Warm regards
Income Tax Department

Did you received the above message from income tax department? worried about , what should do?

Steps to Take Upon Receiving a SMS for Section 80GGC Deduction Discrepancy or verification

If you have received a notice from the Income Tax Department regarding a claimed deduction under Section 80GGC, it is crucial to verify and rectify the details to ensure compliance with tax laws. Section 80GGC allows taxpayers to claim deductions for donations made to political parties. However, any discrepancies or unverified claims can lead to legal and financial complications.

As a leading CA Firm in Delhi and Noida, we guide taxpayers through the proper steps to resolve such issues effectively.

Steps to Take After Receiving the Notice

1. Verify the Claimed Deduction

• Check your filed Income Tax Return (ITR) for A.Y. 2023-24 to confirm the amount claimed under Section 80GGC.
• Ensure that the donation was made to a registered political party or electoral trust through a valid payment mode (excluding cash).
• Cross-check the acknowledgment or receipt of the donation from the concerned party.

1. Gather Supporting Documents

• Please make sure you are in possession of Donation receipt or Obtain a donation receipt from the political party or trust.
• Keep a copy of the bank transaction statement as proof of payment.

1. File an Updated ITR (ITR-U) if Required

• If you find any mistake in the claim, file an Updated Return (ITR-U) under Section 139(8A) before 31st March 2025.
• The ITR-U can be filed online through the Income Tax e-Filing Portal.
• Ensure accurate reporting to avoid penalties or further scrutiny.

1. Respond to the Notice Properly (in case if you have received the Tax Notice)

• If your claim is correct, respond to the Income Tax Department with necessary documents.
• Use the Compliance Portal on the Income Tax website to submit your response.
• If required, seek assistance from a professional CA Firm in Delhi and Noida for drafting a response.

• We have already highlighted this matter earlier, emphasizing that the government is actively monitoring and identifying fake deductions claimed through updated ITRs. This issue was recently addressed and published on our website. You can read the full article by clicking here

Why Choose a CA Firm in Delhi and Noida?

Handling tax notices and rectifications requires expertise in income tax laws and compliance. Professional assistance ensures:
✅ Correct tax filing and compliance with regulations.
✅ Proper documentation and legal response to the tax department.
✅ Avoidance of penalties due to incorrect claims.

If you have received a similar notice, contact our expert team at N C Agrawal & Associates, a trusted CA Firm in Delhi and Noida, for hassle-free assistance in resolving tax discrepancies and filing Updated ITR.

During various search & seizure and survey operations conducted by Income Tax Department, it has come to notice that various individuals are claiming incorrect deductions, under sections 80C, 80D, 80E, 80G, 80GGB, 80GGC, in their ITRs, leading to reduction of tax payable to the government.

As many as 90,000 salaried individuals, both from PSUs and the private sector, have withdrawn wrongful tax deductions claims totalling Rs 1,070 crore as of December 31, 2024, government sources said on Thursday.

During various search & seizure and survey operations conducted by Income Tax Department, it has come to notice that various individuals are claiming incorrect deductions, under sections 80C, 80D, 80E, 80G, 80GGB, 80GGC, in their ITRs, leading to reduction of tax payable to the government.

During investigation, it was revealed that such individuals are employees of organisations operating in diverse fields including PSUs, big corporations, MNCs, LLPs, Private Ltd Companies, etc, sources said. Also, most of them who claimed wrongful deductions were working in the same company.

Analysis of the information with the department showed that there is a vast mismatch between total deductions under section 80GGB/80GGC claimed by taxpayers in their ITRs as against the total receipts shown by the donees in their ITRs.

Similarly, deductions claimed under sections 80C, 80E, 80G also appear to be suspicious in nature, sources said. They said, a list of common employers (TDS deductors) has been identified and tax department would be reaching out to as many persons as possible who are suspected to have claimed bogus deductions under section 80E, 80G, 80GGA, 80GGC and other deductions

Further, verification has revealed that certain unscrupulous elements have misguided taxpayers for claim of incorrect deduction/refunds,” a source said. Sources said the department has been conducting outreach programmes with employers to spread awareness about the consequences of claiming incorrect deductions in the ITRs and corrective measures which can be taken by the taxpayers to rectify the errors of omission or commission.

Till 31st December, 2024, approximately 90,000 taxpayers have withdrawn incorrect claim of deductions amounting to Rs 1,070 crore approx in their ITRs and have paid additional taxes,” a source said.

As per the provisions of Income-tax Act, 1961, taxpayers can file updated returns on payment of some additional tax rectifying the errors within two years from the end of the relevant assessment year, for AY 2022-23 to 2024-25. In order to intensify the efforts of the department of promoting voluntary tax compliance and reducing litigation, outreach programme with employers is being launched, sources added. PTI JD CS ANU

Source: https://www.moneycontrol.com/news/india/90k-salaried-individuals-withdraw-rs-1-070-crore-worth-wrongful-tax-deduction-claims-12912663.html

After successful implementation of Phase-1 & Phase-2 now Phase-III regarding Table 12 of GSTR-1 & 1A is being implemented, from return period January 2025. In this phase manual entry of HSN has been replaced by choosing correct HSN from given Drop down. Also, Table-12 has been bifurcated into two tabs namely B2B and B2C, to report these supplies separately. Further, validation regarding values of the supplies and tax amounts involved in the same, have also been introduced for both the tabs of Table-12. However in initial period these validations have been kept in warning mode only, which means failing the validation will not be a blocker for filling of GSTR-1& 1A. To view the detailed advisory please click here

Source: https://www.gst.gov.in/

The upcoming Direct Tax Code (DTC) 2025 in India is designed to replace the existing Income Tax Act of 1961, aiming to modernize, simplify, and enhance the efficiency of the tax system. Key features include:

1. Residency Simplification: The DTC will reduce residency categories from three (Resident and Ordinarily Resident, Resident but Not Ordinarily Resident, and Non-Resident) to two: Resident and Non-Resident.
2. Unified Financial Year Basis: The concepts of Previous Year and Assessment Year will be removed, with the Financial Year becoming the sole reference point for tax purposes.
3. Integration of Capital Gains: Capital gains may be taxed as regular income, which could increase tax rates for some taxpayers.
4. Updated Income Terminology: “Income from Salary” will be renamed as “Employment Income,” and “Income from Other Sources” will become “Income from Residuary Sources,” though the main income categories remain unchanged.
5. Expanded Audit Eligibility: In addition to Chartered Accountants (CA), Company Secretaries (CS) and Cost and Management Accountants (CMA) may also be authorized to conduct tax audits, enhancing accessibility and competition in tax audit services.
6. Streamlined Sections and Schedules: Fewer sections in the tax code aim to simplify compliance and reduce litigation complexity.
7. Revised TDS and TCS Rules: Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) will apply more broadly across income types, with lower rates but wider applicability.
8. Reduction in Exemptions: Many existing exemptions and deductions are likely to be phased out, broadening the tax base and simplifying filing processes. The goal is to increase the taxpayer base from about 1% to around 7.5% of the population.
9. Corporate Tax Rate Harmonization: A unified tax rate for domestic and foreign companies aims to encourage foreign investment by creating a level playing field.
10. Lowered Tax Burden for Salaried Employees: Salaried employees may see a reduced tax burden, addressing the long-standing issue of a disproportionate tax load on this group.

The DTC 2025 is anticipated to take effect in the fiscal year 2025-26, signaling a major evolution in India’s tax framework that could impact compliance, competitiveness, and transparency across sectors.

An unexpected issue emerged, in which it was stressed that technicalities made via the Department and not the assessee must not be put forth by the department to defeat the legal rights and entitlements of the assessees.

It was carried out by the Bombay High Court that the related Revenue officials (respondent) could not refuse the advantage of the accrued Input tax credit to the taxpayer (applicant) merely because the specified forms had not been furnished electronically but furnished manually.

Since the GST ITC-02 Form was not available for electronic filing, neither the applicant nor TDN could be held responsible for not submitting Form GST ITC-02 electronically on the department’s common portal, the Court stated.

Consequently, the Division Bench of Justice M.S. Sonak and Justice Jitendra Jain asked the respondents to regard the manually filed forms via the TDS as expeditiously as feasible.

The bench therefore specified that if on the due consideration of manual forms the respondents still discovered that the ITC of Rs 18,30,58,995 was not due or was claimed erroneously of and used by the applicant, they are free to pass a relevant order.

Case Facts

The applicant has the business of providing internet services, entered in the Business Transfer Agreement (BTA) with Tikona Digital Networks (TDN), where TDN business was transferred before the applicant as a present concern. Hence TDN approached the AO jurisdictional notifying them of the non-availability of Form ITC-02 functionality on the department’s common portal.

TDN has the objective to transfer unused credit in its electronic credit ledger on the date of slump sale before the applicant. However as Form ITC-02 was not available till now on the GSTIN portal for filing, TDN can not follow with the electronic filing need of the mentioned form.

The applicant in the second half of the year 2017 claimed the ITC to the tune of Rs 18.30 crores. As the respondents do not incur the available electronic facility to file Form GST ITC-02, the applicant has furnished the form manually.

The applicant has received a notice after 6 years alleging that the applicant has erroneously claimed and used the ITC of Rs 18 crores, as the applicant manually furnished the forms. Therefore the applicant has approached the HC contesting the notice and the demand asked from the Respondent department.

High Court Observations

The Bench remarked that the only claim made in the show cause notice is related to the non-electronic submission of Form GST ITC-02 on the department’s shared portal.

The Bench expressed the view that these allegations would be valid if the Department’s shared portal were operating properly, allowing TDN or the petitioners to submit Form GST ITC-02 electronically through it.

The Bench acknowledged that the TDN or the petitioner was unable to submit Form GST ITC-02 on the department’s shared portal during the applicable period due to functionality problems associated with that portal.

Therefore the Bench noted that after the same has been considered that Form GST ITC-02 was not e-filed on the shared portal of the department as it was not operational to generate and accept the Forms, the issuance of the Show cause notice (SCN) is to practice of excessive jurisdiction under the CGST act and the rules.

The Bench noted that the petitioner only claimed the ITC after the CA’s certificate was submitted, which confirmed that the business transfer from TDN to the Petitioner included specific provisions for transferring liabilities.

Respondents can have processed the forms and wished on the issued of ITC if they had problems with the Form GST ITC-02 or GSTR-3B manual filing, the bench said.

The bench outlines that the respondents on the specious plea can not have avoided processing the manual return that Section 18(3) & Rule 41(1) of the CGST Act and Rules identify only electronic filing and not manual filing.

Similarly, the Bench determined that the Allahabad High Court observed that, at the time when BTA transferred its business along with liabilities to the petitioner, the option to file Form IT-02 was not accessible on the department’s common portal, thus ruling that the petitioner should not be denied the ITC.

Moreover, the Gujarat High Court, Delhi High Court, and Bombay High Court determined under the same conditions that the Department’s failure to recognize and transfer the ITC owed to the petitioner was highly unlawful, the Bench noted.

It was therefore specified that the respondents were bound from duty to take cognizance of the decisions of the Allahabad, Gujarat, and Delhi High Courts in dealing with the almost same problem related to the applicant, the Bench quashed the SCN asking for the ITC and permitted the petition of the taxpayer.

It was specified by the Bench that if the respondent concludes that the Input tax credit (ITC) was claimed erroneously. Then the respondents can take action by complying with natural justice.

Probing into a fake Pune based company registered in the name of an auto rickshaw driver, officials of the Directorate of GST Intelligence (DGGI) have unearthed a major fake GST firm scam to the tune of Rs 5,000 crores to Rs 8,000 crores.

Rushi Prakash (39), an officer at DGGI, Pune Zonal Unit, lodged the FIR in this case at the Koregaon Park police station in Pune city on Friday.

The prime accused Ashrafbhai Ibrahimbhai Kalavadiya (50), resident of Surat, Gujarat, is alleged to have opened as many as 246 fake GST firms, using which he committed the multi-crore fraud.

Along with Kalvadiya, police have also booked Nitin Barge, Faizal Mevalal, Nizamuddin Khan, Amit Tejbahadur Singh of Ulhas Nagar, Rahul Baraiyya, Kaushik Makwana, Jitendra Gohel and others in this case, under Indian Penal Code (IPC) sections 420, 465, 467, 471, 120 (b), 34 and sections of the Information Technology Act, the FIR stated.

As per police records, in October 2023, the DGGI team came across suspicious transactions of online accounts of ‘Pathan Enterprises’ located at Girni Shewalwadi on Pune Solapur highway in Pune.

During investigation, DGGI found that Pathan Enterprises did not exist at this spot, or anywhere else. However, it was registered in the name of Pathan Shabbir Khan Anwar Khan, a resident of Bhavnagar in Gujarat. When the DGGI team found Khan, he turned out to be an auto rickshaw driver, who was completely unaware of the company registered in his name.

Further probe revealed that multiple fake GST firms were registered with a particular mobile number and an email address of Pathan Enterprises Company. While checking the suspicious records, the investigation team came across an ICICI bank account in Rajkot, Gujarat, registered in the name of one Jeet Kukadiya. However, when GST officials checked with Kukadiya, he was found to be working as a private security guard and had opened this bank account for accused Kaushik Makwana and Jitendra Gohel. Kukadiya himself never made any financial transactions from this bank account.

Based on leads obtained during further investigation, the DGGI teams carried out raids in Pune, Mumbai, Rajkot and Bhavnagar cities.

A probe revealed that the accused Kalvadiya was operating Pathan Enterprises and several other fake firms.

Subsequently, he was arrested from a hotel in Mira Bhayandar in Mumbai on March 12, 2024. As many as 21 cell phones, two laptops, 11 sim cards, bank debit cards in the name of different persons, cheque books and rubber stamps in the name of different companies were seized from his possession during searches.

A probe revealed that he had allegedly used the seized material for forming fake GST firms and fraudulent GST and bank transactions. A probe also revealed that Kalavadiya was “buying” fake GST firms, bank accounts and sim cards to generate fake GST bills. But he never did any real business of any products and never paid any goods and services tax to the government.

DGGI sleuths arrested him under sections of the Goods and Services Tax Act. He was produced before a court in Pune on March 13, 2024, and is currently under judicial custody in Yerwada jail.

Meanwhile, further probe revealed that the accused Nitin Barge of Mumbai was allegedly looking after all bank accounts and fake GST bills of fake firms operated by Kalavadiya. Mevalal allegedly handled the cash transactions for Kalavadiya.

The accused Nizamuddin Khan, also from Mumbai, was allegedly providing him the sim cards and bank accounts opened fraudulently using KYC documents of common people. Amit Singh allegedly assisted Kalavadiya in opening fake GST firms. Rahul Bariyya was allegedly selling fake GST firms and bank accounts to people, the FIR mentions.

The probe so far revealed that Kalavadiya has opened 246 fake GST firms including Pathan Enterprises. As per the FIT, he allegedly committed a fraud of Rs 20.75 crores through Pathan Enterprises and cheated the government to the tune of Rs 5,000 crores to Rs 8000 crores through all 246 fake GST firms by evading tax between September 2018 and March 2024.

The Delhi High Court has held that the power to issue notice for scrutiny assessment under Section 143(2) of the Income Tax Act, 1961 is not restricted to the Assessing Officer or the officers of National Faceless Assessment Centre (NaFAC) alone.

As per the statute, a notice for scrutiny assessment under Section 143(2) of the Act can be issued by the “Assessing Officer or the prescribed income-tax authority, as the case may be”

In the case at hand, notice under Section 143(2) of the Act was issued by the Assistant Commissioner of Income Tax/ Deputy Commissioner of Income Tax (International Taxation).

Petitioner assailed this notice on the ground of having been issued without jurisdiction. It submitted that the expression “as the case may be” indicates that in case, where the jurisdiction is vested within the Assessing Officer, that officer alone can issue notice under Section 143(2) of the Act.

It was argued that in such cases, it would not be open for the “prescribed income-tax authority” to issue a notice under Section 143(2) of the Act.

Disagreeing, a division bench of Justices Vibhu Bakhru and Swarana Kanta Sharma held, “A plain reading of Section 143(2) of the Act clearly indicates that either of the two authorities – either the “Assessing Officer” or “the prescribed income-tax authority” – can issue a notice under Section 143(2) of the Act. The expression “as the case may be” also indicates the same.”

Revenue also pointed to notifications issued by the Central Board of Direct Taxes in exercise of powers under Rule 12E of the Income-Tax Rules, 1962, authorizing the Assistant Commissioner of Income Tax/ Deputy Commissioner of Income Tax (International Taxation), to act as the “prescribed income-tax authority” under Section 143(2) of the Act.

The High Court also rejected the contention that other than the Assessing Officer, only the authorized Income Tax Officers of the National Faceless Assessment Centre (NaFAC) can issue a notice under Section 143(2) of the Act.

It held, “This proposition is not supported by the plain language of Section 143(2) of the Act or Rule 12E of the Rules. Rule 12E of the Rules does not confine the power of the CBDT to authorise only the Income Tax Officers of the NaFAC as the prescribed authority for the purposes of Section 142(1) of the Act.”

Accordingly, the petition was dismissed.

When purchasing property from a Non-Resident Indian (NRI) seller, the buyer is required to deduct Tax Deducted at Source (TDS) on the sale amount. The TDS rate and procedures are different compared to transactions involving resident sellers. Here’s a breakdown of the process:

1. TDS Rate for NRI Seller

• Standard Rate: TDS is typically deducted at a rate of 20% plus applicable surcharge and cess on the total sale consideration if the property is classified as a long-term capital asset (held for more than 2 years).
• Short-Term Capital Gains: If the property is held for less than 2 years, the TDS rate is 30% plus applicable surcharge and cess.
• Important Note: These rates are subject to change as per the Finance Act. Ensure you verify the latest rates.

2. Procedure for Deducting TDS

• Obtain TAN: The buyer must obtain a Tax Deduction and Collection Account Number (TAN) before deducting TDS.
• Deduction of TDS: TDS should be deducted at the time of making the payment to the NRI seller, whether in advance or in installments.
• Deposit of TDS: The deducted TDS should be deposited to the government account using Form 26QB within 30 days from the end of the month in which TDS was deducted.
• Issue of TDS Certificate: The buyer must issue Form 16A (TDS Certificate) to the NRI seller within 15 days from the due date of furnishing the challan-cum-statement in Form 26QB.

3. Lower TDS Certificate Process

An NRI seller may apply for a lower or nil deduction certificate under Section 197 of the Income Tax Act if the actual tax liability is expected to be lower than the standard TDS rate.

• Application by NRI Seller: The NRI seller can apply for a lower TDS certificate from the jurisdictional Assessing Officer in India. The application is made using Form 13.
• Processing Time: The issuance of a lower TDS certificate can take a few weeks to a few months, depending on the assessment and verification process.
• Issuance of Certificate: Once approved, the Assessing Officer issues the lower or nil TDS certificate specifying the reduced rate of TDS.
• Furnishing to Buyer: The NRI seller must furnish this certificate to the buyer, who will then deduct TDS at the rate mentioned in the certificate instead of the standard rate.

4. Filing of TDS Return

• The buyer needs to file TDS returns on Form 27Q quarterly.
• The return should include details of the NRI seller, the property transaction, the amount paid, and the TDS deducted.

5. Non-Compliance Penalties

• Failure to deduct or deposit TDS may result in interest and penalties. The buyer may also be deemed an “assessee in default,” making them liable to pay the TDS amount along with interest.

6. Things to Keep in Mind

• Consultation: It is advisable to consult a tax professional or legal expert to ensure compliance with the regulations.
• Documentation: Ensure proper documentation, including the NRI status of the seller, property details, and any certificates related to TDS.
• Payment Consideration: TDS is deducted on the entire sale consideration, not just the capital gain portion.

This process ensures that the transaction is compliant with Indian tax laws, and both the buyer and seller avoid any future complications.