Income Tax Regulations When Purchasing Property from Joint Owners
When purchasing a property from joint owners, it’s important to be aware of the income tax rules, especially if one of the owners is a non-resident Indian (NRI) and the other is an Indian resident, and the sale consideration is Rs58 lakh. In this scenario, you are required to pay 50% to each seller.
For the payment made to the resident Indian owner, you can deduct 1% TDS, as per Section 194-IA of the Income Tax Act, since the property’s value exceeds ₹50 lakh. However, for the non-resident co-owner, you must comply with the provisions of Section 195 of the Income Tax Act. This entails deducting tax at source at the rates in force for any payment made to a non-resident.
In the case of long-term capital gains, the tax rate is 20% on the indexed profits. If you have the relevant documents for calculating the capital gains based on the cost and date of purchase, you should deduct tax at 20% on the taxable capital gains if the property was held for more than two years by the seller. If the holding period is less than two years, the tax deduction rate is 30%. If the seller is unwilling to share the documents, you must apply the aforementioned tax rates to the payment. It’s essential to obtain a tax deduction from a non-resident, and a Deduction Account Number (TAN) is not required if the seller is a resident.
For further guidance, you may reach out to tax and investment expert Balwant Jain at jainbalwant@gmail.com or on Twitter at @jainbalwant.