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What is the TDS Rate for Property Purchase Under Section 195?

Understanding TDS on Property Purchases from NRIs

In India, when purchasing property from a Non-Resident Indian (NRI), the buyer is required to deduct Tax Deducted at Source (TDS) under Section 195 of the Income Tax Act. This TDS is a crucial component in property transactions involving NRIs.

TDS Rates for Different Scenarios

  • Long-Term Capital Gains (Property Held for More Than Two Years): The TDS rate is set at 20% on the capital gains. This means that if an NRI has held the property for more than two years, the buyer must deduct 20% TDS from the transaction value.
  • Short-Term Capital Gains (Property Held for Less Than Two Years): For properties sold before two years, the TDS rate increases to 30%. This higher rate applies because short-term capital gains are taxed more heavily under Indian tax laws.

Importance of Compliance

Failing to deduct the appropriate TDS can lead to penalties for the buyer. Therefore, understanding and adhering to these regulations is essential for a smooth property transaction.

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