Avnish Arora, Executive Director, Direct Tax, Forvis Mazars in India said, “Under the current tax framework, resident homebuyers are required to deduct 1% of the purchase value as Tax Deducted at Source (TDS) when the total sale consideration exceeds ₹50,00,000. However, for Non-Resident Indians (NRIs), the process is more detailed and complex.

“When buying properties owned by NRIs, buyers are mandated to withhold tax on the taxable capital gains. However, in practice, many buyers choose to withhold tax on the gross sales consideration to avoid potential tax complications. While this approach simplifies the process for buyers, it often results in NRIs paying more tax upfront than what corresponds to their actual income.

“To alleviate this issue, NRIs typically apply for a lower withholding tax certificate. While this can reduce the initial tax burden, obtaining the certificate is often a lengthy and cumbersome process. Moreover, these certificates are generally issued as a percentage of the sales consideration, rather than being directly linked to the capital gains derived from the transaction. This mismatch can still leave NRIs with an upfront tax burden, necessitating refund claims.

“Streamlining the TDS process for NRI property transactions and aligning the withholding process with that of resident sellers, where tax withholding is directly connected to sales consideration along the lines of the resident, will ease the compliance burden for NRIs and reduce administrative burden, too.”