TDS Under Section 195
- The buyer should first obtain Tax Deduction Account Number or TAN, as per Section 203A of the Income Tax Act, 1961, before claiming TDS tax deductions. It can be obtained by submission of Form 49B, which is available online and offline. The buyer should have his/her own PAN number as well as the PAN number of the NRI seller to complete the Form 49B submission process.
- Under Section 195, TDS should be deducted from source while making payment to the NRI. The details related to TDS deductions and the applicable rate should be mentioned in the sale deed of the transactions made between the buyer and the NRI seller.
- The TDS deducted by the buyer as per Section 195 has to be deposited through challan or Form number for TDS payment on or before the 7th of the following month in which TDS deductions have been made.
- Under Section 195, the TDS can be deposited by the buyer through banks that have been authorised by the Government of India, or the Income Tax Department to collect Direct Taxes.
- After deposition of the TDS as per Section 195, the buyer has to file TDS return through the electronic medium by submitting Form 27Q. TDS returns are filed on a quarterly basis. TDS deductions made in the first quarter, that is, between 1st April and 30th June of a particular financial year must be filed on 15th July of that year. TDS deducted during the second quarter, which is between 1st July and 30th September of a financial year, has to be filed on 15th October. TDS deductions for the third quarter between 1st October and 31st December should be filed on 15thJanuary. TDS deductions for the fourth quarter between 1st January and 31st March have to be filed on 15th May.
- After filing the TDS returns, as per Section 195, the buyer can issue a TDS certificate, referred to as the Certificate of Deduction of Tax or Form 16A, to the NRI seller. It is mandatory for the buyer to issue this certificate to the seller within 15 days from the due date of filing for TDS returns for that quarter.
Rate of TDS under Section 195
TDS rates mentioned under Section 195 of Income Tax Act, 1961 gets increased by adding the applicable education Cess and surcharge. For payments made according to DTAA rates, no additional education Cess or surcharge is applicable.
| PARTICULARS | TDS RATES |
|---|---|
| Income from investments made by a NRI | 20% |
| Income from long-term capital gains under Section 115E for a NRI | 10% |
| Income from long-term capital gains | 10% |
| Short-term capital gains under Section 111A | 15% |
| Any other income from long-term capital gains | 20% |
