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Payments made to NRIs are subject to TDS

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I bought a house in July 2017 by taking a home loan of 30 lakh from Axis Bank. In November 2020, I got the loan transferred to HDFC Bank with an outstanding of 26 lakh. Can I claim a deduction under Section 80EEA, since I satisfy all the criteria broadly?

—Keyur Vinchhi

As per the provisions of Section 80EEA of the Income Tax Act, 1961, an individual is eligible to claim deduction towards interest payable on a housing loan up to 1.5 lakh per year if the loan is sanctioned between 1 April 2019 and 31 March 2022, the stamp duty value of the residential house property does not exceed 45 lakh and the taxpayer does not own any residential house property on the date of sanction of loan.

As per the provisions of Section 80EE of the Income Tax Act, an individual is eligible to claim deduction towards interest payable on a housing loan if the loan is sanctioned between 1 April 2016 and 31 March 2017, the amount of loan sanctioned does not exceed 35 lakh, the value of the residential house property does not exceed 50 lakh and the taxpayer does not own any residential house property on the date of sanction of loan.

In the instant case, as the initial loan was sanctioned in July 2017 (i.e. before 1 April 2019), at the time of acquisition of the residential house property, you would not be eligible to claim deduction under Section 80EEA of the Act. The subsequent transfer of the previously sanctioned loan to another bank for the same house property may not be eligible for this deduction.

Further, as the initial loan was not sanctioned between 1 April 2016 to 31 March 2017, deduction under Section 80EE is also not available.

I’m in the process of buying a property from a foreign national. While the seller has the requisite RBI approvals, I would like to know how to pay TDS on the sale deed. Am I required to have a TAN to deposit the TDS?

—J. Nunes

We have presumed that the said foreign national qualifies as a non-resident of India as per Section 6 of the Income Tax Act, 1961.

The provisions of deduction of taxes at source on payments made to non-residents are governed by Section 195 of the Act. As per the said provisions, any person making a payment to a non-resident individual is obligated to deduct at the rates in force at the time of credit of such income to the individual. Further, to carry out these compliances, you would be required to obtain a tax-deduction account number (TAN) in India as per Section 203A of the Act.

However, where it is considered that the amount paid by you does not constitute taxable income (either in full or part) in the hands of the payee, either you or the payee may make an application in the prescribed form and manner to the Indian tax authorities for a lower tax deduction certificate or NIL tax deduction certificate under Section 195(2) and 195(3) read with Section 197 of the Act.

Where such a certificate is obtained, tax is required to be deducted at the rate prescribed in the certificate for the period specified.

You may also need to comply with other prescribed compliances at the time of making the remittance such as Form 15CA, 15 CB, etc., as may be applicable.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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