Will TDS apply regardless of capital loss from sale of property?

I’m working in Australia and had invested ₹15 lakh in a residential property in India in January 2018. I now plan to promote the property for ₹18 lakh. Can the customer deduct tax on the time of fee regardless of this transaction resulting in a capital loss as a consequence of indexation?

—Name withheld on request

There has been a good quantity of debate prior to now on whether or not TDS (tax deducted at supply) is to be made on your complete quantity of sale consideration or solely on the portion of revenue chargeable to tax. The debate has been settled by the Supreme Court within the case of GE India Technology Centre (P) Ltd. v. CIT and has been reiterated by subsequent Supreme Court judgements. The Supreme Court dominated that TDS can solely be made if the non-resident is liable to pay tax underneath the tax regulation within the first place. Further, it has additionally dominated that an utility to the tax officer could also be made by the payer when the latter is for certain that TDS is relevant however undecided of the quantity of fee chargeable to tax within the arms of the non-resident and therefore the quantity of TDS. When the payer is pretty sure, then he or she could make their very own willpower as as to whether TDS is relevant and, if that’s the case, what needs to be the quantity thereof.

In your case, for the reason that value and proposed sale numbers are available, the capital positive factors computation may be made and it might end in a capital loss underneath tax after indexation [Indexed cost = ₹1,500,000 / 272 * 348 = ₹19,19,117]. Taking this into consideration, ideally the customer isn’t required to deduct TDS, neither is there any must method the tax officer to make this willpower. You can share all paperwork with the customer of your property, in order that the customer can accurately compute the capital loss quantity. The internet proceeds may be remitted to you after acquiring a CA certificates in Form 15CB and submitting Form 15CA.

However, in follow, for the chance of being deemed as an assessee-in-default, the customer sometimes insists for the vendor to acquire a decrease/nil tax deduction certificates from the tax officer with a purpose to stop any litigation at a later level. In the absence of this certificates, the customer would deduct tax at supply on the gross sale consideration even when there’s a capital loss.

Harshal Bhuta is companion at P.R. Bhuta & Co. Chartered Accountants.

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Updated: 23 Aug 2023, 10:49 PM IST